2010 Week 3 market

Equity market pulled back sharply this week, with DJI, S&P down over 4% (biggest weekly drop since Mar 09), in Asia HSI and STI down 3%.  Crude and Gold slipped 5% and 3% respectively.

Currencies Euro is the biggest loser against JPY losing about 6%.  USD also slipped against JPY by over 2% and ended the week at 89.85.

Upbeat corporate earnings reports yielded to negative news one after another - first is doubt over Greek government's ability to rein in debt issues, then China's Dec CPI release fueling tightening concerns, followed by uncertainty over several large banks' fate upon Obama administration's proposal to regulate and restrict banking activities.  The proposal is not a turning-back to Glass-Steagall which forced separation of commercial banks and investment banks after 1930 crisis, rather, it proposes to separate gambling activities (using bank's own capital) from investment banking's service business so proprietary trading, PE fund, Hedge Fund housed under the banks will go.  The revenue impact on the large banks varies but is estimated to below 10%. The proposal is up for Congressional approval and signifies another big challenges for the Obama administration after his Healthcare Plan.

A pull-back has been long-due given the uncertainties surrounding the economy as discussed before. How much further adjustment is hard to predict.  Standing on the sidelines and watching the development is the best thing to do. Of course, don't miss the chance to pick up some cheap stocks if the sell-off continues. My bet is it's driven by profit-taking and I'll position for a rebound shortly.