It's been a pretty light start to trading in 2012 with light volumes across the ASX as many market participants don't return to work until January 16.
This is always an eerie time on the markets because the light volume exacerbates the volatility, as we saw last week with the market gaining 2 per cent and then losing 2 per cent within a three-day window.
The key news came on Friday night with the United States unemployment rate falling to 8.5 per cent in December, its lowest rate in almost three years.
This continues a trend of solid economic data coming out of the US over the past couple of months, with unemployment now falling for four months in a row.
The falling unemployment rate is a relief for the Obama administration because it shows the stimulus injected into the US system is starting to take effect, although this good news is offset by the spiralling US debt.
Despite increasing the debt ceiling to $US15.2 trillion back in August, the US is now again pushing perilously close to this level and another increase of the debt ceiling may be on the cards in the not too distant future.
The upcoming US election further clouds the issue so you can expect some heavy political lobbying around this.
Strong unemployment data out of the US might not be enough to save the world economy as Europe continues to cause headaches, with Italy's 10-year bonds back trading close to that dangerous 7 per cent level.
On top of this, European banks were sold off heavily last week after UniCredit, Italy's largest bank in terms of total assets, announced a right issue priced at a 43 per cent discount to their last traded price.
The bank has now seen its share price almost half since announcing plans to raise 7.5 billion euros last November.
For those investors hoping to see a new dawn in early 2012, it looks like they may have to be a little bit more patient.
The bumps that we saw in the second half of 2011 are still present and until concrete solutions emerge regarding European and US debt we are likely to see the volatility continue.
·If you would like to subscribe to Cameron Bartram's weekly market update, please feel free to contact him at Sentinel Stockbroking on 9225 0028 or email cbartram@sentinelgroup.com.au
_Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time. _
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