Markets: The week that was 10-14/12/12

The FTSE 100 began the week eking out minor gains in the build-up to a Federal Reserve announcement on Wednesday. But it was a case of "buy on the rumour and sell on the news", with shares easing down after the US central bank delivered a further round of quantitative easing.

The FTSE 100 (UKX) started the week at 5914.40.

London's blue-chip bourse, after spending the majority of Monday's session down, rallied to push onto positive ground after US markets opened up.

The index had started the week with a dip into the red, as investors' focus shifted back from across the Atlantic and towards the eurozone crisis.

Italy's political wranglings, with Mario Monti signalling his intention to step down as Prime Minister and Silvio Berlusconi once again entering the fray, unnerved the markets.

Smith and Nephew (SN.) came out on top after moving up just shy of 2%. Hargreaves Lansdown (HL.) had a harder time of it, losing 2.7%.

Over on AIM, Mobile Streams (MOS) led the table with a 31% gain, while Supercart (SC.) fell a painful 64%.

Japan may be in recession, revised growth figures released on Monday indicated. The world's third-largest economy shrank by 0.9% in the three months to 30 September, while the previous quarter's figure was revised down from 0.1% growth to a 0.03% contraction.

New World Oil and Gas (NEW) said its chances of discovering commercial oil at its Belize project had "materially increased". An extension to an existing well at the B Crest prospect confirmed the presence of a working hydrocarbon system of 45% to 65% oil saturation.

Investors welcomed the news, as shares in the explorer climbed 4% and the stock became one of the most heavily bought on Interactive Investor.

Monday's close: 7.23 points to 5921.63.

The FTSE 100 closed just in the black on Tuesday after earlier moving close to highs for the year so far. At the start of the session a survey showed that morale among German investors sharply improved in December, giving the markets in the UK a boost.

Polymetal International (POLY) was top of the tree at the close with a 2.7% gain. Tullow Oil (TLW) was unable to lift itself from the bottom all day and ended down 8.4% after it said it would end its North Sea operations.

The oil and gas firm said it was beginning a process to dispose of its exploration, development and production assets in the UK and Dutch North Sea gas basin to target Norwegian reserves instead.

COMS (COMS) was riding high on AIM as it gained 38%, but IPSA Group (IPSA) lost out with a fall of 11%.

Whitbread (WTB) posted an interim management statement in line with the group's expectations, with consistently strong Costa revenue growth partially offset by declining like-for-like trends in hotels and restaurants. For the 39 weeks to 29 November, like-for-like sales were up 3.9%.

HSBC (HSBA) will pay the largest-ever money-laundering settlement after US authorities ordered the bank to cough up $1.9 billion (£1.2 billion).

An investigation carried out by the US Senate found that HSBC had handled money from drugs barons and "rogue nations" such as Iran. The settlement means the bank will not be prosecuted in the US for its actions, but is not an agreement with UK regulators, which HSBC said it would complete shortly.

In further bad news for banks, three men were arrested in connection with the investigation into the rigging of the inter-bank lending rate, Libor. The Serious Fraud Office and the police arrested the men on Tuesday in Surrey and Essex. It was not clear which banks those taken into custody were connected to.

Tuesday's close: 3.34 points to 5924.97.

The FTSE 100 held on to the gains made early in the session to close in the black on Wednesday. Investors banked on the prediction that the US Federal Reserve would approve further stimulus measures, but with the announcement coming after the close of play, traders had to wait until Thursday to react on the market.

Mining stocks charged up as investors were encouraged to invest in the higher-risk stocks due to the expectation that a new stimulus package would be approved.

Evraz (EVR) came in 4.5% higher ahead of a band of resources stocks. Morrisons Supermarkets (MRW) was bottom of the stack and fell 1.2%.

Aortech International (AOR) made a strong ascent on AIM, moving 16% higher, but KleenAir Systems International (KSI) sank to the bottom with a 17% decline.

India's factory output rose by more than expected in October as demand increased around the country's festive season. Output was up 8.2% compared with October 2011, well ahead of expectations of 4.5%.

Closer to home, UK unemployment fell by 82,000 in the third quarter to 2.5 million, the Office of National Statistics said. The fall was the biggest since 2001 and means that 7.8% of the population are out of work. Employment rose 40,000 to a record 29.6 million, the highest figure since records began in 1971.

In commodities news, Falkland Oil and Gas (FOGL) commenced a 3D seismic survey over the mid-Cretaceous Diomedia fan complex within its southern Falkland licences. The survey will cover a minimum area of 4,000 square kilometres and is likely to take approximately four months to complete.

Also welcomed was a report that Sound Oil (SOU) had agreed to sell its Indonesian subsidiary, Mitra Energia Bangkanai, to Salamander Energy (SMDR) for up to $7.1 million in cash. Shares in Sound were among the most heavily bought on Interactive Investor.

Wednesday's close: 20.88 points to 5945.85.

The FTSE 100 brought six days of gains to an end as it finished in the red on Thursday.

The benchmark index limped out of the gate as investors betrayed conflicted feelings about news from the US Federal Reserve. Traders welcomed the central bank's extension of its quantitative easing programme, but were knocked for six by doom-laden comments from its chairman about the looming fiscal cliff.

Tullow Oil was unassailed in the top spot as it reversed its poor fortunes from earlier in the week. John Wood Group (WG.) lost a painful 4.6% however.

Xtract Energy (XTR) was riding high on AIM as it galloped up 83%, while Cyprotex (CRX) lost a quarter of its market capitalisation after it warned of lower profits.

Centamin's (CEY) Egyptian woes showed no sign of easing on Thursday as the FTSE 250-listed gold miner's shares took a battering after it suspended its operations in the country, following what it believed was an illegal $65 million retrospective claim from Egyptian Petroleum Corporation.

There were signs that all was not well on the high street as HMV (HMV) warned it may breach its banking agreements in January as revenue has continued to fall.

The ailing retailer said it was in discussions with its lenders over the next covenant test at the end of January. HMV added that in light of current trading performance, and market conditions, it was probable that the covenants would not be complied with at that time.

Thursday's close: 16.24 points to 5929.61.

The FTSE 100 shrugged off a poor US performance and strode ahead in early trading on Friday, as figures out of China proved a boon for the index. The Asian giant showed recent signs of a brightening economy and the latest data showed that the HSBC/Markit China purchasing managers' index (PMI) stood at 50.9, a 14-month high, up from 50.5 in November.

However, the blue-chip index gave up the gains as the session wore on, after data suggested Germany's exposure to the wider eurozone crisis was deepening.

The overall purchasing managers' index for the eurozone saw a small pick-up, but the German manufacturing sector slipped to 46.3 in December, from 46.8 in November.

The UK now has a negative outlook rating from all major credit ratings agencies after Standard & Poor's downgraded the economy. Britain kept its AAA rating, but S&P warned it could lower this "if fiscal performance weakens beyond our current expectations".

Further afield, Japanese business sentiment took a slide in the three months to December as a further indication that the world's third-largest economy was suffering severely.

Rockhopper Exploration (RKH) narrowed its losses to $6 million in the first half of the year, compared with $20 million a year before as it reduced its exploration expenses, with extensive drilling and seismic campaigns coming to an end.

Friday's close: 7.85 points at 5921.76 (a gain of 7.36 points for the week).

US markets

Wall Street finished Monday on the up, as the Dow Jones climbed to its highest point since election day after investors put their money on a deal being struck to avoid the approaching fiscal cliff.

Shares across the Atlantic took a decidedly positive course on Tuesday as the Federal Reserve meeting got underway. Investors were gambling on the extension of the quantitative easing package as well as a satisfactory resolution to the fiscal cliff dilemma.

US stocks wiped out gains made throughout the session on Wednesday as Federal Reserve chairman Ben Bernanke warned that the central bank does not have the power to hold the economy back from toppling over the fiscal cliff.

Wall Street had seen a steep rally earlier in the day after the Fed confirmed that it would extend its monetary stimulus measures. The bank said it would add $45 billion a month in treasury-note purchases to its $40 billion bond buyback.

Stocks shuddered down on Thursday as splits over a resolution to the impending fiscal cliff cut-off once again emerged, with politicians on both sides of the divide exchanging verbal blows.

There was a mixed start to the session on Friday as economic data showed inflation has been well contained. The cost of living was shown to have fallen by 0.3%, slightly above the 0.2% decline forecast.

Apple (AAPL) led technology stocks in a decline as the electronics giant continued to see its market fortunes fade.

At a glance...

Asian marketsCurrenciesCommodities
Nikkei 225: 9738 ( 211 for the week)GBP/USD: 1.6142 ( 0.0106)Gold: $1,695.91 ( $14.02)
Hang Seng: 22606 ( 415)GBP/EUR: 1.2290 ( 0.0135)WTI crude oil: $86.59 ( 0.22)
Shanghai Composite: 2151 ( 11)EUR/USD: 1.3137 ( 0.0229)