US stocks had a very volatile and eventful week, with heavy losses on Monday as Treasury Secretary Paulson’s plan to rescue Fannie and Freddie struck investors that this is merely a blank cheque and new equity may ultimately lead to more widespread losses. The financial sector experienced the worst tumble in eight years. Fed Chairman Bernanke also noted significant risks to downside growth, yet intensified inflation risks.

From mid-week onwards, the market turnaround and soared as a number of banks such as JPMorgan, Wells Fargo, and Citigroup reported better than expected earnings, even though technology stocks continued to be weak. Additionally, the market rally was also supported by a rapid drop in crude oil price.

In Europe, stocks also experienced a volatile week and largely followed the direction of the US market with a one-day lag. Banking stocks tumbled on Tuesday, along with US financial companies, but staged a rebound from mid-week onwards particularly seen in the DJ Stoxx European banks index. Technology stocks were also in the spotlight as handset maker Nokia provided a solid outlook. Again, the late rally was aided by a falling crude oil price.

Japanese stocks fell for the sixth straight week, though the magnitude was less severe compared with its Asian neighbours, on concerns that credit-market losses in the US will spread and Japanese financial institutions are holding substantial amounts of securities issued by the two US government-sponsored mortgage institutions.

The market rose briefly during mid-week as investors were stimulated by a strong rebound in Wall Street due to oversold financial stocks and a drop in oil price, but remained volatile on Friday and ended the week lower as a quick and excessive crude oil price tumble persuaded investors towards a economic slowdown again.

In Hong Kong, stocks had a volatile week with the index falling initially, largely following the footsteps of the US market amid worsening credit outlook. The Hang Seng Share Price Quote (HIS) was once reaching its four-month low recorded in March this year. However, as the US market stabilized from mid-week onwards, so did the local stocks.

Sentiment was further boosted on Thursday when China released its economic data, which showed that the economy is still growing at a healthy pace despite a global slowdown, and inflation is in check. Mainland Chinese stocks also staged a turnaround on Friday, though the index level is still down by over 2 percent compared to last week.

Taiwan was the worst-performing stock market among Asia and slumped to their lowest levels in one-year on Tuesday, weighed down by Wall Street’s plunge and the local financial sector’s exposure to troubled US mortgage firms.

On the positive side, the government relaxed restrictions on Taiwanese firms investing in China from 40 to 60 percent this year, and also allowed Chinese firms to invest in Taiwan. Stocks surged by 4 percent on Thursday, and are perceived to be positive for Taiwanese equities over the long-term.

In Korea, stocks fell for the seventh consecutive week and once pushed the Korean Composite Stock Price Index (KOSPI) to a 15-month low. The main concern is on the US financial sector with its two quasi-government institutions, and some reports had been saying that Korean financials had a preliminary $550mm in total exposure to those struggling institutions.

Foreign investors remained on the sell side for the 27th straight session, the longest stretch of foreign selling in the stock market history. Financial stocks were hit hard. On the other hand, technology exporters added some momentum on the back of a weaker currency.