US Treasuries declined as diminishing concerns over the worsening credit market reduced the flight to quality to government debts. The yield on the benchmark 10-year note finished the week at 4.08 percent, the highest level in a month. Bonds initially rallied on concern that US banking-system turmoil may be worsening after Fed’s proposal to shore up mortgage-lenders Fannie Mae and Freddie Mac.

The US dollar (USD) weakened across the broad initially but ended little changed last week. The German ZEW survey collapsed to record lows and showed that business confidence has deteriorated materially over the past month. Sterling (GBP) strengthened along with other major currencies.

US stocks had a very volatile and eventful week, with heavy losses on Monday. In Europe, stocks also experienced a volatile week and largely followed the direction of the US market with a one-day lag. Japanese stocks fell for the sixth straight week, though the magnitude was less severe compared with its Asian neighbours.