The Australian market lost ground last week amid concerns an agreement would not be reached at a critical European summit in Brussels.

The ASX 200 edged lower 85 points (-2.0%) to close the week at 4203 – giving back some of the previous week's gains.

The banking majors weighed on the market; NAB (ASX:NAB) lost 2.2%, whilst Westpac (ASX:WBC) dropped 2.3%. During the week all the banks announced that they will pass on the full RBA rate cut to consumers.

The big miners struggled on the back of weaker commodity prices; Rio Tinto (ASX:RIO) sank 3.9%, BHP (ASX:BHP) declined 2.2% and rival Fortescue let go of 2.9%.

Smaller miners Aston Resources (+7.1%) and Whitehaven Coal (+3.2%) enjoyed good weeks after they announced they were in discussions about a possible merger.

Both companies agreed to proceed with the merger today.

The energy sector struggled during the week; Santos (ASX:STO) dropped 4.8%, while rival Woodside (ASX:WPL) slumped 5.3%.

Retails also had a bad a week, seemingly unhelped by the RBA rate cut.

David Jones crashed 7.6%, Harvey Norman lost 3.7%, whilst rival JB Hi-Fi held up better than most to record only a 0.1% loss.

Supermarket giant Woolworths bucked the trend to record a 0.5% increase.

Economic News: What Does it Mean?

It was busy week for local data, with the RBA rate decision, the release of third quarter GDP and also the November jobs report.

The RBA responded to the global uncertainty and decided to cut the official cash rate from 4.5% to 4.25%, matching economist expectations.

RBA governor Glenn Stevens said that the European financial and banking problems were likely to weigh on economic activity for the foreseeable future.

The central bank cited weakening commodity prices as a factor behind the rate cut.

Lower commodity prices have helped take the pressure off inflation, thus providing scope for further easing.

The GDP figures released showed that the Australian economy expanded by 1% in the third quarter, beating economist expectations of a 0.8% rise.

For the 12 months to September, GDP grew seasonally adjusted by 2.5% compared to an expectation of a 1.8% gain.

Second quarter GDP was also upwardly revised to 1.4% from 1.2%.

Employment data revealed an increase in the unemployment rate to 5.3% in November. Economists were expecting the rate to stay the same at 5.2%.

The total number of people employed fell 6,300 in November, which was well short of economist expectations of a 10,000 net gain.

A breakdown of the numbers revealed a decrease in full-time employment of 39,900 people, whilst there was an increase in part-time employment 33,600.

In the week ahead we have the NAB Business Confidence data slated for Tuesday and Westpac Consumer Sentiment survey is scheduled for Wednesday.

Overseas Market and Commodity Wrap:

It was an erratic finish to the week in overseas markets, which responded sharply to developments out of Europe.

The two major pieces of news were comments by ECB President Mario Draghi, which dashed hopes that the central bank would raise its bond purchases of debt-ridden eurozone nations.

The other piece was an historic agreement to draft a new treaty for deeper economic integration in the eurozone.

The new agreement helped most of the international indices finish above water for the week.

Some of the biggest gainers in Europe were the UK FTSE (+0.8%), the German DAX (+1.9%) and the French CAC (+2.5%).

The US markets also finished stronger, with the Dow (+1.6%), Nasdaq (+1.9%) and S&P 500 (+1.7%) all recording gains.

However Asia was weaker for the week, with the news of an agreement in Europe not hitting the markets till after they were closed.

The Hang Seng fell 2.9% and the Nikkei dropped 1.5%.

Commodities were mostly positive, benefiting from the improved sentiment out of the EU. Lead (+2.9%) was the best of the gainers, whilst Palladium (-1.9%) the worst of the losers.

Oil and gold both enjoyed a solid week, with a 1.1%, and 0.2% climb, respectively.

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