Well, the local market here is expected to be a touch firmer today after Friday’s indifferent close in New York and the absence of any negative news about commodities and the BHP-Rio bid situation.
Last week’s Chinese investment story that popped out in the local media, sent BHP to $50 here on Friday and put its 3.4 share for one bid for rival Rio Tinto back in the money, but it was another show of strength by oil prices and some other commodities (gold, grains and copper) that will add to the lure of local shares today.
However the move by the Aussie dollar through the 95 USc mark on Friday night, plus a couple of earnings warnings Friday which cited the impact of the currency and uncertain economic conditions, will start prompting a flow of earnings downgrades for companies operating internationally.
Last week’s strongish earnings statements from the likes of Leighton, Coca Cola Amatil and Adelaide Brighton Cement perhaps gave local investors a too optimistic view of the current half’s earnings outlook for all companies. The higher Aussie dollar will have an impact outside the resources sector and will be felt especially by funds managers and financial groups like AMP, Axa and Platinum.
There was no lead from the US or Europe and its probable oil prices will weaken off the back of Friday’s news that Saudi Arabia will lift oil production by 300,000 barrels a day from later in the year.
That will add to supplies and possibly press down on prices if sustained for a long period. But lower production from Mexico, Russia, Venezuela and Nigeria, and rising demand from India, China and other emerging economies will offset any impact from the higher production and lower demand from a slowing US economy.
On Wall Street, the S&P 500 added 1.78 points to 1,425.35, extending its weekly rise to 2.7%. The Dow and Nasdaq were slightly lower Friday on the day but the Dow gained 1.9% in the week and Nasdaq added 3.4% off the back of the positive impact of the Hewlett Packard $US13 billion bid for EDS, which will see it surpass IBM as a technology services provider if successful.
As well a move on the Yahoo board by investor Carl Ichan to try and get the board to restart talks with Microsoft also energised the sector, even though Yahoo indicated its opposition.
At the close on Friday, the S&P 500 was within 3% of being positive for the year, while the Dow was within 2.2% and Nasdaq about 4.8%.
One market that is at record levels is the Canadian bourse where stocks rose to a record level on Friday for the third time last week.
The stronger oil, gas and commodity prices pushed the market higher all week.
The TSX Composite Index rose 1.1% on Friday to 14,984.20 in Toronto, extending its gain for week to 3.2%, its third-straight weekly gain.
Gold prices had their biggest rise Friday for three months and oil prices of course topped $US127 a barrel.
In Europe markets jumped Friday to boost the Dow Jones Stoxx 600 Index to a two-month high
The Index added 0.4% to 329.86 and rose 1.5% over the week.
But unlike Canada and US markets, the Index is still 18% under its all time peak reached last June.
National indexes advanced in 13 of the 18 western European markets. Germany’s DAX increased 1.1%; France’s CAC was up 40 0.4% and London’s FTSE 100 was up 0.8% to the highest level in more than four months, as nuclear group, British Energy said it had received a number of takeover proposals and British Airways climbed after the airline doubled full-year profit. But investors missed the significance that earnings could plummet this financial year, according to a post results briefing from management.
The FTSE 100 rose 52.5 or 0.8% to 6,304.3, taking its advance for the week to 1.6%.
Still in Europe and Iceland’s market’s index, had its biggest rise for a month Friday after three Scandinavian central banks put together a credit line for the country.
The Icelandic market is the world’s second-worst performer so far this year because the highly indebted and geared country is seen as a victim of the credit crunch and high inflation: the cost of living is running at more than 11% and interest rates are at 15.5% but that has failed to stop the rot.
But Friday saw the central banks of Norway, Sweden and Denmark offer Iceland an $A2.5 billion short term loan to help avert an economic collapse.
Financial groups, which have borrowed heavily and invested heavily offshore in countries like Britain, saw the shares rise, while the country’s currency, the Krona also rose.
The ICEX 15 Index had its biggest rise since April 18, adding 1.4% on news of the lifeline.
Iceland has only 300,000 people with a $US19 billion economy, and foreign debt considerably higher than GDP. Credit rating agencies have cut the ratings on the country’s banks in recent weeks, adding to the pressure on the financial system and the economy.
And Asian markets had another solid day Friday for their fifth straight rise.
The MSCI Asia Pacific Index rose 0.7%, completing its longest winning streak since last October and reaching its highest since early January: the index rose 2.9% over the week.
Japan’s Nikkei fell 0.2% Friday but other Asian benchmark indexes increased, apart from China and Vietnam, where stocks fell for a 10th day, the longest stretch of losses in almost four years, on concerns about rising inflation.
Asian stocks rose every day last week on speculation of takeovers among mining companies (BHP) and after technology companies forecast profits will increase, led by Sony and Fijitsu.
The MSCI Index rose 3.3% last week with the Nikkei up 4.1% and Australia up almost 3%.
BHP added 4.7% to a record $A48.70 in Sydney, but it had gone to $A50, a record high thanks to those ‘rumours’ of mystery Chinese bidders.
Its target, Rio Tinto also hit an intraday record of $156.90 on Friday before closing at a record $A155.35, up 6% on the day. The strength in BHP, R
