According to the share price futures close on Saturday, our market will start up by around 1.5% today after Wall Street shrugged off the worst unemployment report in 34 years, another drop in US consumer credit and a further rise in home loan foreclosures.
That was either an act of bravado, or a bit of pie in the sky thinking that the big stimulus package is a certainty, as President-elect Obama again made clear at the weekend.
But the fact remains that for our market the big drivers today won’t be Wall Street’s bounce, it will be the savage fall in oil and copper prices on Friday in the wake of those terrible jobless figures.
Oil prices dropped to four-year lows on markets in Europe and the US to $US41.81 in New York, the lowest since late 2004.
Oil prices in fact had their worst week since January 1991, losing more than $US12 in five days. The oil price fell 25% since the previous Friday, November 28.
Copper prices continued to sink, hitting a low of $3,000 a tonne before recovering a touch to end at $3,060 in London, down 6.5% on the day and 15.5% over the week.
Copper prices tumbled to the lowest level since mid-2005, on signs of a deepening US recession as the November jobs report worried traders and confirmed the worst fears about the slump.
Comex March copper fell 9.6 US cents, or 6.5% to $US1.3735 a pound after touching $US1.356, the lowest for a most-active contract since May 2005. It finished at $US1.38 a pound in London
It will make for a miserable opening here for BHP and Rio Tinto. BHP shares slid 8% in London, Rio was also weak, off almost 4% on the day in London.
That was after a rotten week last week where the shares fell more than 31% in the wake of the move by BHP to abandon its bid the week before. BHP shares slipped $1.35 Friday to end at just over $26.
Its 52 week low is $20. Rio’s was just under the $30 hit on Friday at $29.91.
It will make life problematic for local investors today: the copper and oil markets (not to mention lead, zinc and aluminium received a severe shaking last week on those growing concerns that the 2009 global recession will be far deeper and nastier than forecast.
The economic news from Japan and Germany, not to mention the US, was not nice.
Friday’s terrible US jobs figures, and expectations of more bad news to come this week, will do nothing for confidence in those markets.
Some forecasters reckon oil will reach $US25 a barrel before bouncing (only $US15 a barrel to go) and copper $US1 a pound, only 37 USc to go.
The Obama stimulus package won’t have an impact before mid year, but some traders will try and look through that to pick winners, so watch for more false starts.
Here out traders are already looking to pick winners from the stimulus package that starts appearing in bank accounts this week.
That’s why Harvey Norman rose 9.3% last week, David Jones 11.2% and the Seven Network 10.4%.
That was despite another substantial downgrade by Goldman Sachs JBWere analysts of the media sector, with a forecast that real recovery wouldn’t start until well into 2010, perhaps two years away,
In the US, with three weeks left in the year, the Dow is down 34.9% for 2008 after last week’s trading, the S&P 500 is off 40.3% and Nasdaq is down 43%.
The Dow gained 259.18 points, or 3.09% on Friday, to close at 8,635.42. The Standard & Poor’s 500 Index climbed 30.85 points, or 3.65%, to 876.07. Nasdaq rose 63.75 points, or 4.41%, to close at 1,509.31.
For the week, the Dow fell 2.2%, the S&P 500 lost 2.3% and Nasdaq shed 1.7%.
The S&P 500 though is up 16% from the 11 year low on November 20. GM shares slipped 0.7% to $US4.08, while Ford rose 2.3% to $US2.72 ahead of a weekend of horse trading on a bailout package.
In Europe, markets went south reacting to the poor jobs figures for November, so they missed the later outbreak of optimism.
In fact European markets fell for a third day on Friday in a week with oil and resource stocks dragging markets in the UK, France and Germany lower.
BP, Europe’s second-largest oil producer, sank 6.6% Friday, Shell, the region’s biggest, lost 6% and Total, the French giant, shed 8.9%.
The Dow Jones Stoxx 600 Index lost 3.8%, with all 19 industry groups decreasing.
The index fell 8% last week, despite rate cuts from the European Central bank, the Bank of England and the Swedish and Danish central banks.
Not helping was news that the German economy, Europe’s largest, saw a sharp fall in industrial orders in October and a forecast from the country’s central bank that the economy will contract by 0.8%, faster than an expected 0.5% fall for the eurozone as a whole.
National indexes fell in all 18 western European markets except Iceland. The FTSE 100 lost 2.7% in London on Friday and 5.6% over the week.
Germany’s DAX dropped 4% on Friday alone on the downgrading of growth for 2009 and the slump in manufacturing orders.
Asian markets fell as the deepening global recession slashed investor confidence.
But China went against this trend, finishing with a 7.9% rise Friday. The spate of economic reports will test that confidence.
The MSCI Asia Pacific Index fell 3.8% last week. Tokyo’s Nikkei lost 0.1% on Friday for a 7% drop over the week, the largest in six weeks.
The Nikkei has tumbled 48% so far this year.
MSCI’s Asian index has lost 50% this year.
Australia’s S&P/ASX 200 Index retreated 6.8% last week, driven lower by the weakness in resource stocks. The index lost 1.2% on Friday.
