So are we seeing a Christmas market boomlet?
Millions of investors around the world would hope for some relief this festive season.
The best indicator is what’s happening in the US: despite the increasing bitterness of the recession there, the key market benchmark, the Standard & Poor’s 500 index is up sharply from its 11 year low last month.
Since its market low on November 21, the American market has gained confidence from somewhere that not even the bleakest of news can shake. There’s a conviction that the slump could not get much worse and an economic rebound could emerge by the second half of next year.
We have already seen three of these circumstances over the past year: a year ago in fact, after Bear Stearns was rescued in March and in September until Lehman Brothers collapsed.
The market survived Friday’s confusion over the short term bailout of the big three US car companies. Something concrete should emerge in the next day, with General Motors and Chrysler targeted.
But after the S&P slid on November 21 to its bear market intraday low of 741.02 points – a level last seen in 1997 – the index has gained almost 19%.
For the week, the Dow fell 0.1%, the S&P 500 rose 0.4% and Nasdaq was up 2.1%.
Nasdaq jumped 2% on Friday alone with Intel leading tech majors higher on speculation that the Obama government will lift spending on new technologies in the next couple of years.
America’s second largest shopping centre owner renegotiated two troubled loan deals and saw its shares soar.
General Growth Properties shares jumped 25%, leading real-estate companies higher, but it still has another set of loans covering two Las Vegas shopping centres to rollover with lenders.
An announcement is expected this week. That might be good news for struggling Centro Properties and Centro Retail Trust here in Australia.
After Friday’s close with a small gain on the day, the Dow is down 34.9% for the year, while the S&P 500 is off 40.1% and Nasdaq is down 42 %.
That’s still ‘ouch’ territory for anyone, but the recent strength is intriguing.
At the same time the US dollar has weakened: it’s off around 6% against the euro and once the car bailout is sorted, there’s every chance the currency will continue its recent fall.
Commodities have firmed, driven by a rebound in oil ahead of this week’s OPEC meeting: a cut in production is likely to leave oil confused as the slump in demand around the world is continuing and there’s a feeling the OPEC countries will cheat and not obey the cut, which is already at 2 million barrels a day.
Friday saw a mixture of drivers for markets around the world: the car bailout, big spending packages in Japan, currency support for the Korean won, speculation about the OPEC meeting, the worry about the depth of the US recession, more wobbles amongst banks and a summit between China, Japan and South Korea, the first ever held.
As well, a possible $US50 billion fraud on Wall Street that broke Thursday, could damage confidence this week Stunned investors around the world are only now coming to terms with it. More than $US15 billion in investments have already been identified in the media.
The Fed meets this week, but a rate cut won’t help or hinder confidence: merely reflect the reality of where market rates are.
Two US banks, Goldman Sachs and Morgan Stanley report financial results this week and they will test this new found confidence because analysts reckon losses will be reported, and the tone of the reports will be depressing about 2009.
In Australia our market could open 2%, or 83 points after trading finished Saturday morning. The local market fell 2.4% on Friday after the car rescue package fell apart after being sort of settled earlier in the day.
GM fell 4.4% to $US3.94. It lost as much as 37% earlier.
European shares fell for a second day Friday with the US Senate’s rejection of a bailout for American carmakers the big catalyst in Europe.
The Dow Jones Stoxx 600 Index fell lost 2.7%, trimming the week’s gain to 4.4%. The Stoxx 600 has fallen 46% this year.
National benchmark indexes fell in all 18 western European markets. London’s FTSE 100 slid 2.5%, France’s CAC 40 lost 2.8% and Germany’s DAX slipped 2.2%.
The FTSE rose 5.7% over the week.
The MSCI Asia Pacific Index rose 6.1% to 84.38 this week. The measure rose every day this week bar Friday when the US Senate sank the carmakers bailout plan.
Japan’s Nikkei rose 4%, but China’s CSI 300 Index fell 2.6%. Most other markets in Asia advanced this week
In Australia the ASX 200 fell 2.4% and the ALL Ords dropped 2.3%. For the week, the S&P/ASX200 eked out an 0.8% gain while the All Ords managed an 0.7% rise.
The Australian dollar fell 3% on the US news, to around 65.85 USc. It finished at 66.44 in New York trading Friday night after it appeared that the Bush Administration would proceed with a rescue package for the car companies.
BHP Billiton fell $1.38, or 4.6%, at $28.82 while Rio Tinto dropped $3.79, or 9.5%, to $36.21.
The banks were mostly lower, with Westpac off 52c, or 3.1%, to $16.03. The ANZ rose 14c, or 1%, to $14.56, the CBS was steady on $28.15 and the NAB 25 fell 1.3%, to $19.10. Suncorp fell 3c to $7.66. Macquarie Group fell $1.75, or 5.8%, to $28.25 and Babcock and Brown ended at 16.5c, off half a cent.
The AMP’s Dr Shane Oliver says that the very short term outlook for shares is anyone’s guess.
"The period around Christmas and into January is normally strong for shares and anticipation of more decisive policy action under the incoming Obama Administration sho
