A pause that refreshes; or something a bit more ominous for market bulls, such as running out of gas?
Whatever the reason, last week’s pause in the market rebound in most major markets (except for the tech-dominated Nasdaq) ended the seven week rally for the time being.
Europe, Asia, Australia and the Dow and the Standard & Poor’s 500 Index all ended the week lower for the first time since the ‘green shoots’ rebound started in February.
London went against the trend with a solid gain. Nasdaq did the same on results seen as encouraging.
This week could very well see another sideways movement as investors await details of the results of the stress tests of the balance sheets of the US’s 19 biggest banks.
Details are sure to start leaking into the markets this week in less than complete detail, which will increase nervousness.
The Federal Reserve said on Friday that the top 19 banks need to hold a "substantial" amount of capital above regulatory requirements to weather a potential worsening of the economic recession.
Its white paper on bank stress tests was outlined, but didn’t provide any detail of the test results. They come May 4..
Chrysler could be forced to file for bankruptcy this week if the banks and bond holders won’t fall into line on a low ball government deal.
According to media reports, General Motors might be releasing its new business plan tonight, US time.
That plan will form the basis of talks and a deal with the government on further aid. Lots of agreements are still be nailed down, but GM would appear to be better placed than Chrysler.
Another four regional banks went bust over the weekend to bring the total so far this year to 29.
More corporate earnings reports will hit investor confidence, especially with several big media and consumer products groups to report.
Another wildcard factor is the sudden appearance of a worrying outbreak of Swine flu in Mexico, the US, and possibly the UK.
Hundreds of people are reported to have been infected in North America, there’s fears passengers just arriving in the UK and Europe from the US may be carrying the infection.
At least 81 people have died in Mexico, it could be more as more records are checked and the World Health Organisation has started issuing global alerts, as it did when the last worrying outbreak happened in China and Asia in 2003 when Sars first appeared.
Sars hurt China and several other economies, but damaged airlines in the Asia region in particular. This flu could have a similar impact on North America and could also hurt airlines, trade and other business interaction because the US and Mexico are strongly interlinked.
The already damaged economies and consumer confidence in the US, Mexico and perhaps Canada could be impacted by a any shutdown on travel and transport links between the countries and even between US states by authorities trying to control the infection.
(Outbreaks of swine flu infections have been reported from California, Texas, Ohio and New York states in the US in the past 24 hours. Canada has reported cases and possibly new Zealand).
For last week, the Dow fell 0.7% and the S&P 0.4%. The Nasdaq rose 1.3%
The falls ended the six week winning streak for both indexes, the Nasdaq extended its winning streak to seven straight weeks, its longest string of gains since early May 2007, according to Reuters and Bloomberg.
Friday saw oil and global shares rally on most markets after results at Ford (a smaller than forecast loss) and others showed companies are weathering the recession while better US and German economic news offset more other reports containing bleak economic data (such as the worst fall in UK economic growth in 30 years in the first quarter).
Oil jumped above $US51 a barrel, following equities higher. The weaker greenback helped.
The S&P 500 was up more than 2% in late trading, then retreated, ending up 1.68 % on the day.
The US government is planning to sell a mass of bonds this week, which helped push up long term market rates.
Not helping confidence in global bond markets is worries that the UK is in desperate shape and could lose its Triple A credit rating as it issues more and more bonds to fund a ballooning deficit.
The unemployment rate in Spain soared to above 17%, which also hurt bond markets.
The FTSEurofirst 300 index of top European shares ended 2.3% higher at 810.38 points Friday, but fell for the week. It was the first weekly loss in the past seven weeks.
But London went against the trend with the Footsie up to a two month high.
The FTSE 100 added 3.4% Friday to take the week’s gain to 1.5%. The Foostie is up 18% since the low in March.
The Dow Jones Stoxx 600 Index eased 0.6% over the week, ending the longest streak of weekly gains on the measure since 2006. The index had rallied 24% since the lows reached March 9.
Asian stocks fell on earnings disappointments, ending the region’s best gain in 18 months.
The MSCI Asia Pacific Index slipped 0.4% last week, following a 25% rally in the previous six weeks.
Japan’s Nikkei and Hong Kong’s Hang Seng Index both dropped by 2.2%. Thailand’s SET Index rose 3.8% after Prime Minister Abhisit Vejjajiva ended 12 days of emergency rule in Bangkok.
Australia fell 1.6% over the week.
New York oil futures rose $US1.93 to settle at $US51.55 a barrel. London Brent crude rose $US1.56 to close at $US51.67.
Gold jumped to a three-week high before easing, boosted by the prospect of further purchases by China after the country said it had been buying the precious metal since 2003.
