Oil climbed above $US66 a barrel to a six-month high as the US dollar fell under $US1.41 against the euro for the first time this year, and the Australian dollar jumped past 80 USc to an eight month high.
Commodities, led by oil, surged to new highs for the year in some cases and markets generally capped a very bullish month in May when it seemed in the last two weeks that the rally since early March had run out of steam.
The All Ords and the ASX 200 were up 1.5% last week and they rose for a third month, with the ASX 200 up 1% and the All Ordinaries up 1.8%.
That was in contrast to the much stronger performances offshore, making our market one of the weaker performing major bourses in the month.
America’s bounced strongly over the last three days of last week.
Nasdaq rose 4.6% over the 5 trading days of last week. The S&P 500 rose 3.4% and the Dow gained 2.5%.
For May, the Dow jumped 3.8%, the S&P 500 rose 5.3% and the Nasdaq advanced 3.6%.
May’s gains mark the first time stocks have risen for three consecutive months since October 2007.
Friday saw a surge in oil prices boost energy stocks in the US and lift the market firmly back into the black.
Not even the impending bankruptcy of General Motors could shake confidence levels.
GM shares dropped under $US1 on Friday to end at 75 USc. It will be replaced in the Dow tonight. The replacement company hasn’t been named.
World oil prices jumped around 30% last month, the largest monthly rise since March 1999.
Crude oil closed above $US66 a barrel as the greenback fell.
Investors greeted news that the second estimate of first quarter economic growth in the US was a bit better than first reported: it was a contraction of 5.7% against the first reading of minus 6.1%.
Mobile investor cash that has sought safety in the US during the crunch and intense collapse in the first quarter, is now hunting for yield (trying to relieve the glory days before the credit crunch in August 2007 of using cheap money to find higher yields around the world). It’s why the Australian dollar is up so strongly.
US consumer confidence also improved last month, so US investors were receptive to the thought that higher energy prices meant higher earnings for oil companies and not the downside that it could mean lower consumer spending and less driving during the US summer, as happened a year ago.
The falling US dollar has started boosting the shares of big exporters such as Coca-Cola (which gets the bulk of its sales from offshore), Caterpillar, Boeing, etc.
The falling US dollar is driving the surge in commodity prices, as it did a year ago. We know that boom ended in tears and huge losses, and this is headed for a repeat at the current rate.
The Reuters/Jefferies CRB Index of 19 raw materials rose 14% last month on optimism about a recovery, especially in Asia and China.
But much of the rise has been engineered by Chinese buying of record amounts of iron ore, copper, aluminium and other commodities.
Japan’s industrial output rose 5.2% in April, the most in 56 years and South Korean industrial production increased for a fourth straight month in April. India’s economy grew 5.8% in the first quarter
The Baltic Dry Index, which tracks transport costs on international trade routes, added 4.2% to 3,298 for its 19th straight advance, the longest streak in two years.
The S&P 500 is now up 1.8% in 2009 after that 36 % rise from a 12-year low in March
Asian markets jumped for the fourth week in the last five, driving the MSCI Asia Pacific Index to the highest level in eight months.
The Index gained 2.7% to 102.04, its highest level since October 3. It has rebounded by around 44% from the five-year low on March 9.
In Europe markets rose for a second week, with the Dow Jones Stoxx 600 Index capping its longest stretch of monthly gains since May 2007.
The Index rose 0.6% last week and added 4% last month in a robust rise. It’s now up 32% from the lows of early March.
Friday saw markets rise in 11 of the 18 main western European countries. London’s FTSE 100 climbed 1.2%, France’s CAC 40 added 1.5% and Germany’s DAX was up 0.5%.
The Footsie is up 26% since the lows of March, and the Dax is up 35%.
