Australian shares will kick higher today after another solid night on Wall Street on Friday and a deal overnight to provide financial support for Greece.
News of agreement in Europe on a huge financial package to support Greece, should it be unable to borrow from the markets, will boost markets and trading today.
The size of the backstop package is put at 30 billion to 40 billion euros in the first year, should it be needed.
The deal will see the euro rise, the US dollar fall and commodity prices firm, with markets expected to head the same way.
Friday saw the Dow in New York briefly rise just above 11,000 (10 minutes before Friday’s close), gold hit the highest level this year, oil eased, other commodities were weak and the euro hit an 11 month low against the greenback and was down against the Aussie dollar.
The Aussie market had its 9th weekly rise in a row last week and is now up more than 9% in that time.
Other major markets have risen solidly in the same time, with gains of 6% to 9%.
Significantly the Chinese market is down around 5% in the same time, and fell again last week, despite the soaring growth reports.
Some investors and analysts are starting to wonder if there’s a correction of some sort ahead in the next couple of weeks, just to relieve some of the pressure.
The fears about Greece last week impacted the euro, but didn’t spread to many markets. That should be seen as a bull point.
Gold got a kick, but US bonds were impacted more by the growing belief in the strength of the US economic rebound which will be again tested this week by a solid flow of data.
On Friday, the Fitch credit rating agency cut Greek sovereign debt two notches to BBB-, leaving the rating just one grade above junk status.
It all cut the ratings of five of the country’s biggest banks.
With the US first quarter earnings season kicking off this week, and strong economic data expected from China during the week (see the above story), there’s every reason to watch out for any tremors from a poor set of reports from the US, or fears of rate rises in China if inflation surprises on the upside.
Friday saw the Dow add 70 points, or 0.6%, closing at 10,997.35. The Standard & Poor’s 500 index added 8 points, or 0.7%, to 1,194.37 and Nasdaq rose 17 points, or 0.7%, to 2,454.05.
For the week, the Dow rose 0.6%, the S&P 500 1.4% and the Nasdaq rose 2.1%.
That was the 6th weekly rise in a row, the longest up period since the rebound from the recessionary lows in March 2009.
Australian shares extended the up streak to a ninth week (the longest up run for a decade, according to ASX figures), thanks mostly to the takeover battle for Macarthur Coal which lifted energy stocks.
The ASX200 index closed up 10.2 points, or 0.2%, at 4948.1 points, while the All Ordinaries index added 12.6 points, or 0.3%, at 4972.9 points.
For the week, the ASX 200 gained 0.8% – extending the run of advances to a ninth week
The ASX 200 is up 9.3% in the nine weeks and is now 1% below the 5000 point mark.
(In fact the US market and our market seem to be having trouble with key resistance levels: 11,000 for the Dow and 5,000 for Australia.)
In Asia, the MSCI Asia Pacific Index rose 1.2% for the week.
Hong Kong’s Hang Seng rose 3.1%, its best weekly return in six, while Taiwan rose 0.8% and South Korea’s Kospi index rose 0.1%.
But it wasn’t uniform; Japan’s Nikkei lost 0.7% over the week and China’s Shanghai Composite Index declined 0.4%.
In Europe, the Stoxx Europe 600 Index rose 0.8% to be up 6.2% this year so far.
Most of that rise has come in the past five weeks as the index was negative for January and February on fears about Greece’s stability and possible default and worries about the eurozone economic health as a whole.
But there are signs conditions are turning up and reports over the weekend say that a deal for Greece with lower than market interest rates is being arranged.
Markets in 15 of the 18 major economies in Europe rose last week, with Germany’s DAX up 0.2% and France’s CAC 40 up 0.4%.
London’s FTSE 100 increased half a per cent, but the big loser was Greece, where the market slumped 5% as the enormity of the country’s financial debacle is becoming more real.
Comex gold for June delivery rose $US9 to settle at $US1,161.90 per ounce.
Gold ended the week about 3% higher, which was the best gain since early January.
May West Texas Intermediate crude eased 47c to $US84.92 a barrel on the New York Mercantile Exchange, well down from the peaks above $US87 a barrel earlier in the week.
In London, Brent crude added 2c to settle at $US84.83.
