Markets are set to continue their global rally this week, but only after the American market emerges from a tonight’s holiday.
That means there won’t be a trend globally until tomorrow night.
The mood is now more upbeat than a fortnight ago, so the capacity for investors to ignore the poor data that will flow from the US and Japanese economies in particular this week, should see indices continue with their recovery.
But while investors were grabbing at what they could from the August jobs report and the manufacturing sentiment survey earlier in the week, they ignored a surprise fall in the same measure of the huge US service sector.
That fall will come to hang on the strength of US markets in coming days because services cover around 90% of the economy.
It took the gloss off oil and copper gains on Friday.
The Institute for Supply Management’s index of non-manufacturing business fell to 51.5 in August from 54.3 in July. 50 is the dividing line between expansion and contraction and the August reading was the weakest since the start of the year.
But that was ignored to an extent, although some late selling indicated that it attracted the eye of some investors.
The reason for the more upbeat outlook is the better manufacturing and jobs figures last week for the US.
But we should warn you that US markets do not like September and have in the past rallied in the first 10 days or so, only to sell off in the closing days of the month and go into October with a negative frame of mind.
But according to articles on several US websites, September is typically the weakest month for stockmarket performance, according to the Stock Trader’s Almanac.
The S&P 500 has declined 0.7% on average during September in the years since 1950. However, on the day after Labor Day (Tuesday night, our time) the Dow has risen on 12 of the last 15 years.
The US Labor Department said the economy lost 54,000 jobs in August, better than the 120,000 loss expected by economists, as the unemployment rate climbed to 9.6%, the highest level since May.
The underlying details of the employment report were mixed.
Economists said the positives were: the upward revisions to the June and July reports, a slight increase in hours worked for manufacturing employees (flat for all employees), an increase in hourly wages, and the decrease in the long term unemployed.
Other positives include the slight increase in the employment-population ratio and the participation rate.
The negatives include the hiring of only 60,000 new workers ex the losses from the Census workers being let go, the increase in the unemployment rate, and the increase in part time workers for economic reasons, and thousands more jobs lost from state and local governments as they cut back in services.
America needs more than 125,000 jobs a month to keep up with normal growth in the labor market.
Overall, economists said it was better than expected, but that didn’t disguise the fact that it was a weak report and consistent with a sluggish recovery that will take several more years to cut jobless numbers significantly.
But the longer term subtleties were ignore by the US sharemarkets.
The Dow jumped 127.83 points, or 1.24%, to 10,447.93, marking a move back into the black for the year so far.
The Standard & Poor’s 500 Index gained 14.41 points, or 1.32%, to 1,104.51. The Nasdaq Composite Index rose 33.74 points, or 1.53%, to 2,233.75.
The S&P 500 rose 3.7% for the week, its best in eight weeks.
US Treasury debt yields have risen from levels reflecting expectations of another recession to around 2.71% on Friday.
That was a rise of 0.22% in three days, but the yield was only up 0.05% over the week.
At roughly 10,448 points, the Dow is up 0.2% since it closed at 10,428 points on December 31.
The Dow added 2.9% this week, while the Nasdaq advanced 3.7%.
It was the first weekly gain for all three market gauges in three weeks.
In Europe, the Stoxx 600 index added 3.7% this week. Last month saw the index lose 1.6%.
Markets rose in all but one of the 18 major western European economies.
Paris’ CAC 40 Index advanced 4.7%, Germany’s DAX Index rose 3.1% and London’s FTSE 100 Index soared 5.3%.
It was the London exchange’s strongest showing since early July. The market closed on Friday at its highest one-day level since the end of May.
In Asia the MSCI Asia Pacific Index rose 2.7%.
Tokyo’s Nikkei added 1.4% and the Shanghai Composite rose 1.7%.
South Korea’s Kopsi jumped almost 3%.
Australia’s ASX 200 rose 3.9% after June quarter gross domestic product grew faster than economists estimated.
At the close, the ASX200 index was up 8.5 points, or 0.2%, at 4541.2, while the All Ordinaries was up 14.6 points, or 0.3%, to 4577.6.
It was the first weekly advance in a month and the biggest increase since the last week of August 2009.
