Sharemarkets continue to enjoy a great September, with Wall Street’s 9%-plus gain the best for a decade, which seems odd given that the economy is in worse shape than a year or ago, or six months ago.
It seems the fact that it is not getting any worse is the point for bulls.
Adding to it is the expectation of positive benefits from the sliding dollar (which will boost offshore earnings and profits and domestic inflation, thereby easing those deflationary fears) which is reacting to the widespread expectation that the Fed will soon start spending hundreds of billions of dollars buying debt and pumping more money into the economy to try and kick start it into life (and inflation).
That is an expectation, not a certainty, although Friday’s big rise on marginal improvements in new home sales and durable goods orders reveals US investors to be basing their buying on hope and crossed fingers.
But the rally isn’t very convincing.
Volumes continue to be weak, as they have been for most of the year, especially in August.
Friday’s volume was only 7.55 billion shares traded on the NYSE, Amex and Nasdaq, more than 20% under the previous year’s daily average of 9.65 billion shares.
Wall Street’s 2% gain on Friday followed solid rises in Europe, but a down day for much of Asia where holidays reduced market depth and liquidity for the week.
As a result, overnight futures for the Australian share market rose 57 points on Friday night, indicating a strong 50-60 point gain in Australian shares when the market opens today.
That’s despite the fall here on Friday, which left the market with a small loss for the week of 0.8%.
For US shares, it was their fourth week of gains as investors used a reported rise in business spending to revive the September rally after three days of losses.
Economic data gave a mixed picture, but traders latched on to a rise in August business spending as the latest sign the recovery is on firmer ground.
That seemed to trump a weak report on new home sales in August which showed no real improvement and the second lowest level of sales on record.
For September, which is historically a weak month, the S&P 500 is up 9.5%.
Investors said the need for money managers to boost quarter-end performance had bolstered buying last week and would continue this week.
But confronting the markets in the US and around the world is that hedge fund clients have their last chance to redeem some or all of the holdings this week for the year.
Analysts are expected high levels of redemptions (many of the funds have been closed for two years since the collapse of Lehman Brothers which forced a freeze on redemptions in many cases.
That will see selling in the final quarter, starting next week.
The Dow was up 197.84 points, or 1.86%, at 10,860.26. The S&P 500 Index finished up 23.82 points, or 2.12% higher, at 1,148.65, while the Nasdaq Composite Index was up 54.14 points, or 2.33%, at 2,381.22.
For the week, the Dow was up 2.4%, the S&P rose 2.1% and the Nasdaq added 2.8%.
In Europe, the Stoxx Europe 600 index rose 1.1% on Friday, eking out a weekly gain of 0.4%.
The index is up 5% so far in September.
National markets rose in all but 13 of the 18 major western European economies.
France’s CAC 40 Index and London’s FTSE 100 both rose 1.6% each, while Germany’s DAX Index was up 1.4%.
In Asia, holidays cut volumes and trading for much of the week. China was closed on Friday for example.
But the MSCI Asia-Pacific Index ended 1% higher by the close of trading on Friday after reaching its highest level in almost five months on Wednesday.
The index weakened Thursday and Friday, but the losses were not enough to offset earlier gains.
The Hang Seng Index rose 0.7%, Taiwan’s Taiex Index rose 0.1%, Tokyo’s Nikkei was up 1.6%, South Korea’s Kospi, 1.1% and Singapore’s main index finished half a per cent in the black.
In Australia, the 0.7% fall on Friday ended a three-week winning and left the market off 0.8% for the week.
The ASX200 Index was down 31.7 points, or 0.7%, at 4601.9 on Friday, while the All Ordinaries Index fell 28.5 points, or 0.6%, to 4651.5.
