Wall Street finished on a solid note on the weekend, the US dollar fell, gold plunged (see the next story), confidence in Europe and the US economy rose; overall, it was another week when the buoyant outweighed the negative (such as the rise in US jobless claims and the impact of higher oil prices and inflation fears).
And according to Wall Street pundits, we should see more of the same in the coming week.
But that will be in the US and Europe, the Indian and Chinese markets weak and more worried about inflation, as are other emerging markets, such as Brazil.
The Indian market is down 10% since November amid talk of a rate rise, weak profits and continuing inflation problems, China’s market is off 13% in the past few months with similar fears, especially about rates and inflation.
China will test this complacency this week with its 2010 economic scorecard due for release; another big number for inflation will concern investors worldwide, especially in commodities and commodity-related stocks.
But US market commentators and analysts are ignoring any offshore events and see few worries ahead to derail the optimism that has been building since early November, when the US Federal Reserve embarked on it second round of easing.
So by the close early Saturday, our time, the S&P 500 ended a seventh successive winning week.
It was the market’s longest up streak since May 2007 which was before the crunch hit.
For the Dow it’s the highest it has been since May 2007, while for the S&P 500, Friday’s close was the highest it has been since August 2008.
But the gains were trimmed when news of China’s first asset reserve ratio increase of the year was announced mid-trading.
Banks led the way on Friday after encouraging financial results from JPMorgan.
For the week, the Dow ended up 1%, the S&P 500 1.7% and the Nasdaq composite rose 1.9%
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US financial markets will be closed tonight for Martin Luther King Jr. Day.
Some US analysts say that seven weeks of gains on the S&P are a warning sign for declines ahead.
The last time the benchmark rose eight or more weeks in a row was a nine-week run between November 2003 and January 2004.
They caution that a weak report by a bank or from some of the other major stocks reporting this week could trigger a sell-down.
But others say the enthusiasm for risk; cheap money and the better news for the economy have made bulls out of more and more investors.
The Dow added 55.48 points, or 0.47%, on Friday to 11,787.38. The S&P 500 rose 9.48 points, or 0.74%, to 1,293.24. The Nasdaq Composite gained 20.01 points, or 0.73%, to 2,755.30.
For our market, which tucked a 2% gain away by the close on Friday, the start to the week should be solid.
But with Wall Street closed tonight, don’t expect too much enthusiasm.
There might be the odd glance to China and the asset reserve ratio tightening, but our investors will be focused mostly on the continuing floods and their impact in Queensland and now parts of Victoria.
By Friday’s close, the ASX/200 ended at a 10 month high, adding 6.3 points on the day, or 0.1%, at 4801.5. The 2% rise over the week was the best for six weeks.
The All Ordinaries index added 7.1 points, or 0.1%, to 4908.6 on Friday.
The Australian dollar eased to just under 99 USc in New York early Saturday.
In Europe, the Stoxx Europe 600 Index gained 1% over the week.
Bloomberg said that national benchmark indexes rose in 15 of Europe’s 18 western markets.
France’s CAC 40 Index gained 3%, London’s FTSE 100 Index rose 0.%, Germany’s DAX Index advanced 1.8% and Spain’s IBEX 35 Index jumped 8.6%, while Italy’s FTSE MIB Index surged 4.5%.
Much of the gains were down to strong rises by European banks after Spain and Portugal had successful government bond auctions late in the week, which swung sentiment in favour of the euro and saw the currency gain against the US dollar.
China’s move to tighten the asset ratio hit London with commodity shares impacted (as they were in the US).
Will that be a sign in Australia today?
In Asia, Australia stood out on Friday.
China’s Shanghai market fell 1.3% on Friday and will come under pressure today from the asset ratio move and reports that the Shanghai city government will trial a property tax this year.
India’s market fell almost 2% after data showed India’s wholesale price index-based inflation for December rose 8.43% from a year earlier, accelerating from November’s 7.48%.
The news is expected to see the country’s Reserve Bank boost interest rates next week.
The Indian market was down 4.2% for the week.
Japanese stocks came under selling pressure, with exporters losing ground as the yen strengthened against the US dollar.
The Nikkei lost 0.9% on the day and 0.4% for the week.
Fresh government moves in Singapore to cool property prices hit developers and bank shares. The market was off 0.3% by the close.
