Wall Street’s bull run continues unabated.
Friday’s close saw Wall Street post its third consecutive week of gains with the S&P 500 up around 1% last week, 6.8% for the year so far and more than 20% in just six months.
World stocks, as measured by MSCI, have raced to 30-month highs in the past week.
The index has already gained more than 5% this year, more than half of last year’s total gain.
US markets will take a break tonight for the Presidents Day holiday, but analysts see the headlong charge continuing as investors simply ignore overbought positions and some potential bad news from the Middle East.
The Group of 20 finance minister’s conference in Paris didn’t produce any breakthrough on global imbalances or other big issues.
But more rioting and demonstrations across the Middle East is slowly lifting concerns.
American markets seem oblivious to what is going on in that region; despite the Friday fall a month ago when the demonstrations in Cairo turned ugly.
The latest move by China to control property prices, bank lending and inflation failed to knock markets off their bullish course on Friday.
China’s central bank will raise the reserve requirement ratio for the nation’s banks by half a percentage point, marking the second increase so far this year (to 19.5% for big banks).
The government lifted the reserve requirement six times in 2010, as it attempts to combat inflation. Interest rates have gone up three times since last October, the last increase two weeks ago.
Chinese inflation and house prices rose in January (house prices rose in 68 of the 70 cities surveyed), but markets ignored the news.
Inflation in emerging markets and in some developed countries like the UK, continue to worry policymakers, but not sharemarkets.
Emerging stocks have turned lower so far this year with a loss of nearly 3% year to date because of the growing inflation fears. Last year they rose 16%.
The eurozone sovereign debt crisis certainly is lingering, with banks tapping the European Central Bank for an unusually high amount of emergency overnight borrowing in the past week, thanks to Anglo Irish and one other Irish financial group needing short term funds to cover a small funding gap for the next couple of weeks.
Ireland goes to the polls this Friday, February 25 in the first general election since the debt crisis.
The current government will lose and the opposition will take control and could very well want the 85 billion euro bailout facility renegotiated.
If that was to happen then the euro crisis would be back on.
German Chancellor Angela Merkel’s party also faces a series of possible defeats in seven state elections, starting with a poll in the small city state of Hamburg yesterday.
Hamburg is the smallest of the polls and probably the least important, but could very well send a signal of the way German voters feel about the bailouts of Greece, Ireland and the way Germany has been the major funder.
But while there’s the appearance of a boom, it remains weak with daily volumes down on last year.
Small investors seem to be regaining confidence in equities with inflows into mutual funds and other managed vehicles rising again last week.
More than $US8 billion flowed into US equity funds for the week ended February 16, according to Thomson Reuters Lipper figures reported by Reuters.
Investors poured a net $US8.72 billion into US equity funds for the week ended Wednesday, up from $US2.04 billion in the prior week.
The money that flowed into fixed interest funds last year seems to be returning to equities, though not at the rate of last year’s inflow into bonds.
But the reality is that the strength of the rally is still coming from big investors with lots of churning and high frequency investors chasing spread and volume.
Reuters said that around 7.13 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq on Friday, below last year’s estimated daily average of 8.47 billion.
It was also down on the previous week when around 7.7 billion shares were traded on the Friday.
On Thursday, the volume was the second-lowest of the year at 6.7 billion shares, and Monday’s session was the lowest of the year with a mere 6.6 billion shares.
Some analysts argue it’s a lack of willing sellers that is keeping volumes lower, others say it’s nothing of the sort and much of the trading volumes are being done by high speed trading networks, while billions of shares are being traded in secret (in so-called black pools) between big investors and not being disclosed.
Despite what some of the bulls might say, weak volumes are not a good sign for the longevity of the current rally.
Wall Street in particular has run ahead of other markets (though commodity markets are surging under growing speculative interest) and is cruising for a bruising in the not too distant future.
American markets are closed on Monday for the Presidents Day holiday.
On Friday the Dow Jones added 73.11 points, or 06%, to 12,391.25. The Standard & Poor’s 500 Index added 2.58 points, or 0.2%, to 1,343.01 and the Nasdaq Composite Index edged up 2.37 points, or 0.08% to 2,833.95.
All three indexes closed up around 1% for the week.
The failure of two small US local banks didn’t impact sentiment. They took the number of failures so far in 2011 to 21.
In Australia, the S&P/ASX200 index slipped 1.7 points on Friday to 4936.7 points, but still rose 1.1% for the week. The All Ordinaries index added 0.1 point to 5026.1.
