So was the solid week in Asia a one-off bounce, or a sign that investors have figured out that the region is once again a ‘safe haven’ while Europe and the US struggle with their respective crises?
While US shares fell Friday and European shares dropped for a 7th week, Asian markets broke their recent run of outs with a very sharp improvement.
That was despite more signs that the Chinese economy is still slowing (but not crashing) to a soft landing.
The MSCI Asia Pacific Index rose 2% last week, ending the longest series of weekly losses since 2004.
The continuing European debt crisis had little impact on sentiment, as did the US political argument over cutting debt and deficits.
Japan’s Stock Average added 3.5%, South Korea’s Kospi Index advanced 2.9%, Hong Kong’s Hang Seng Index increased 2.2%, while the Shanghai Composite Index climbed 3.9%.
In contrast the Australian market struggled half a per cent higher, as investors focused on local factors and ignored the firmer leads from the region.
Last week’s rise leaves the MSCI Asia-Pacific index off 6% since the peak for the year in May.
In Australia, overnight trading on the share price index saw a nasty 41 point fall to 4456.
So it should be a weak start to the week’s trading here later today.
At the close on Friday, the ASX200 index was up 7.6 points, or 0.2%, at 4508.1, while the All Ordinaries index rose 3.6 points, or 0.1%, to 4565.
The ASX200’s 0.5% rise last week ended four weeks of losses.
But for June so far the index is down more than 4%; with only four trading days to claw back some of those losses.
The Australian dollar slipped nearly half a US cent to fall below $US1.05 in offshore trade and was last buying $US1.0491.
While US stockmarkets finished up for the week, Friday’s drop was a reminder that the temperature is rising on both sides of the Atlantic about debt and default.
Normally worries about banks in Italy would only be a passing concern for the US, and yet on Friday it sent tremors through the markets that didn’t settle all day.
The Dow Jones Industrial Average sank 115.42 points, or 1%, to close at 11,934.58.
The S&P 500 dropped 15.05 points, or 1.2%, to 1268.45, while the tech-heavy Nasdaq Composite shed 33.86 points, or 1.3%, to close at 2652.89.
For the week, the Dow fell 0.6% and the S&P 500 lost 0.2% but the Nasdaq added 1.4%, despite a fall by Google as US government anti-trust action gathered pace.
Bond prices were mixed.
The yield on the 10-year US Treasury note fell to 2.87% from 2.91% on Thursday, while that on the 30-year bond edged up to 4.17% from 4.16% as concerns about inflation continued.
In Europe, the Stoxx Europe 600 Index fell 1.2% last week to the lowest level since March 16, as the Greek debt crisis continues to rattle confidence.
The index last shed 9.3% since its high on February 17.
Bloomberg said national indexes fell in all 18 western European markets last week.
The UK’s FTSE 100 declined 0.3%, Germany’s Dax lost 0.6%, France’s CAC lost 1%.
Italy’s FTSE MIB plunged 4.7%, the most in more than a year on those renewed bank worries (see separate story).
