So do you reckon the 11% rise in the S&P 500, the double digit surge in Hong Kong or Australia’s 7.2% jump are accurate gauges of the reality of markets and the global and regional economies at the moment?
Does copper’s 17% surge last week, oil’s 16% October jump or gold’s 6.3%monthly rise, tell us that all is right in the eurozone, that the US economy is burbling along nicely and China is surging, again?
Despite what the euro leaders might think, the situation is starting to go bad again with the OECD cutting forecasts for the growth and warning of a possible new recession.
Overnight we saw another rise in Italian and Spanish interest rates for a second day and Greece said it will hold a national referendum to vote on the latest bailout package, a move that holds out the spectre of rejection and more confusion for the eurozone and investors big and small.
Emerging markets as a whole are up by more than 20% (a bull phase!) and even the Chinese market rose more than 4% as the late rebound erased all the negative tone that held sway for most of October, but that is also a long way from reality.
It is clear that Europe isn’t booming, China is slowing, making the rest of the world increasingly nervy and the US is stagnating. Big economies like Brazil are cutting interest rates and India is groaning thanks to high interest rates, high inflation and slowing growth.
Japan, South Korea and Thailand are all sluggish (See the story below).
So if the answer is an honest ‘no’, then treat the October rebound as one long relief rally and nothing more.
And that’s what we saw overnight with a big sell off around the globe.
In New York, the Dow dropped 276.10 points, or 2.3%, to end at 11,955.01.
But that still left it up 9.5% for the month, a solid gain.
The S&P 500 fell 31.79 points, or 2.5%, to end at 1,253.30 while the Nasdaq Composite dropped 52.74 points, or 1.9%, to 2,684.41.
For the month, the S&P 500 and the Nasdaq each added 11%, which were also strong gains and not to be sneezed at.
In Europe the Stoxx 600 fell 2.2%, Germany’s Dax dropped 3.2%, London’s FTSE 100 was off 2.7%, Paris shed 3.1% and Milan was down 3.9%.
In Asia, Australia’s fall of 1.3% was the biggest in the region yesterday. That will be added to today after the weak night on other markets, especially in the US.
Despite the return to reality, October was a welcome month for investors after six months to losses ending in a miserable September quarter which saw balanced super funds in Australia lose around 5%.
But now the reality is set to return with the various central bank meetings (starting with Australia later today), the US jobs report which could cripple the rebound on Friday and before that the European central Bank meeting which is widely expected to cut rates to try and stave off recession.
In Australia, the October rise of 7.25% was the largest rise for the ASX200 since July 2009, when the market rose 7.3% as it rebounded out of the depths of the GFC.
The rise last month came amid doubts, finally resolved (for the time being) in the eurozone crisis last week.
October’s surge in the US ended six straight months of falls, for a total loss of 18.7%.
Yesterday’s late sell off trimmed the gains however:
The ASX 200 was headed for its best month since the index began trading in 1992 until the late slump which clipped 1.3% from the month’s advance to last Friday of 8.50%.
The ASX 200 fell 55.2 points, or 1.3%, to close at 4298.1, while the All Ords fell 50.9 points, or 1.1%, to 4360.5.
In the US, equities had their best month for years.
Having briefly entered a bear market at the start of October, the S&P 500 has subsequently registered a gain of 12.3% for the month – second only in the record books to the 16.3% gain of October 1974.
In comparison, the FTSE 100 index has gained 8.1% the largest monthly increase since May 1990 – but only the third largest since the index was created in 1984.
Germany’s Dax was up 11.6% and Paris’s CAC 40 jumped 8.8% as the euro crisis seemed to retreat by the last week of the month
But in Japan the Nikkei 225 which was up only 4% till last Friday, saw that small gain trimmed by 0.7% yesterday for a total gain for October of 3.3%.
The Tokyo market ended in the red after an initial bounce on the intervention against to stop the rise in the value of the yen.
The Hong Kong market surged 12.9% as CHinese main;land shares improved. That was despite continuing fears about the slowdown in China becoming a hard landing.
We will learn more about the health of the Chinese economy today with the release of the two usual monthly surveys of manufacturing activity.
So what else happened overnight?
In New York’s West texas crude for December delivery, closed at $US93.19 a barrel, down 13 US cents from Friday’s closing level.
In London, Brent North Sea crude for December dropped 35 US cents to end at $US109.56 a barrel.
Comex December gold shed $US22 or about 1.3% to end at $US1,725.20 an ounce. (Remember gold hit a nominal all time high of $US1920.30 an ounce, then fell 11% that month. The 6.3% gain in October only recovered half that fall.
Copper jumped 13% last month, thanks to the huge gain last week.
Overnight LME 3 month metal dropped $US175, or a little more than 2%, to end October at $US8,000 a tonne.
In New York, the key Comex December c
