Markets have finished a confident February on a mostly weak note overnight, despite over half a trillion more euros of easy money for Europe’s banks.
There are signs some investors are wondering if the solid start to the year can continue without a sell-off to set a base for a new climb later in the year.
The bank loans in Europe are greasing the climb, no matter the market, oil, US shares, euro shares or the Aussie dollar (which rose around 2 US cents in the month).
Now there’s more money in the markets, the risks of a collapse or financial strains in Europe should ease again, but watch for fears about inflation to rise, especially if oil and petrol prices go higher.
But not the Australian stockmarket which went to sleep last month after the solid gains of January.
Held by banks and mining shares, our market hardly moves in the 29 day month, a big contrast to the sharp rises seen in Tokyo, on Wall Street, in Germany and China.
At the same time, it’s looking clearer that the US economy is gathering pace, although the rising price of oil could crimp those gains later in the year.
Certainly the US Federal Reserve now seems very unlikely to stage another round of extra spending, a belief that had helped lift US shares, plus commodities, such as gold higher.
Gold had done well up to overnight Wednesday when it was hammered after comments by US Fed chairman, Ben Bernanke which cast doubt on another round of easing.
Comments in the Fed’s Beige Book of economic anecdotes about recoveries in housing and jobs also added to the pessimism about a new round of spending by the central bank.
Mr Bernanke said the Fed was receiving mixed signals on the economy and had been taken by surprise at some of the strength, especially in the jobs market.
As a result, gold lost $US71 on the day (and over $US83 at the depth of the sell down), or 4.3% which left the metal down 1.7% for the month instead of being up just over 2.5%.
Gold settled at $US$1,711.30 an ounce in New York, which still left it up 9.2% for the year so far.
Silver (down a massive 6.9%) and copper also fell on the day and oil had a small rise.
Oil finished February up 8.7%, copper rose 2% and silver was up by just over 4%.
US oil futures ended the month with a small rise on the day, while Brent futures in London were also a touch higher.
With that near 9% gain for February, oil and rising petrol prices are now the new threat to the slowly evolving recovery in the US, the rebound in Asia and the biggest danger of all to recessed Europe.
In contrast stockmarkets in Asia, with the exception of Australia, had a very sold month in February, Europe did well, driven by a strong gain by Germany, and the US saw new post GFC records set, with the Nasdaq doing very well, thanks to the Apple boom.
The Australian market added just 0.8% for February, a sharp slowing from the 5.8% gain in January.
In fact the monthly gain was set yesterday when the market rose 0.84%! That’s leaving it to the last minute.
The European Central Bank’s latest three year loans to euro banks means well over 900 hundred billion has been advanced to the sector since November.
The news left European markets mostly easier on the day after the solid gains of February.
Not helping sentiment was an upgrade to US third quarter economic growth to an annual 3% rate, from 2.8% in the first estimate in late January.
The Beige Book’s comments that there had been improvements in housing and employment in the past month or so also added to the end of month’s swoon.
Asia has been the standout region, with the MSCI Asia Pacific Index up around 5% for February and 13% for the first two months of 2012.
In contrast January and February has seen a 9% advance by the S&P 500 and an 8% rise in the Stoxx Europe 600 Index (and 6% in Australia).
The Japanese market added around 11% last month, while Hong Kong and Shanghai were up 6% and South Korea climbed around 4%.
The weak performance in Australia is due to mining and bank stocks (which are a huge part of our market), going off the boil, despite solid results from the sector’s majors.
On Wall Street, the Dow rose 2.5% last month, the Standard & Poor’s 500, 4.1% and the Nasdaq was up 5.4%.
Overnight, the S&P 500 initially touched a new post-financial crisis high, helped by a better than expected US third quarter GDP and the results of the ECB loan sale.
But Mr Bernanke’s comments knocked that off and the market fell, with the index down 0.47% at the close.
The Dow shed 54 points or 0.4% as well.
The Nasdaq Composite touched the 3,000 mark in early trading, the first time the tech-heavy index has broken above that level since the dotcom boom in 1999.
But it then turned down to close off 0.64%.
The Nasdaq is up by around 14% for the year so far, thanks to the boom in Apple shares, which topped $US530 a share last night.
That compares with an 8.6% rise for the S&P and a 6% gain for the Dow.
In Europe, the Stoxx 600 Index was unchanged on the day, but up 3.9% last month and 8.1% for the year so far. It has risen 23% from the lows of last year as the ECB funding deals have steadied nervous inve
