Was last week a reminder to the bulls that the rebound is becoming overbought, or were the big falls (especially in Europe) a timely warning that the problems which gave us the miserable final quarter for 2011 (and 2010) are still with us?
Equities were on the whole much weaker, oil copper and other commodities were lower and only gold showed a spark of strength and that came on Friday as traders chased it.
US bonds also had a solid day on Friday on renewed safe haven buying after figures suggested weaker Chinese manufacturing activity and a shallow recession for Europe.
The US dollar weakened on Friday, especially against the euro.
The bulls will ignore the weakness and possible reasons and say the markets are having "a rest" or establishing a new, higher base from which to resume their upward progress.
The bears (and the not so bullish) would be saying the falls last week are at least a timely reminder that much of the rebound has been built on shifting sands of weak European recovery and doubtful Chinese economic progress.
The latter is the best reason why the Australian market continues to lag behind the rest of Asia, Europe and the US.
That’s despite our market falling around 0.1%, which was a better effort than some of the markets in the US, Asia and Europe.
US markets in particular will soon have to run the gamut of a jobs update (next Friday week) and the start of the first quarter earnings season which will again test valuations.
Last Friday, the Dow Jones Industrial Average rose 44.77 points, or 0.3%, to end the week at 13,090.83.
The S&P 500 added 5.31 points, or 0.4%, to 1,398.09, while the Nasdaq Composite rose 4.72 points, or 0.2%, to 3,068.07.
The Dow and S&P 500 are down 1.5% and 0.5%, respectively, for the week. The Nasdaq Composite rose 0.4%.
For the month, the indexes are up 1% to 3%.
For the quarter, they’ve rallied 7% to nearly 18%, led by the Nasdaq Composite (thanks to Apple).
The benchmark S&P index is up 11.1% so far for the first quarter and the year.
That would follow the 11.% jump in the fourth quarter.
By comparison, the 10-year US Treasury bond’s yield has risen nearly 36 basis points (0.36%) this quarter so far.
If that rise holds this week, US analysts saw it will be the first quarterly rise in yield for this key bond for a year.
Ten year US bonds ended at 2.24% last week, up from 2% a fortnight ago, but down from the peak of around 2.36% for the week.
In Australia the market is likely to open with a small loss today after the share price index futures contract fell 12 points to 4273 in US trading early Saturday morning, our time.
The Aussie dollar ended the week on an update note, ending at $US1.0463 in New York, up from $US1.0387 at Friday’s local close.
The local market staged a rebound on Friday, mostly reversing a 32 point early fall to end the day and week down just 3.3 points or less than 0.1% at 4270.4 for the ASX 200.
For the week, the index only shed 0.1% after the previous week’s 1.5% drop.
Elsewhere in Asia, Japan’s Nikkei Stock Average, Hong Kong’s Hang Seng Index and the Shanghai Composite each fell 1.1%.
South Korea’s Kospi closed with a tiny gain on the day.
For the week, Hong Kong lost 3%, Japan was 1.6% lower, while South Korea 0.4% weaker.
The MSCI Asia Pacific Index fell 1.3% to 126.33, the biggest weekly loss since the period ended December
The index is still up 12.5% for the year so far.
In Europe, London’s FTSE 100 index climbed rose 0.1% to 5,854.89 points on Friday, while in Frankfurt the DAX 30 added 0.2% to 6,995.62 points and in Paris the CAC 40 was up 0.1% to 3,476.18 points.
Over the week, London shares fell by 1.9%, Frankfurt by 2.3% and Paris by 3.3%, ending the latest rally. Italy was down 3.5%.
The Stoxx 600 index fell 2.5% last week, the biggest drop since December.
But it is still up 8.6% for the year so far.
