Wall Street’s record finish on Friday was a bit of chimera – it gave the wrong impression of a lift in sentiment in markets after some indifferent days earlier in the week.
It wasn’t quite that – more relief that the record marks for the Dow and the Standard & Poor’s 500 had been topped at last and retained on Friday.
Commodities were definitely weaker than shares, and ahead of us is another diversion – the US shopping season which starts at the end of the week.
Thanksgiving on Thursday and then the half day holiday Friday will see light trading volumes for much of the week, meaning there could be some big swings that end up meaning not very much.
An estimated 90 million or more Americans will go shopping from Thursday night onwards and until Sunday night.
The huge holiday season for retailer, starting early Friday morning, our time, is going to be a big influence on market sentiment with investors now trained to wait for surveys on ‘footfall’ (the number of people coming and going at shopping malls), early data on sales and freight volumes for the likes of Fed Ex and UPS.
And then the figures from Cyber Monday next week when the likes of Amazon and other big US retailing sites get into the sales act.
Friday US time is known as ‘Black Friday" because its the start of the Christmas retail season that generates from 40% to 60% of many retailers profits (and in some cases, sales).
This year it is more concentrated with the way the 2013 calendar falls, effectively cutting a week out of trading in the run up to Christmas. A poor season and there could be a spate of earnings and sales downgrades early in the New Year.
US analysts expect many retailers to give up profit margins to maintain sales growth in this very competitive environment.
US income growth has been weak for the overwhelming majority of consumers and while there has been a small uptick in credit card debt, US consumers are on the whole still reluctant to buy.
That’s why some of the big chains such as WalMart, Target and Macys will open on Thanksgiving night, instead of midnight and early Friday morning, as in earlier years. (America’s biggest holiday seems to be getting smaller by the year.)
So, an expected fall in trading volumes, the holidays and attention on the retail-dominated weekend ahead, will probably see US markets keep those gains from Friday as a sort of security blanket.
In the US, the Dow Jones rose 54.78 points, or 0.34%, to end at 16,064.77. The Standard & Poor’s 500 Index added 8.91 points, or half a per cent, to finish at 1,804.76. The Nasdaq Composite Index jumped 22.50 points, or 0.57% to end at 3,991.65
For the week, the Dow rose 0.6%, the S&P 500 added 0.3% and the Nasdaq was barely up, rising 0.1%.
Not only was it a record end to the week for the Dow and the S&P 500, but it was also the seventh straight week of gains, which has encouraged those believing in trading momentum in markets.
In Europe, the Stoxx 600 index eased 0.1% last week. Markets rose in 13 of the 18 major European economies, with Germany’s Dax up 0.5% the Footsie in London off 0.3% and Paris’s CAC 40, down 0.3%
And in Asia Tokyo’s Nikkei rose 2.2%, the Hang Seng China companies index in Hong kong leapt 7.2% and the Shanghai market was up 3%.
The MSCI Asia Pacific Index dipped 0.2% last week, with Friday’s solid gains ending the three day sell down.
The Aussie dollar ended around 91.60 USc early Saturday – down a good three cents on the week after the RBA Governor Glenn Stevens raised the question of possible intervention to drive the currency’s value lower.
The currency could slip closer to 90 USc this week, especially as the flow of third quarter economic data starts mid week.
Saturday’s close was another 10 week low. The US dollar rose by around 2% last week against the Aussie.
Equally the two monthly surveys of China’s huge manufacturing sector are due out on Friday afternoon and will impact the value of the currency, one way or another (weak will see the dollar ease further, solid reports will halt the fall for a while).
The main HSBC/Markit final report for November is due out Saturday, our time.
Australia fell 1.2% last week, a fall that was partially offset by the solid rise on Friday, with the share price futures market telling us there’s another solid opening ahead today.
The ASX 200 Index closed at 5335.9 points, after that 47.6 points, or 0.9% jump on Friday.
The All Ordinaries Index gained 46 points, or 0.9%, to 5330.3. For the week, it was down 65.88 points, or 1.2% as well.
Banks fell with the CBA falling 1.7%, Westpac 1.5%, the NAB 1.1% and the ANZ 1.9%. Telstra was another losing, off 2.1%.
BHP Billiton eased 0.1% and Rio Tinto lost 0.4%.
Worley Parsons stood out with a 27% fall after its surprise earnings downgrade shook the mining services sector.
Retailers were also weak with David Jones off nearly 4%, Woolies lost 0.6% ahead of its AGM today and an expected earnings outlook update and Wesfarmers was down 0.4%.
Look for a couple of new updates this week from the mining services sector. The sell-off in this sector has more to go.
