Watch for a solid day’s trading in local and other markets in Asia after a surprise rate cut from China last night.
That will follow Friday’s rebound across markets in Europe and the US in the wake of the UK election won by the Conservatives, and the solid US jobs report for April.
Markets across Europe rose by more than 2% in many cases, with the US news on jobs the major factor. It helped settle nervy buyers and markets after the big and volatile sell-off earlier in the week.
As well the Shanghai market settled and rose strongly on Friday (up 2.28%), despite another surprisingly weak trade report for April from the Chinese government.
That weak trade report had a quick sequel – an interest rate cut in China last night, the third in six months.
Effective from today, the People’s Bank of China the central bank, is cutting the key one year lending rate by 0.25 percentage point to 5.1%. The one year benchmark deposit rate would be cut by the same amount to 2.25%.
Some analysts forecast the rate cut after the weak trade report and low inflation report at the weekend. As a result markets across the region will bounce today, which they would have done after the solid trading on European and US markets Friday night.
That saw US stock indexes rise more than 1% on Friday.
That will help push our markets higher at the opening this morning by more than 30 points on the share futures contract.
Also helping will be another good night for global iron ore prices on Friday.
According to the SteelIndex, iron ore prices rose 0.8% to $US60.50 a tonne on Friday, the highest level in five weeks. The Metal Bulletin’s Index price rose by more than $US61.40 a tonne.
And the rebound in prices saw a stronger rise for lower grade fines (less than 62% iron content) with the Metal Bulletin price jumping 2.8% $US53.89 on Friday, the highest since end-January.
US job growth rebounded last month and the unemployment rate dropped to a near seven-year low, suggesting underlying strength in the economy at the start of the second quarter after growth hit a soft patch in the first.
US non-farm payrolls in April increased by 223,000, just below expectations, while the unemployment rate dropped to 5.4% from 5.5%, despite more people looking for work.
But the weak March new jobs figure of 126,000 (which startled markets) was revised downwards to show only 85,000 jobs created, the fewest since June 2012.
The Dow jumped 267.05 points, or 1.5%, to end at 18,191.11, the S&P 500 added 28.10 points, or 1.3%, to 2,116.10 and the Nasdaq rose 58 points, or nearly 1.2%, to 5,003.55.
For the week, the Dow was up 0.9%, the S&P 500 was up 0.4%, but the Nasdaq was down 0.04%.
The trade and inflation data from China over the weekend will make for an interesting start to trading in Shanghai today – will investors there forget last week’s fears about official curbs to margin trading? That seemed to be what happened on Friday.
The Shanghai market had something of a wild afternoon session on Friday after the weak trade data for April was released. At one stage it fell into negative territory to be down around 0.3%, before a strong late rally took it to a 2.3% gain for the day.
That still left Shanghai down 5.3% for the week, which is the worst since a 6.7% slump in the week ended July 2, 2010.
The Shanghai Composite is now down 7.1% from the recent multi-year high of 4527.4, hit on April 27.
The Shenzhen Composite ended up 4.2% for the day and 0.2% for the week.
Hong Kong’s Hang Seng closed 1.05% higher on Friday, down just over 2% for the week.
The ASX 200 rose in early trade on Friday, then eased in the wake of the weak April trade data from China to finish 0.2% lower and 3.1% for the week. It was the biggest weekly fall since the week of May 24, 2013.
Japan’s Nikkei closed 0.5% higher on Friday, but down 0.8% for the holiday-shortened week. Markets in South Korea and Singapore also lost ground last week.
The Australian dollar was 0.3% higher at 79.32 and up 1% for the week.
It was the fifth straight week of gains for the Aussie dollar – the longest winning streak since the five weeks to July – August, 2012, according to Bloomberg data.
