Look for another strong start to local trading today after markets ended trading in Europe and the US on Saturday morning on an upbeat note.
Foreign shares got a strong boost on Friday night from the interest rate cut in China – the 6th so far in the past 11 months, and the earlier move by the European Central Bank (ECB) in signalling that further monetary easing could be possible in December.
Surprisingly good earnings reports in the US from a trio of tech giants in Amazon, Alphabet (Google) and Microsoft also helped push Wall Street higher on Friday. This week it will be the turn of Apple and Twitter to report.
As a result, US shares rose 2.5% last week, eurozone shares gained 4.5% thanks to the ECB’s suggestion, Japanese shares rose 2.9%, Chinese shares eked out a 0.6% gain and the Australian share market gained 1.6%.
Friday night saw the rally in shares continue boosted by further easing from the People’s Bank of China, good earnings results in the US and surprising gains in business conditions surveys in both the US and Europe – that was a big surprise as analysts had forecast a further weakening in the pace of activity.
As a result, eurozone shares rose 2% on Friday night, our market jumped 1.6% on Friday and the S&P 500 ended 1.1% higher by the close early Saturday morning, our time.
Following the positive global lead ASX 200 futures rose 55 points or 1%, pointing to a positive start to trade for the Australian share market on Monday.
While bond yields rose a bit in the US, they were flat in Australia and fell sharply in the Eurozone on the prospect of more ECB quantitative easing.
Commodity prices, led by gold and oil, fell as the $US rose and the Aussie dollar eased on Saturday morning to just over 72 US cents in the value of the $A.
So the stage is set for a solid start to trading across Asia, especially in the wake of the move by the Chinese central bank to cut its key lending rate by 0.25%, deposit rates by 0.50% and to free up another $US90 billion for lending by trimming the reserve requirement ratio.
The central bank also abolished its last control on deposit rates in China, leaving banks free to compete for depositors’ funds.
Attention on Wall Street this week will be on the results of Apple and Twitter, as well as a group of oil and gas giants led by Shell, BP, Chevron and ExxonMobil.
The Dow rose 157.81 points, or 0.9%, to 17,646.97 and ended the week with a 2.5% gain.
The Nasdaq added 111.81 points, or 2.3%, to 5,031.86, and gained 3% over the week, its strongest weekly advance since July. That was thanks to the better than expected results from Amazon, Microsoft and Alphabet (Google).
That also helped the S&P 500 add 1.1% on Friday to 2075.15 and 2.1% over the week.
The boost from China’s rate cuts added to already strong gains for the European markets from the ECB’s move the day before and the Stoxx Europe 600 Index added 2% on the day and 4.5% for the week – its third straight weekly gain.
Closing ahead of China’s move, Asian markets had solid days on Friday – the Shanghai Composite Index rose 1.2% and the Nikkei jumped up 2.1%.
Gold, oil and copper fell for the day and week.
