China resumes trading today, but US markets will be closed tonight for a national holiday, meaning global markets will have to cope with some more jitters in Shanghai for a while, plus flying blind for the next day because of the absence of leads from Wall Street.
But judging by the overnight futures market on Saturday morning, the ASX will open strongly – the share price index futures showing an 87 point gain today.
But that will be before the jittery Japanese and then the Chinese markets open for trading.
The turmoil in financial markets last week came amid continuing worries about global growth, and specifically the exposure of global banks to energy loans and rising bad debts if there is a recession.
But Friday’s strong rally in European and US shares was driven by a relief rally in banks and financials after good results from Commerzbank, stronger than expected US retail sales and a rebound in the oil price, thanks to short covering by speculators.
Despite this, US shares still fell almost 1% over the week, Eurozone shares shed 4.8%, Japanese shares plunged 11.1% and Australian shares lost 4.2%.
Sovereign bond yields in core countries (US, UK, Germany, Japan and Australia) continued to fall over the week and commodity prices excluding gold fell with the oil hitting a new seven year low on Thursday before rebounding by 10% or more on Friday. Copper fell and the Aussie dollar was firm as the $US remained under pressure.
On Wall Street, the Dow finished 313.66 points, or 2%, higher at 15,973.84, while the S&P 500 index jumped 35.70 points, or 2%, to 1,864.78. The Nasdaq Composite rose 70.67 points, or 1.7%, to 4,337.
But the gains weren’t large enough to avert a second straight weekly loss for all three main indexes. The Dow was down 1.4%, the Nasdaq lost 0.6% and the S&P 500 slid 0.8%. On Friday Japanese shares were slammed, capping their worst week since the 2008 global financial crisis. The Nikkei Stock Average finished down 4.8% for the day (it was down more than 5% at one stage) and 11% for the week, its biggest weekly percentage drop since October 2008.
The Nikkei’s year-to-date decline of 21% is now almost as steep as the losses in China’s mainland stock market, the centre of the global stock sell-off at the start of the year, and really the source of much of the stability since the middle of last year (aided by the way the Chinese are playing around with the value of its currency to try and choke off speculation).
Shares elsewhere in Asia were weak to mixed – Australia fell 1.2% on Friday, Hong Kong’s Hang Seng Index lost 1.2% at 18,419.58, the lowest since June 2012. The index posted a loss of 5% for the week and South Korea’s Kospi fell 1.4%. European stocks finished higher Friday, coming back from a sharp sell-off on Thursday, and held their gains after the release of sluggish 4th quarter economic growth figures for the eurozone and the start of the rebound in oil prices. The major indexes posted more steep weekly declines, however.
The Stoxx Europe 600 rose 2.9% to 312.41, trimming the week’s loss to 4.1%. it’s now down nearly 15% in 2016 and is 25% under its 2015 peak last April (It rose 6.8% in 2015, so those gains have evaporated).
London’s FT 100 surged 3.1% to 5,707.6, but still lost 2.4% over the week.
In Frankfurt Friday, the DAX 30 added 2.5% to 8,967.5, but recorded a 3.4% weekly loss and France’s CAC 40 closed up 2.5% to 3,995.0, but ended the week 4.9% lower.
