So where now to for markets after the solid rebound of the past three weeks?
Judging by the way they faded on Friday, markets will meander for a while in Asia at least, as investors make up their minds about whether to keep pushing prices higher.
But the ASX will start flat this morning after ending last week down one point on the futures market on Saturday morning.
That was after a solid rally last week, which petered out in Friday’s fall. But markets still had their best week so far in 2016.
MSCI’s index of world shares lost a quarter of a per cent on Friday, but was up 3.7% for the week, the best gain since October.
In fact a day or so of weaker trading this week wouldn’t surprise – watch what Japanese investors do in Tokyo because that is where a lot of the recent instability has been generated as the markets there adjust to negative interest rates.
The past week saw the rebound in markets continue.
US shares rose 2.8%, Eurozone shares added 4.7%, Japanese shares rose 6.8%, Chinese shares gained 3.5% and the Australian share market ended 3.9% higher.
Bond yields were mixed, oil moved a bit higher along with other commodity prices as did the Aussie dollar which ended just over 71 US cents and in demand in the ‘risk on’ rally.
But Friday brought a different tone as the rally ran out of puff and oil prices faded.
US consumer inflation was stronger than expected (at a core level), which got some of the noisy minors in the markets chattering on about the Fed and rate rises.
The Dow and the S&P 500 had their best weekly gains since November on Wall Street.
The S&P 500 trimmed early losses to finish less than a point lower at 1,917.78 on Saturday morning. The index added 2.8% for the week, the best for four months.
The Dow also trimmed a 110-point drop to close 21.44 points, or 0.1%, lower at 16,391.99. It was up 2.6% for the week, which was also the best in four months.
And the Nasdaq Composite started in positive territory, but gradually lost those gains to end up 16.89 points, or 0.4%, at 4,504.43, for a rise of 3.9% over the week, the largest and most convincing rally since mid-July.
In Australia, the local sharemarket enjoyed its best week in three months. The ASX 200 lost 0.8% on Friday, to close at 4952.8. The All Ordinaries also ended down 0.8% to 5008.3.
BHP Billiton jumped 10.1% to $16.61, while Rio Tinto added 5.3% to $42.62.
The banks also rose, with the Commonwealth up 0.1% to $73.43. National Australia Bank rallied 6.1% to $25.62 after a solid trading update and the ANZ was up 5.5% despite a rise in bad debts in Asia to $23.40, and Westpac added 6.1% to $29.78.
Telstra fell 5.2% to $5.28 after a flat profit, but Woolworths rose 3.5% to $22.95 while Wesfarmers added 2.3% to $43.43. Woolies and Wesfarmers both report interim results this week.
The final week of the December 31 profit season will pressure the local markets as well.
Look especially at BHP Billiton, Woolworths, QBE, Wesfarmers and Qantas results and investor reaction to the figures, particular BHP’s decision on its dividend and Woolies’ comments on losses and other costs in its hardware adventure.
