Most sharemarkets enjoyed a solid trading last week, thanks to rising confidence about stronger US growth, signs that the global oil market is rebalancing and the new debt deal for Greece which went more smoothly than expected.
Overall, most investors have quickly accepted that US interest rates will rise shortly – possibly in June, almost certainly in July.
As a result, US shares rose 2.3%, eurozone shares gained 3.4%, Japanese shares were up 0.6%, Australian shares added 1%, but Chinese shares dipped by half a per cent.
On Friday, eurozone shares rose 0.1%, the US S&P 500 gained 0.4% in quiet pre-holiday trade with the US market closed for Memorial Day on Monday (tonight our time).
Australian shares rose 0.3% and Japanese shares were up nearly 0.4%, despite the latest inflation figures showing deflation deepened in April.
The positive global lead saw the ASX 200 futures market rise 23 points or 0.4% pointing to a positive start to trade for the Australian share market later this morning. Helping sentiment in Australia today will be a solid rise in the global spot iron ore price on Friday night – up 3.4% to $US51.15 a tonne.
Oil prices rose and the $A fell as the $US rose.
Wall Street had its best weekly run since early March, as investors took a more optimistic tone on the US economy. US stocks closed slightly higher Friday, in the wake of Federal Reserve Chairwoman Janet Yellen signalling that a rate hike will almost certainly happen in the next two months.
The Dow rose 44.93 points, or 0.3%, to close at 17,873.22, adding 2.1% for the best weekly performance since March 18. The S&P 500 Index added 8.96 points, or 0.4%, to finish at 2,099.06, for a 2.2% weekly gain, the best since March 4.
And the Nasdaq Composite jumped 31.74 points, or 0.7%, to close at 4,933.50, for a 3.3% weekly gain, the best week since mid-February.
Technology and financial shares lead the way higher. But the utilities sector, which has been 2016′s top performer up to a couple of weeks ago when the chances of a rate rise grew, was again the worst performer.
In metals, gold slid by 3.3% over the week, while West Texas Intermediate crude futures rose 3.6% to $US49.46 a barrel, after topping the $US50 a barrel mark on Thursday.
As solid as the gains were, the Financial Times pointed out that investors continue to withdraw billions of dollars a week from investment funds.
“Global equity funds suffered their seventh consecutive week of outflows, shedding another $9.2bn for the week ending May 25, taking their total outflows for the year above $100bn, according to data from EPFR,” the FT reported.
"It comes off the back of a week of positive news, with signs of a pick-up in US growth and inflation, alongside rising oil prices and dissipating concerns about the Greek debt crisis.
"The S&P 500 is up 1.2 per cent for May, with strong gains for financial and technology stocks over the week, which have risen 1.9 per cent and 3 per cent, respectively. In Europe, German, French and UK bourses are all in positive territory for May, with the Euro Stoxx 50 index up 1.42 per cent.”
But the FT noted that despite this positive news and performance, investors are still selling down their investments in equities, and there’s no sign the withdrawals are going to slow anytime soon.
