Markets survived the comments from Fed chair, Janet Yellen on Friday night our time on the outlook for US interest rates (higher rates are coming, but not just yet).
Now for the usual start of month test from the US jobs report which is out Friday night, our time.
Markets in Asia should start fairly cautiously this morning with the ASX expected to start slightly weaker after a 4 point fall on the overnight futures market on Friday night. The local market ended lower on Friday with the ASX 200 off 26 points.
Eurozone shares rose 0.7% on Friday, mostly ahead of Ms Yellen’s remarks (and those subsequently from Fed Vice Chair, Stanley Fischer), but Wall Street reversed initial gains on the back of Janet Yellen’s more upbeat assessment of the US economy to end down lower as expectations for a rate rise this year rose.
Tokyo shares fell 1.1% on Friday after the monthly inflation report confirmed that the economy fell deeper into a deflationary rut in July, with underlying measures favoured by regulators also revealing a slowing in core inflation.
But the news of a sooner than expected rise in US rates should take some pressure of the yen and help Japanese shares to recover.
Last week saw eurozone shares rise 1.2%, US shares down 0.7%, and Australian shares also down, this time by 0.2%. Japanese shares fell 1.1% and Chinese shares last 1.7% by Friday. Viewed that way the local market didn’t do so bad for all the gloom and dooming about weak earnings results.
The AMP’s Chief Economist, Dr Shane Oliver wrote that “A ramping up of expectations for a Fed rate hike, which were reinforced by comments by Fed Chair Janet Yellen and Vice Chair Stanley Fischer, and downwards pressure on defensive shares weighed on the US share market and concerns about regulatory controls of interbank lending and property weighed on the Chinese share market.”
“In a broader sense some sort of share market consolidation/correction seemed likely after the strong gains in seen over the last six months,” he wrote at the weekend.
The Australian dollar and commodity prices were a bit softer as the $US rose. The Aussie ended at just over 75.30 US cents early Saturday (down around a cent over the week). Bond yields were up in the US but were flat to lower elsewhere.
On Wall Street, the Dow and the S&P 500 ended loser early Saturday morning thanks to those from fed chair, Janet Yellen,which were followed by comments from Fed Vice Chairman Stanley Fischer.
Together they sent a solid message to investors that the case for a rate increase from the central bank is gathering steam. But neither laid out any semblance of a timetable, leaving investors to watch the Fed meeting next Month and then December for possible rate rises.
The Dow fell 53.01 points, or 0.3%, to finish at 18,395.40, retreating an earlier 124-point gain, but trimming a 113-point loss. For the week, the Dow finished down 0.9%, for a second week in a row.
The S&P 500 index eased 3.43 points, or 0.2%, to close at 2,169.04, after trading up as many as 16 points earlier and bouncing back from a 12-point deficit.
The index saw a 0.7% fall over the week, for its second straight weekly fall.
And the Nasdaq rose 6.71 points, or 0.1%, to finish at 5,218.92, after being up about 41 points earlier and down as down around 20 points during the session. The index, lost 0.4% for the week, ending its eight-week streak of gains.
