It was a late bounce that pushed Wall Street higher on Friday afternoon, but the question for investors around the world is whether it is sustainable, or of the dead feline variety which if it is, means there’s another slide around the corner.
Before that late rebound share markets fell sharply over the last week led by the US share market primarily on the back of worries about rising interest rates and bond yields, stretched valuations for mega tech and the deteriorating US/China relationship.
US shares lost 4.1%, Eurozone shares fell 4.8%, Japanese shares fell 4.6%, Chinese shares lost 7.8% and Australian shares fell 4.7%. Bond yields fell though reflecting safe-haven demand (especially in the US) which also boosted the gold price.
Iron ore prices rose back over $US71 a tonne in China which the weaker Aussie dollar will make even better for Australia, but the oil price fell. Metal prices though ended solidly on Friday after earlier weakness.
A fall in the US dollar saw the Australian dollar push back above $US0.71 by the close on Saturday morning and it ended just over half a cent over the week.
The AMP’s Dr. Shane Oliver says last week’s fall is unlikely to be the start of a major bear market.
“Every so often shares go through rough patches. We saw this most recently in February on the back of US inflation and interest rate concerns which saw US shares fall 10% and Australian shares down 6%,” he wrote in a weekend note.
“Shares managed to get through the seasonably weak months of August and September surprisingly well (except in Australia) but the worry list has pulled them back down again. So far shares have had a roundly 7% fall from recent highs.”
Friday saw the S&P 500 bounce 1.4%, ending a six-session losing streak — the longest of the Trump presidency. The Dow rose 1.2% and the Nasdaq Composite leapt 2.3%.
For the week, the benchmark S&P 500 shed 4.1%, the Dow dropped 4.2% and the Nasdaq fell 3.7%. The trio all staged their worst weekly performances since late March. Many US stocks (close to two-thirds of the S&P 500 are either close to or in correction territory (falls of 10% or more from their most recent peak) or bear territory (20% or more falls from their most recent high).
The yield on the US 10-year Treasury was 3.2 basis points lower at 3.1632% – around 10 points over the week from the seven-year high of over 3.26% on Monday.
Watch the Chinese markets later today as Asian trading resumes. The Shanghai Composite and CSI 300 — which tracks the 300 biggest companies on the Shanghai and Shenzhen exchanges — fell by near on 8% last week, keeping both in bear market territory.
It was a rough week after the market was closed the previous week for the Golden Week holiday.
For the 4th time this year, China’s central bank on Sunday cut the amount of cash that commercial lenders are required to keep on reserve in a bid to boost lending and economic growth. That caused the renminbi to weaken but did nothing to reassure investors.
Chinese growth and monthly and quarterly data plus inflation figures will be issued this week.
