So will markets tiptoe deeper into September or charge after last week’s late revival?
The Australian market will open strongly today after a 79-point gain by the close of futures dealings on Friday that followed on from the 45-point gain in physical trading earlier in the local trading session.
Then markets in Europe and the US rallied later Friday to cap off a strong weekly performance, rebounding from the Federal Reserve-induced slump.
Europe’s Stoxx 600 index added 1.5% for the day on Friday and 1% for the week after weeks of soft to sliding efforts.
A big unknown today and this week is the Russian reaction to gains made by Ukrainian armed forces in the north and south of the country.
Some reports Russian troops have been pushed back, suffering big losses in the north and going on past performance, President Putin doesn’t like that and usually throws a tizzy and issues a big threat.
High gas and energy costs, rising inflation and a worsening economic outlook, all look worrisome but Europe caught Wall Street’s late wave of positivity.
The Dow jumped 377.19 points, or about 1.2% to 32,151.71. The S&P 500 added 1.53% to 4,067.36, and the Nasdaq Composite had another strong session, climbing 2.11% to 12,112.31.
The week saw the three averages end a three-week losing streak. The Dow added 2.66% on the week, while the S&P 500 surged 3.65% and the Nasdaq ended 4.14% higher.
Investors in fact ignored another warning from Federal Reserve Chair Jerome Powell who again made it clear that he is “strongly committed” to bringing down inflation and that will involve leaving interest rates higher for long than many in the markets think.
Friday saw the ASX 200 close 0.7%, or 45.5 points higher at 6,894.2. The market was lifted largely by a strong performance from heavyweight BHP, which gained 3.17%, which left the shares up more than 3.6% for the week.
The positive finish took the ASX 200’s weekly gains to 0.96%, the best week for three weeks.
Now the focus is back on just how far and fast the central bank will go in lifting rates.
This week’s US consumer inflation data (tomorrow night) will have an impact but for now the Fed is seen as being committed to higher rates.
July saw more and more fund managers, brokers and analysts abruptly seemingly wake up and found themselves convinced the Fed was changing.
That was ignoring the terrible first half of the year, thanks to Vlad Putin’s invasion of Ukraine and the way that destabilised economies, share prices and commodity prices, especially energy.
Those gains were ill-won, if you think about it. because they came off the back of seriously wrong thinking – a sort of fool’s paradise for a month to six weeks that was abruptly ended by the post-meeting statement by Jay Powell in August and then a couple of speeches (the last late last week) where he reinforced the message that the central bank was not heading off on a rate-slowing fantasy.
The fairy tale in some ways was worse than the harsh realities it overwrote for a month or so.
From mid-July to mid-August, the S&P 500 index jumped 16%. The MSCI World index rose by a similar degree. The ASX 200 was up around 9% from mid-June to mid-August.
Now, approaching mid-September, the realities of the northern autumn and winter have arrived and investors are hunkering down for a nasty winter after the Fed char made it very clear he and the central bank were not for turning.
Were last week’s gains a sign of the reluctant acceptance of the reality that markets have to wait until the Fed’s game is played out?
