The ASX will jump today as it moves back into synch with Wall Street which rose sharply on Friday.
But from the rebound will be limited by the federal government’s economic statement tomorrow and then the September quarter consumer price index on Wednesday which could very well turn sentiment on its head by the size of the rise.
And the complete takeover of the Chinese Communist Party and government by President Xi Jinping will test investor sentiment in China, Hong Kong and across Asia today.
The ASX’s Share Price Index was up 95 points in overnight futures trading on Friday.
The ASX 200 eased 1.2% last week which was a big difference to the very strong performance on Wall Street.
The Dow jumped 748.97 points, or 2.47%, to close at 31,082.56. The S&P 500 was up 2.37% to 3,752.75. The Nasdaq added 2.31% to 10,859.72.
Friday’s moves extended the market’s gains for the week. The S&P 500 and Dow gained 4.7% and 4.9%, respectively, while the Nasdaq rose 5.2%.
It was the best week since June for all three major averages.
That’s because Wall Street is sniffing changes in monetary policy stances in central banks and starting to paw the ground, looking for a rally, as Bank of America analysts suggested in the bank’s October global fund managers’ survey.
One thing to watch will be the value of the US dollar – if this belief that the Fed will start easing back on its rate rises (by size or frequency) then the greenback will also ease which could boost shares and commodities especially.
Before that Wall Street’s desire for a rally will be tested by the group of earnings reports from major techs, especially Apple and Amazon on Thursday, with Microsoft, Twitter and Alphabet also reporting.
Snap shares fell 28% on Friday to be down 22% for the week after the weak third quarter report and weaker outlook for this quarter.
Snap’s performance contrasted with that of Netflix – after its better-than-expected subscriber numbers (the importance of that metric is being wound back by the company from next year), the shares jumped by more than a quarter.
While Snap’s weak report hit other techs, Netflix’s surprise gains though lingered in the minds of many investors and the sector had a solid week.
Friday’s surge came amid suggestions that after the 0.75% rise in the federal funds rate forecast from the Federal Reserve at next week’s meeting, the US central bank might shift to smaller rises or even a pause to allow the central bank to assess the impact of its aggressive rate increases.
The suggestions came in a report in the Wall Street Journal and in then in separate comments from San Francisco Fed head, Mary Daly.
Eurozone shares were up 2.4% last week, feeding a little off the run on Wall Street and signs of a settling in the UK with Prime MInister Liz Truss departing as soon as a new leader can be found. That helped the FISE 100 to add 1.62% over the week.
But Japanese shares fell 0.7% and Chinese shares fell 2.6%. The Hong Kong market hit a series of 13-year lows on Friday.
The falls in the Chinese and Hong Kong sharemarkets came as the Chinese Communist Party’s 20th congress headed towards its predictable end with President Xi Jinping to be named leader for a third five-year term.
But importantly, he looked like having total control after humiliating former President Hu Jintao who was removed from the Congress in front of Xi on Saturday afternoon.
And as a result China’s Premier Li Keqiang and his ally Wang Yang will retire from the Communist Party leadership committee, paving the way for Xi Jinping to take full control of his cabinet.
Li and Wang were left off the list of 205 members of the Central Committee, which supplies the 25-member Politburo and the seven-member Politburo Standing Committee.
Those events will further shake the Chinese and Hong Kong markets and worry investors elsewhere in Asia and in Australia.
Wall Street’s strong gains on Friday and over last week came despite the 10-year Treasury yield surging to its highest level since 2008 and a mixed bag of corporate earnings reports.
The 10-year touched a high of 4.33% in morning trading on Friday and was at 4.228% in afternoon trading. The yield ended the previous week at 4.02%.
The yield moved lower Friday, as investors reacted to a Wall Street Journal article and comments from San Francisco Fed President Mary Daly, who said the Federal Reserve could begin to slow the pace of hikes.
The article in the Journal also suggested the Fed could consider a smaller hike in December, after it raises its fed funds target rate by three quarters of a point in November.
Bank stocks were a bright spot on Wall Street on Friday, with Goldman Sachs gaining 4.6% and JPMorgan Chase adding 5.3%. The weakish quarterly reports were forgotten.
