The big question is whether markets can ‘go on with it’ this week after Thursday’s mega bounce and Friday’s more restrained follow-up.
What was bearish news before last Thursday will now be seen differently with investors looking for even the smallest positive in the worst news.
Thanks to the surprise inflation outcome, last week effectively saw the resumption of a bear market rally, which began in mid-October. The question now is if and / or when the ‘bear market’ qualifier disappears.
Some urgers were claiming the China re-opening story is still on track after the county eased Covid testing and quarantine rules for international travellers, but analysts with a memory said China first relaxed these rules for international visitors in June and didn’t follow with any further move to open up further.
If anything, the surge in cases from April into July meant no chance of a further easing and the situation is similar this time with Covid case numbers currently over 10,000 a day which is around the level in April.
But it is possible President Xi Jinping could say something at the G-20 summit in Bali today and tomorrow that will once again set the China bulls off and stampeding.
The S&P 500 closed out its best week since June as a report on Thursday showing slowing inflation raised hopes that the Federal Reserve would soon slow its tightening campaign.
A fall in the level of US producer prices in October from September’s 7.2% is forecast – but the size of the fall will be the key.
UK and Canadian consumer inflation data out this week will not have the same impact except to add to the statistical misery Britain now becoming a rotten reality with a growing recession and rising inflation.
The continuing implosion of the crypto world is not enough to worry wider markets – except to hold some big smartypants investors up to ridicule for being too bullish and not sceptical enough, especially after the first round of debacles from May onwards. The gyrations Elon Musk is engaging in at Twitter to save his $US44 billion investment (see separate story) are of far more importance to stockmarket sentiment.
The ASX will be looking for a 40-point or so gain today after the Share Price Index ended up 42 points early Saturday, Sydney time. That was after Friday’s 194-point surge which took the gain for the week to 3.85%.
Wall Street saw the Dow end up 0.1% at 33,747.86 on Friday while the S&P 500 added 0.9% to end at 3,992.93.
This brought its gain for the week to 5.9%, its best week since the one ended June 24 of this year. The Nasdaq added about 1.9% to end at 11,323.33 as investors snapped up tech shares on hopes interest rates would ease.
The Dow was up 4.1% for the week, while Nasdaq leapt 8.1%.
Eurozone shares rose 4.8%, Japanese shares gained 3.9% and Chinese shares rose 0.6%, thanks to that easing of traveller test rules for inbound passengers.
The Aussie dollar rose to around 67.09 US cents after Thursday’s big rebound.
US bond yields fell sharply, with the key 10-year security losing more than 0.35% over the week to end at 3.82%.
