Will the markets have more of what upset them last week, or will things become more strained if the US debt talks fail to make progress and Europe again wobbles?
Thankfully the China ‘hard landing’ fears have been put to rest for another three months after last week’s solid second quarter GDP numbers and production data.
US earnings reports will be a factor, especially with a string of tech giants due to report this week.
Technology could become a hot spot or a bust this week.
The question for investors is did Google’s very strong result last week foreshadow a solid quarter for the tech sector, or was it a one-off because of the company’s dominance?
Some analysts suspect it could be the latter.
Last week US markets started focusing on the debt ceiling talks after being dragged to the story by the downgrade warnings from Standard & Poor’s and calls for quick action from Fed chairman Ben Bernanke and leading bankers, such as JPMorgan’s Jamie Dimon.
Bernanke also dashed silly hopes from the markets that the Fed would rescue them with another splash of easy money.
For the week, the S&P 500 ended down 2.1%, while the Dow shed 1.4% and the Nasdaq fell 2.5%.
That was after the Dow closed up 42.61 points, or 0.3% on Friday.
The S&P 500, added 7.27 points, or 0.6%, to close at 1,316.14 and the Nasdaq rose 27.13 points, or 1%, to close at 2,789.80.
Standard & Poor’s warned there is a one-in-two chance it could cut the United States’ triple-A rating if an agreement is not reached soon.
And on Friday, S&P also put on review for possible downgrades a range of powerful financial firms — many of them little known but crucial to the country’s financial infrastructure as they handle US government securities which are central to the operations of most of the companies cited.
These groups include the Depository Trust Co, which facilitates payment transfers among major banks, as well as several Federal Home Loan Banks and Farm Credit System Banks.
Also singled out were Fannie Mae and Freddie Mac, the two government-sponsored (and now controlled) enterprises that are central to the residential mortgage market.
In Australia the share price futures index is pointing to a flat start later this morning with the SPI200 unchanged at 4458.
At the close on Friday in Australia, the ASX200 index ended down 17.2 points, or 0.4%, at 4473.5, while the All Ordinaries index fell 18.6 points, or 0.4%, to 4542.7.
The dollar was at $US1.0653, off more than a cent from the previous week.
Australia’s ASX 200 Index dropped a nasty 3.9% last week as the external worries were joined briefly by the carbon tax fears, and then boosted by the David Jones earnings and sales downgrade which prompted a rather hysterical sell-off in retail shares.
On Friday, BHP Billiton lost 71c to close at $42.89 after the market failed to be convinced by the $US15.1 billion ($A14.13 billion) takeover of Petrohawk Energy.
But the action was in retailers such as David Jones, Myer and Harvey Norman, which fell for a second day.
David Jones fell 5c, or 1.6%, to $3.15. That was the lowest the shares shave been since April 2009.
Myer was down 5c, or 2%, at $2.43.
It hit a low of $2.41 in trading, the lowest the shares have been since listing in late 2009 at $4.10.
Harvey Norman fell 3c to $2.27, which was a year low for the retailer. It was also the lowest the shares have been since March 2009, as the markets were starting their rebound.
JB HI-Fi hit a two year low Friday, closing at $15.40, down 15c or 1.6%.
Woolies fell 5c to $27.35, but Wesfarmers, which owns Coles and Bunnings, rose 35c, or 1.1%, to $30.37.
Flight Centre was up almost 1% to $21.40 after upgrading its profit guidance due to low airfares and the higher Australian dollar.
News Corp non-voting shares lost 1.8% to $15.36 in after hours trading after news that another senior executive in Les Hinton, the boss of the Dow Jones Co, had quit.
News shares fell 2.8%, or 43cs, to $14.77 in Sydney and News Corp non-voting stock slid 44cs, or 3%, to $14.32.
And on Sunday night, our time, Rebekah brooks, the former head of News International and editor of The Sun and The News of the World was arrested by London police, the 10th current or former News Corp executive or journalist arrested in connection with the deepening scandal.
In the rest of Asia the MSCI Asia Pacific Index declined 1.9% to 135.68.
Banks were again sold off across the region with the Commonwealth Bank shedding 5.3% in Australia last week to end Friday at $49.02.
The NAB lost an even larger 6.9% over the five days to $23.46 by the close on Friday.
Japan’s Nikkei Index lost 1.6%, as did South Korea’s Kospi Index.
The Hang Seng in Hong Kong dropped 3.7%, but China’s Shanghai Composite Index rose 0.8% after the better than expected second quarter GDP figures, and solid production and import data which looked better than at first glance.
Europe’s markets suffered their biggest fall in a month with the Stoxx Europe 600 Index down 3.5% to 266.91.
Italy’s FTSE-MIB index ended the week down 3.1% after losing more than 7% the week before.
