Don’t expect too much support for shares this week – in fact the odd sell-off could be more likely as investors lose their nerve ahead of the Federal Reserve meeting on Wednesday and Thursday, our time.
Last week’s gains in equities will be hard to replicate this week until we learn of the Fed’s decision around 4.15am Thursday.
There will be a lot of talk about tight trading ranges and ‘rangebound’ markets until we find out if the Fed is lifting rates or sitting put.
At the moment the guessing is no change.
US shares rose 2.1%, eurozone shares rose 0.5%, Japanese shares jumped 2.7% (helped by talk, again, of corporate tax cuts), Chinese shares rose 1.3% and the Australian share market gained 0.6%.
Bond yields rose in the US and in Australia but were flat to down in Europe.
Oil and gold prices fell but metal prices (led by copper) rose and the Australian dollar had a decent bounce back above 70 US cents and closed at 70.92.
The local market will start with a gain of around 25 points on the ASX 200 this morning, but again all eyes will be on how Shanghai opens after the release of the August economic data yesterday.
But it’s the looming Fed decision that will drive investor sentiment for the next three days or so.
On Wall Street, S&P 500 rose 2.1% last week to 1,960.79 – the biggest gain in 8 weeks, the Dow rose 2% to 16,431.15 – the best week since March, and the Nasdaq Composite jumped 3% 4,822.31 at the close on Friday – also its biggest weekly gain in 8.
The Shanghai Composite Index, which hasn’t had an up week in about a month, closed up 1.3% last week on Friday, while stocks in Hong Kong up 3.2% for the week, had their first positive week since mid-July.
Tokyo’s Nikkei was up 2.7% this week, helped by a 7.7% surge on Wednesday, which was its biggest daily percentage gain since October 2008. That was the first weekly rise in four weeks.
The Kospi Composite Index was up 3% this week, while Australia’s ASX 200 finished up 0.6%.
On Friday, the Nikkei Stock Average closed down and Australia’s S&P ASX 200 lost 0.5%. Shanghai stocks finished up 0.1%, while the Hang Seng Index closed down 0.3%.
South Korea’s Kospi was down 1.1% on Friday, after the Bank of Korea kept interest rates unchanged, as expected, for the third straight month.
