The coming week will be dominated by a string of major meetings among central banks, data on GDP and other areas from Australia, jobs from the US, OPEC oil from Vienna, weak commodity prices and the strength of the greenback.
The central bank meetings will cover interest rates in Australia and the huge quantitative spending program of the European Central Bank. India’s central bank also meets tomorrow.
And investors will be watching China’s markets very closely after the very unexpected sell-off on Friday as a government crack down on leading brokers and investors expanded (arresting one).
Last week saw a mixed performance in a holiday shortened week. Eurozone shares for the week were up 1% on good economic data and expectations of the further ECB easing this week; Japanese and US shares were basically flat, Australian shares lost 1% (but after that 4.1% jump the previous week) and Chinese shares ended down 5.4% in response to soft profit data and the growing regulatory probe into brokerages.
Bond yields fell, commodity prices fell (led by oil) and gold dropped (to new five year plus lows) and the $A eased as the $US rose.
In fact the greenback looks set to rise again this week, meaning more pain for commodity prices and producers.
Friday saw eurozone shares lose 0.1% in light trading, while on Wall Street, the S&P 500 gained 0.1% in a holiday-shortened session. Our market lost 0.1% on Friday.
And reflecting the lack of a lead in from the half day session on Wall Street, the ASX 200 futures market fell just 1 point overnight Friday, pointing to a flat start for the Australian share market later today.
The Shanghai Composite though was the big story from Friday – the sharp fall came out of the blue and was the largest since the big sell-off in August.
That was after news emerged of an expanded and rapidly moving investigation into securities brokerages over activities in the big slump mid-year, including insider trading and illegal transactions.
On top of that, October profits of China’s big industrial companies fell sharply which surprised investors.
And investors are nervous ahead of the restart of initial public offerings this week after a hiatus since the market collapse in August. That could trigger a drain on money in the market, and in turn spark another sell-off, as happened mid year.
The Shanghai Composite lost 5.5% on Friday, but had been down as much as 6.1% inside the final 15 minutes of trading.
The smaller Shenzhen Composite ended 6.1% lower, after being down close to 7%. Hong Kong’s Hang Seng lost 1.9% as well.
But the Chinese market might get a pick-me-up tonight if the IMF agrees to include China’s yuan as one of its reserve currencies. The Fund deferred a decision earlier in the year.
If the decision is positive, then it should boost the yuan which traded around three-month lows on Friday.
In Australia, the week saw the massive destruction of shareholder value at law firm Slater and Gordon, with 75% of its market capitalisation being wiped out following legislative changes in the UK budget. The shares plunged 26% on Friday alone, closing at just 69 cents.
The shares are down 89% since the peak in May of $6.49.
BHP Billiton shares were also whacked on Friday night in London, losing 3% after dropping more than 8% in Australia last week.
The shares will face more pressure again today.
