Shares markets face a testing week with key Chinese economic data to be released, the looming fear of Japanese government intervention to try and halt the rise in the yen, the start of the US March quarter earnings season, and the expected slicing of world growth forecasts by the International Monetary Fund and World Bank.
That will make for a volatile week to follow falls on many markets last week as global growth worries returned. The weakness came despite the rally in oil prices, which up until now, had usually helped push share markets higher.
Japanese shares fell 2.1%, getting hit by a further 7% rise in the value of the yen. US, European and Australian shares all fell 1.2%, with worries about banks continuing to weigh on the Australian share market, and Chinese shares fell 0.8%.
Bond yields fell and the yen rose as some investors looked for safety amid the return of global concerns.
The yen’s rise has caught Japan unawares and it is now 12% higher than the January 29 shock news from the Bank of Japan that produced the move to a partial negative interest rate regime in Japan.
The higher yen is hitting exporters and the stockmarket has fallen 20% in the past year, with half of that happening since the January 29 announcement.
The Aussie dollar eased but remains above 75 US cents.
But despite the weakness in the greenback, commodity prices fell instead of rising (the value of the greenback influences the daily movement of commodity prices, being the pricing currency).
Metal prices fell sharply (copper was down 3.6%), but gold was stronger and oil rose on optimism that OPEC will agree to freeze oil supply at its April 17 meeting.
It won’t, not with 100% participation from Iran, and it wants to boost oil production to what it was before the western sanctions were imposed – around 4 million barrels a day.
Friday saw an outburst of optimism and European shares added 1.4% and the US S&P 500 rose 0.3% helped by gains in energy shares as the oil price rose 6.6%.
Tokyo rose 0.1%, Shanghai, India and Singapore fell and the Aussie dollar market fell 0.5%.
But Friday night’s positive lead from offshore (Wall Street’s gains shrank as the day went on) saw the ASX 200 futures eventually end 20 points or 0.4% higher at the close, pointing to a positive start to trade later this morning for the Australian market.
On Wall Street the S&P 500 rose 5.69 points, or 0.3%, to close at 2,047.60, but lost 1.2% over the week. The Dow gave up the bulk of a 150-point advance to end the day with a gain of 35 points, or 0.2%, closing at 17,575.96. It also lost 1.2%. And the Nasdaq added just 2.32 points at 4,850.69, and lost 1.3% for the week.
Several of the biggest banks and financial groups are due to release quarterly results this week.
They include JPMorgan Chase, Bank of America, Wells Fargo and Citigroup. The weak trading environment in the first quarter will hit bank profits, and investors will also be looking for updated information on banks’ credit loss provisions for loans to the energy and mining sectors. European stocks ended the week on a strong note on Friday night. The Stoxx Europe 600 index rose 1.2% to end at 331.86, after closing 0.8% lower on Thursday. The index lost 0.4% over the week, its fourth-straight losing week.
London’s FTSE 100 index rose 1.1% to 6,204.41, closing at the highest level so far this year. France’s CAC 40 index jumped 1.4% to 4,303.12, while Germany’s DAX 30 index was up 1% to 9,622.26.
Italian banks were among Europe’s top performers. Those gains sparked a 4.1% gain for the market in Milan making the Italian market the best performer among European bourses on Friday.
In Australia local investors will focus on offshore news this week, with the big local event the jobs data for March on Thursday from the Bureau of Statistics. Economists think up to 20,000 new jobs could be reported, and the jobless rate around 5.9%-6%.
The ASX 200 fell 1.3% for the week to 4937.6, including an 0.5% loss on Friday. That was its third straight week of losses.
The All Ordinaries fell 0.5% on Friday and 1.1% for the week to end on 5018.2. Tokyo fell 0.4% and the rumoured yen intervention from the Bank of Japan and the Government remains a big concern.
Watch events in Japan and China so far as local markets are concerned this week – they could be influential.
