Markets will open quietly in Australia and Asia today after last week’s madcap Trump-inspired rally, which ran out of puff in trading in Europe and the US on Friday night.
At the same time, volatile trading in many commodity markets and big rises and falls in copper and iron ore will confuse investors as some start worrying that a bust could be coming very quickly.
Copper prices surged 11% over the week and fell in an unprecedented trading range of of 15% in European and US trading, iron ore futures jumped past $US90 a tonne, coal prices edged higher, nickel rose, then fell, but oil and gold sold off sharply.
Actual iron ore prices closed above $US74 a tonne on Friday night to be up 25% over the week.
Apart from the curious belief that the uncertainty of the new Trump Presidency in the US will be good for business, there is little else to drive markets higher.
There is a firming belief that US interest rates will rise for a second time at next month’s meeting of the US Federal Reserve.
So Eurozone shares fell 0.5% and the American markets fell 0.1% on Friday nights as investors paused to digest Donald Trump’s election win and the commodity instability.
The soft global lead saw ASX 200 futures fall 0.3% by the close on Saturday morning, and the Aussie dollar fell by just under 1% on the day to end at 75.50 US cents and looking to go lower (despite the soaring price for iron ore).
As a result the Australian market will open down this morning – by how much depends on the news flow from Washington and New York over the weekend.
After the 3.7% surge in the ASX 200 last week some short term pull back is to be expected, according to the AMP’s chief economist, Dr Shane Oliver.
As well as Australia other major share markets saw strong gains for the week but emerging market shares fell sharply, bond yields surged sharply on expectations for higher inflation and interest rates and the $US rose and this along with sharp falls in Asian currencies.
For the week US shares rose 3.8%, Eurozone shares rose 2%, Japanese shares rose 2.8%, Chinese shares rose 1.9%. In fact China’s key Shanghai market is now in bull market territory.
After rising 0.8% on Friday to a close of 3,196.043, the Shanghai market has now risen 20.4% from its January low.
The technology-focused Shenzhen Composite, which rose 0.5%, is up 29.4%, while the CSI300, an index comprising the top 300 stocks on both the Shanghai and Shenzhen exchanges, is up 19.7% from its low.
Unlike the last bullmarket in the first half of 2015, this one has happened more sedately, but that is not to say speculation isn’t happening China.
It seems to be concentrated in commodities markets where the various exchanges have been tightening trading rules (such as deposits) in the past two weeks.
On Wall Street, the Dow hit a record closing high for the second day in a row on Friday, ending up 0.21% at 18,847.66. The positive close brought the Dow Jones’ weekly gains to 5.3% from Friday’s close.
The S&P 500 meanwhile fell 0.14% but finished the week up 3.8%.
And the Nasdaq Composite, which saw a sell-off mid-week on fears that president-elect Trump might target Silicon Valley companies, rose half a per cent on Friday and 3.7% for the week.
Oil trading saw Brent crude finished the week down 1.8%, at $US44.66 a barrel, while US crude lost more than 5% to close around $US43.41. Gold fell more than 6%, but copper jumped 18%.
