Asian stocks, including Australia fell last week, sending the region’s benchmark index to its lowest in more than two years.
But Friday’s quick reversal of Thursday’s commodity price spike, led by oil, should steady markets in the region today, and Australia’s bounce on Friday off the back of the higher resource stocks, could be sustained if resource stocks are resilient..
Oil prices fell more than 5% on Friday in the biggest one-day slide since 2004 as dealers completely reversed the previous day’s madcap chasing of oil and commodities. A weakening British pound helped push the US dollar higher.
Wall Street kicked higher Friday on the slump in oil and suggestions Lehman Bros might be rescued by a Korean Government-owned bank coming to its aid with a generous deal to buy 50%. It’s only a maybe, but some on Wall Street treated it has a fact and sent Lehman shares higher.
What should worry investors more is Warren Buffett ruling out any interest from his Berkshire Hathaway company in helping rescue Fannie Mae and Freddie Mac shareholders. He says his company was a shareholder eight years ago but sold when he realised the two companies were producing quarterly profit results to suit Wall Street and not reality.
The Standard and Poor’s 500 added 14.48 points, or 1.1% Friday to 1,292.20, the Dow jumped 197.85, or 1.7%, to 11,628.06 and Nasdaq was up 1.4%, or 34 points to 2414.71.
For the week to Friday, the Dow fell 0.3%, the Standard & Poor’s 500 Index lost half a per cent and the Nasdaq lost 1.5%.
Traders said the market was the thinnest since last Christmas. Only 888 million shares were traded Friday on the New York Stock Exchange, the lowest volume since December 26.
JPMorgan Chase & Co. strategists said investors should buy more financial stocks and US companies that rely on discretionary spending by consumers and sell energy and raw- material producers. But big institutional investors have been doing that since May.
That’s why financial stocks haven’t followed Fannie Mae and Freddie Mac lower. But Morgan failed to tell clients the downside of buying these shares, except for a rotation of investment objectives.
US banks and retailers face a year of misery with the banks having no money to lend and consumers no money to buy anything but essentials.
In Asia the MSCI Asia Pacific Index lost 0.8%t to 121.97 to take its losses so far in 2008 to 23%.
It was the 4th weekly fall in a row as Asian markets seem to be ignoring the up trend in the US.
Japan’s Nikkei Index fell 0.7% Friday, China’s CSI 300 Index lost 1.5% but Australia’s S&P/ASX 200 Index added 1.2% on the resource-driven rebound that will be tested today, despite the futures market showing a 70-plus point rise for the opening today. Friday’s rise cut the week’s losses to 1%, the 12th weekly fall in 14 weeks.
The ASX200 rose 56.2 points, or 1.2% to 4931.4 while the broader All Ordinaries gained 60.6 points, or 1.22%, to 5010.2.
BHP Billiton lifted $1.20, or 3.08%, to $40.15, Rio Tinto gained $2.10, or 1.77%, to $121.00 and OZ Minerals surged 19.5 cents, or 11.57%, to $1.88.
Babcock & Brown closed up 26 cents, or 11.71%, at $2.48, compared to $4.51 on Monday.
Among the banks, Commonwealth Bank was up 78 cents to $41.38, NAB was steady at $23.55 and Westpac added 34 cents to $22.00. The ANZ was up 8 cents to $15.67 after delivering a report explaining its controversial involvement with collapsed securities lender Opes Prime.
Insurance Australia Group reported a $261 million annual loss, but says its performance should improve this year. Its shares rose 6 cents to $3.75.
And Caltex Australia reported a fall in first-half earnings due to refinery shutdowns affecting production, and a narrowing of refiner margins.
Caltex shares finished 20 cents higher at $11.95.
Energy stocks were higher Friday and that will reverse today after that sharp fall in oil prices. Woodside finished $1.85 higher, or 3.35%, to $57.00, Santos 72 cents to $18.90 and Oil Search 12 cents to $5.69.
Woolworths dipped 84 cents, or 3.11%, to $26.14 ahead of its results this week while Coles’ owner Wesfarmers slipped 95 cents, or 2.89%, to $31.95 as investors continued to give it the thumbs down for the poor Coles numbers in its report on Thursday.
European shares had the best day for a fortnight Friday rose the most in two weeks as investors speculated takeovers may increase and the plunge in oil prices sent car companies and airlines higher.
Europe’s Dow Jones Stoxx 600 Index added 1.9% to 283.82, the biggest rise since August 5 and cut the week’s loss to 1.5%.
Despite the optimism of Friday it was the worst week for shares in the region for a month as reports signaled faster-than-forecast inflation in the US and Germany and a shuddering halt to growth in Britain where second quarter growth stalled, according to figures out Friday.
But the optimists in Britain looked at the lower oil price, some corporate activity in insurance, saw the possible Lehman Bros deal and said yippee!
The FTSE 100 jumped 135 points or 2.5% to be up 0.9% over the week.
Oil fell sharply. Turning Thursday’s big rebound in commodity prices into a one-day wonder that only confirmed the weakness in sector.
At one stage crude prices dropped more than $US6 a barrel, dropping the most in percentage terms since December 2004, as the US dollar also rebounded from Thursday’s weakness.
The main driver of Friday’s fall was BP restoring shipments on a Caspian Sea pipeline through Turkey, and a belated rea
