Judging by the futures market, it will be a rough opening on the ASX today after Wall Street’s somewhat surprising across-the-board dip on Friday night.
That ended what was the roughest week this year since January for many markets.
But there could be a couple of other issues to take into account.
The first is the more complete outline of the bailout of Greece (which will not be enough in the medium term); the second is the fall-out from the Henry Tax review and the federal government’s reaction.
There will be a lot of trying to pick winners and losers from the Tax Review, but there’s a long way to go before these policies become fact.
There’s also the Federal budget next week to be considered with the tax changes to be a part of that. And there’s the Senate and the Federal election later this year.
Oil and gold rose Friday night in commodity markets; in fact gold hit its 2010 high in the wake of worries about Greece, the oil slick, the Goldman Sachs saga and a couple of weak tech profits.
That will make the outlook for gold and oil producers here today a little better.
So, the 62 point fall on the Share Price Index on Friday night/Saturday after Wall Street’s 158 point, 1.4% drop for the Dow, will be a guide, but those other factors could play a role during the day, especially if Greece is rescued.
Our market fell 1.5% last week which accounted for the 1.4% fall in April after the 5.6% jump in March.
That means super fund investors will be battling to make a positive return for the month (2.9% for the median balance fund for March).
Everyone will be watching the above factors, but it will pay to keep a wary eye on China.
There was a report overnight of further tightening of controls on property lending with developers told to put up as security existing projects and not undeveloped land.
The continuing move to control the overheating property sector helped most Chinese shares fall Friday and the index finished down on the week and the month.
The Shanghai Composite Index rose 0.1% Friday, despite the widespread falls.
Chinese markets are closed today for a holiday and Japan will be closed until Thursday. The UK markets are shut and others in Europe will be shut for Labour Day (May Day).
The holiday will help investors to assess the reaction to Wall Street and the Greek rescue, but the crunching of property remains the biggest issue for them.
The Shanghai Composite fell 7.7% in April, the biggest decline since January.
Over the year so far it has lost 12% in value, making it the world’s second-worst performer.
And the weekend saw confirmation that the Chinese economy is still going gangbusters with another strong rise in the government’s Performance of Manufacturing Index last month.
There’s no sign of the property crackdown hitting economic activity in the wider economy.
In the US they are absorbed with the recovery in the economy (GDP rose an annual 3.2% in the first quarter, down from the 5.6% annual rate in the December quarter), Greece, Goldman Sachs, the oil spill in the Gulf of Mexico and the quarterly profits reports which are doing better than expected.
But more worries Friday about Greece, reports of a criminal probe into Goldman Sachs, the oil slick and some disappointing tech earnings dragged the major indexes to their worst week since January.
For the month though, the major indexes posted solid gains.
In the US, after hitting a fresh 19-month high at the end of the week before, the Standard & Poor’s 500 lost 2.5% last week (1.6% on Friday alone), thanks to the big falls on Wednesday and Friday. The Dow lost 1.4% Friday and 1.8% last week and Nasdaq shed 2.7% (2% on Friday alone).
Over April, the market rose with the Dow up 1.4%, the S&P 500 1.5%, and the Nasdaq 2.6%. Last week and Friday therefore took a fair chunk out of April’s rises.
European shares where hit hard by Greece, suffering their biggest weekly drop since February.
The Stoxx Europe 600 Index fell 2.8% for a third weekly decline.
That pushed the index down 1.4% for April. That cut the year’s gain to just 2.4%.
Over the week, 15 out of the 18 western European markets fell. Germany’s DAX slid 2%, France’s CAC 40 dropped a nasty 3.4%, while the UK’s FTSE 100 lost 3% in the worst weekly fall since last October.
London was down 2.1% last month, so the falls Wednesday and Friday destroyed all the positive performance.
Germany eased 0.4% and France was off a solid 4% for the month thanks to worries about the exposure of French banks to Greece.
In Asia, the MSCI Asia Pacific Index rose 0.4% over the week and 0.6% in April (so Asia as a whole is still doing better than Europe).
Hong Kong’s Hang Seng Index fell 0.6% last week; Australia lost 1.5% in value and Shanghai shed 3.8% which was half the overall monthly fall of 7.7%.
Tokyo lost 0.3% over the month.
