Take the value of the Aussie dollar as the best indicator of how markets sit at the start of this week.
Despite the semi-euphoria seen late in the week after remarks by Fed Chairman Ben Bernanke, which initially boosted the dollar to close to 93 cents, by the close of the week’s trading on early Saturday morning, the currency had sagged back to the 90.45 level US cent level.
In fact the Aussie dollar briefly dipped to 89.99 US cents on Friday night, the first time it has been below 90 US cents since 2010.
A return under that level in coming weeks might see the Reserve Bank not cut rates for a few months if the fall is sustained.
The hard heads in the forex market had worked out that what the Fed chairman said hadn’t changed a thing really about the end of quantitative easing – it will happen sooner than later – and certainly within the next three months.
For the local market, a moderate start is expected today with the share price index futures contract showing a 14 point gain on Friday night to 4950.
Earlier the market ended the week up 2.7%, thanks to those Ben Bernanke comments as it shook off weak economic news from China in particular.
The ASX200 index was up 8.2 points, or 0.17% at the close Friday at 4,973.9. The All Ordinaries index was up 10.6 points, or 0.21%, at 4,957.5.
US bond yields eased, with the yield on 10 year bonds ending around 2.59% a touch lower than earlier in the week – but they had been as low as 2.52% earlier in the day.
Gold eased on Friday, closing at $US1277.60 an ounce, but notched its biggest weekly advance in nearly two years of 5.4%. But it is still down 24% for the year so far.
US West Texas Intermediate oil for August delivery rose $US1.04 to settle at $US105.95 in New York, up 1% for the day and 2.6% for the week.
In London August Brent crude rose 1% to end at $US108.81 for a similar-sized weekly gain.
In the US Wall Street ended with a bit of a whimper on Friday as that reality started being appreciated by sharemarket traders who are eternally optimists.
As a result, Wall Street coasted to a weak close early Saturday as reality of the real message to markets from the Fed and chairman Bernanke, sank in.
The Dow ended up 3.38 points, or 0.02% at 15,464.30 on Friday.
The Standard & Poor’s 500 Index was up 5.17 points, or 0.3%, at 1,680.19.
And the Nasdaq Composite Index was up 21.78 points, or 0.6%, at 3,600.08.
But as a result of Mr Bernanke’s comments on Thursday morning our time, which followed the release of the minutes of the last Fed meeting, major markets around the world ended the week with their best weekly gains since last November on Friday night.
On Wall Street, the Dow and the S&P 500 hit all-time closing highs for a second day, and the S&P 500 rose for a seventh straight day, and had its best weekly percentage gain since early January.
So far this year, S&P 500 is up 17.8%, and 3% for last week, the Dow was up 2.1% and, the Nasdaq ended 3.5% higher. It was the third straight week of gains for all three.
The MSCI world index was up 0.1% and 3.4%, its best weekly percentage gain since November.
