And the commentary on commodity prices applies equally to equities – watch the Fed, it’s the single biggest influence and will be well into 2014 and possibly beyond.
So, for that reason, the widespread solid gains most markets saw on Friday wasn’t due to investors confidence about economies or financial systems – it was all down to the fact the Fed will keep its money gushing into the US economy for the foreseeable future.
And as well remember, the Bank of Japan is also fuelling the Japanese economy and stocks, the Bank of England the UK economy and the European Central bank is goosing the eurozone economy with a rate cut and generous lending to banks.
So there will still be a lot of money sloshing around world markets well into 2014.
In fact the Japanese central bank’s spending campaign continues to produce better than expected results and the 1.9% annual growth rate estimate for the third quarter was better than expected, and helped send the Japanese market up more than 7% last week in what was the best performance around the world.
But the eurozone remains the weakest of the four major economies currently being supported by central banks – GDP growth slowed to just 0.1% in the September quarter from 0.3% in the June quarter, with Italy and France sliding into the red and German growth slowing as well.
And eurozone inflation was confirmed at a weak 0.7% for September on Friday night, with large parts of the southern area of the zone suffering deflation (such as Greece and Italy).
European shares may be up 15% or more this year but the rally isn’t reflecting current growth, more rose-tinted views of next year and 2015.
In the US, the Fed’s continuing spending helped markets to yet another set of record closes on Saturday morning, our time.
It was the sixth record close in a row for two key measures of the US share market.
The Dow and the S&P 500 Index both ended at new all time highs, boosted by a solid rise in the price of oil giant Exxon Mobil after Warren Buffet’s Berkshire Hathaway company emerged with a 40 million share stake, worth close to $US3.5 billion.
The S&P 500 index climbed 7.56 points or 0.4% to finish at 1,798.18. The Dow was up 85.48 points or 0.5% to close at 15,961.70. Nasdaq rose 13.23 points on Friday or 0.3% to end at 3,985.97.
The S&P 500 and Dow rose 1.6% and 1.3% respectively last week and the S&P 500 had its longest winning streak since February.
The S&P 500 is up 26% so far in 2013.
The Nasdaq rose 1.7% for the week, posting its first up week in three weeks and came despite the sharp fall in Cisco shares after a weak profit report and outlook.
On Friday, US markets ended higher despite some softer-than-expected economic data, such as a weaker-than-expected New York State area manufacturing report, a dip in industrial production and a bigger-than-expected drop in import prices and weak trade data (which will help cut GDP growth in the second estimate next week).
NASDAQ YTD – US tech strength solid, but US Fed remains a key support for markets
In Europe most markets ended with small gains last week.
The Europe Stoxx 600 Index rose 0.1% last week – not much, but enough to push the run of rises out to six weeks.
That’s the longest winning streak in almost 15 months. The weak growth data hit confidence, but not by much.
Friday saw the index dip 0.2%, as the slide in eurozone inflation in September was confirmed, with deflation confirmed for a few countries like Greece and Portugal.
In Asia, the MSCI Asia index rose by just under 2% for the week, boosted by the belief that the Fed support will continue into 2014. It is up 9.4% so far this year.
Most markets in Asia had solid gains on Friday, especially Japan, Australia, Hong Kong and China, which gained from 0.9% to 1.7% on the day.
For the week, Tokyo’s Nikkei starred, jumping more than 7% over the week, thanks to signs the huge spending campaign from the Bank of Japan and the government is continuing to help the economy grow.
China’s composite index was up 1.4%. The Hang Seng Index rose 1.3% in Hong Kong, but the Taiwan market fell 0.6%.
Australia was little changed over the week – the gain was an ultra tiny 0.03%, thanks to Friday’s near 1% rise in a burst of confidence.
The ASX 200 Index added 46.3 points, or 0.9%, to 5401.7 points on Friday as the big four banks and Telstra led the market higher on Friday.
The big four banks rose by between 0.8% (CBA) and 1.6% (NAB) on Friday, but over the week lost ground on profit taking.
Over the week, the Commonwealth Bank fell 1.6% to $77.79, ANZ fell 1.3% to $32.28, the National Australia Bank shed 1.3% to $34.30 and Westpac lost 0.5% to $33.
Fortescue Metals jumped 6.8% to $5.84 for the week as investors endorsed its accelerated debt repayments.
BHP Billiton dipped 0.2% to $37.89, but Rio Tinto added 0.4% to $65.51.
Chemicals and explosives group Orica though stood out with its solid 2012-13 profit news last Monday.
As a result the shares leapt 19.8% to end at $23.41 by the close of trading on Friday.
And building materials supplier James Hardie was another reporting company to enjoy a solid gain last week.
Its interim profit, revealed on Thursday, was stronger than expected and the shares jumped 13.2% to a record $12.17.
Rival building materials supplier CSR also had a strong week, the shares ending up 13.4% to $2.79 on Friday after a solid profit result midweek.
BlueScope Steel added 12% to $5.52 on Friday after its AGM on Thursday.
And department store chain Myer saw its shares end up 13.2% after a small rise in quarterly sales (a whole $3.1 million extra over the same quarter in 2012). They ended at $2.92.
Australia’s biggest insurer QBE added 3.8% to $15.52.
Telstra shares rose on Friday, but still finished the week down 0.2% at $5.17%.
The reporting companies last week – Orica, CSR, James Hardie and DuluxGroup – all surprised on the upside, which was a rare event in the current 2012-13 reporting and AGM seasons.
The housing rebound helped in most cases, but in Orica’s case it was the lack of any more bad news from the mining sector which is its major area of activity.
And, keep an eye on the great dairy auction. Canada’s Saputo lifted its offer to $9 for each Warrnambool Cheese share late on Friday night.
