Believe it or not, the Australian stockmarket outperformed most of the world’s major exchanges in last week’s slide, bar the Chinese market.
Driving most markets lower was the spillover from the gathering rout on Wall Street, especially in the tech-heavy Nasdaq market, where, led by weakening biotechs, investors are bailing out and taking their profits.
And with so many tech giants of all kinds – from Cisco, to IBM, Google, Facebook, Microsoft, Twitter and a host of major biotech’s the American market is vulnerable to a loss of confidence in these sectors.
And that’s what’s happening now.
But Australia isn’t as exposed because of our dependence on resources and banks, and some consumer staples (such as retailers).
So the main market gauge, the ASX 200, eeked out a five point gain last week (not much, but it was a rise) or just 0.1%. The All ordinaries was down 0.1%.
The Aussie dollar closed a touch under 94 USc at 93.97 – it peaked at 94.61 last week.
Gold rose 1.2% last week and New York oil was up 2.6%, while copper added 0.7%.
And the share price futures contract has our market starting today with a loss of around 12 points – which is much better than the near 1% slump on Wall Street on Friday night.
US shares fell between 2.4% for the Dow, 2.7% for the S&P 500 and a nasty 3.1% for Nasdaq the week (all of that and more occurring in the sell-off on Thursday and Friday).
Eurozone shares fell by around 3.5%, while Japanese shares fell a very nasty 7.3%.
But China’s market saw a rise of 3.5% over the week.
The gains in the Chinese market were from low levels, but that fact that investors there didn’t panic about the weak March trade figures, as many western analysts did, tells us something about the way Chinese investors view their economy at the moment.
The Chinese central bank pumped money into the financial markets for the first time in weeks and there was more talk of central government spending to help the sluggish economy.
The London market was down 2% and bigger falls were seen elsewhere in Europe such as in Germany where the Dax lost 3.9%.
The Stoxx 600 index fell 3.1% after European markets hit a six year high the week before – like the Australian market.
As I pointed out in Friday afternoon’s email, this relative out performance by the Australian market is how it should be – the falls in Europe, the US and Japan are being driven by a loss of faith among investors large and small in the sustainability of the booms in biotech, net and cloud computing stocks and then in more traditional tech stocks.
Our market withstood much of the selling pressure (except on Thursday) because our mining shares (and the mining services business) have already suffered a big correction.
Bank stocks and Telstra, plus the retailers have also remained solid and supported our market in the face of offshore selling.
All four big banks were up by between 0.2% and 1.4% (the ANZ hit an all time high last week).
That strength will be tested by the Chinese first quarter economic data on Wednesday (as we head into the long Easter break) and after Easter when Westpac, the ANZ and NAB report and the Commonwealth produces its March quarter trading update.
The AMP’s chief economist Dr Shane Oliver said on the weekend, "Investors should allow for a 10 to 15% correction at some point along the way this year”.
"A trigger could be rising worries about when the Fed will start to raise in interest rates as US growth recovers from its winter soft patch, but worries about Ukraine or tech stocks could also be triggers," he wrote at the weekend.
However, just as we saw in the last two years this would just be a correction in a rising trend as share market fundamentals remain favourable with reasonable valuations, improving earnings on the back of rising economic growth and easy monetary conditions helping entice investors to switch out of cash and into shares.
"So any such dip should be seen as a buying opportunity. Our year-end target for the ASX 200 remains 5800," he added.
The S&P 500 fell 17.39 points, or 1% on Friday, to close at 1,815.69. Over the week the index lost 49 points, or 2.7%. The Dow shed 143.47 points, or 0.9%, to finish at 16,026.75. The index shed 2.4%, or 386 points, for the week.
And the engine room of the fall – for a third week in a row – was the Nasdaq which lost 54.37 points, or 1.3%, to end at 3,999.73 on Friday.
The tech-dominated index hadn’t closed under 4,000 since February. 3. It fell 3.1% for the week, or 128 points.
They were the biggest falls for the three indexes since June 2012, according to Bloomberg.
The Nasdaq Biotechnology Index sank a seventh week, the longest streak since 1998 and the sector is now in a bear market with the fall of over 20% since its peak on February 25.
The index shed 4.5% in value last week alone.
The Dow Jones Internet Composite Index dropped 3.3% last week, the fifth week of losses and a sure indicator of the damage the tech sectors are doing to the wider markets in the US.
Six of the 16 companies that were due to list on US exchanges last week pulled their issues at the last moment because of weak prices or the volatile conditions.
The 16 companies would have been the largest number of new listing since December 2006, according to Bloomberg.
On Friday tech giants like Yahoo shed 1.6%, Twitter fell 3.1% Apple fell 0.7%, while Netflix dropped 2.4% and Amazon lost 1.7%.
