The local sharemarket will be looking for an early gain this morning after Wall Street ended a soft week with a nice recovery on Friday night, our time, and as a result the futures market has the ASX 200 looking at a 30-plus point jump.
Coming after Friday’s 24 point rise (in the face of a slide in iron ore prices), a rebound today will be handy for sentiment as investors eye the Reserve Bank board meeting tomorrow, and a possible interest rate cut decision.
Friday’s 0.4% gain was mostly based on expectations of a rate cut tomorrow after a couple of well-placed market reports suggesting that one will happen.
And if that rate cut happens, then shares will remain buoyant, but if there’s no cut, egg on face for some commentators and a sell-off on the ASX.
Also to be aware of is the stream of bank earning reports and updates from the NAB, ANZ, Westpac, Commonwealth and Macquarie.
The sell-off Wednesday and Thursday revealed concerns about bank earnings and also possible capital calls to meet new capital adequacy rules sooner than later.
The ASX200 index rose to 5814.4 on Friday at the close, while the All Ords also added 0.4% to 5798.8. But the local market was still down 2% over the week.
That softness last week was a global trend for a variety of reasons – rising bond yields, especially in the US and the eurozone, a weakening greenback against the euro, the Aussie dollar bouncing back over 80 USc (and then falling, closing weaker on 78.51 early Saturday, our time), a mixed message from the Fed about interest rates after its meeting last week, softish data in the US and Europe on manufacturing, and the end of deflation in the eurozone for the time being.
Greece’s problems remain a constant concern, with more deadlines ahead this week and next.
On top of that there were some weak earnings reports amid the US and European March quarter and half year figures, especially from leading social media stocks, while Apple was weak until Friday when its shares rebounded 3%. Profit taking popped up in US and eurozone markets (on the German and UK exchanges in particular).
Given the interplay of those factors, it is no surprise that sharemarkets weakened last week.
US shares fell 0.4% over the week, with Friday’s rebound clipping the losses. Eurozone shares lost 2.7% and Japanese shares fell 3.3%.
The 2% loss for Australian shares saw the market fail to break through the 6000 level for the fourth time in a month, and that was not helped by the dollar’s volatility, those reports that APRA may move faster to raise bank capital requirements (which saw bank shares sold off last week) and talk of Australia losing its AAA rating (which was hot air from an investment bank).
Bond yields rose, but this was mainly led by Europe. The USD continued its correction and this saw most commodity prices rise (copper and oil, but not gold).
On Friday, the S&P 500 closed up 22.78 points, or 1.1%, at 2,108.29, but finished the week 0.4% lower.
The Dow jumped 183.54 points, or 1%, to 18,024.06, but still lost 0.3% over the week, and the Nasdaq added 63.97 points, or 1.3%, to 5,005.39, but lost 1.7% over the week, mostly due to the sell-off in biotech and social media stocks.
Apple provided the biggest boost to the major indexes on Friday night, jumping 3% to $US128.95 in its biggest daily percentage gain since January. The stock lost 2.7% on Thursday.
LinkedIn, Twitter and Yelp all notched their biggest weekly percentage declines since their debuts. LinkedIn, which reported results late Thursday, dropped 18.6% to $US205.21.
