Once the dust had settled and investors concluded that a large and continuing fall in the value of China’s yuan was not likely, markets bounced back late last week.
By the close on Friday night and Saturday morning, Eurozone shares were down 3.4%, Japanese shares down 1% and Australian shares down 2.2% over the week.
But US shares rose 0.7% and Chinese shares jumped 5.9% as they would be beneficiaries of the lower currency.
Bond yields rose marginally, but Friday’s strong economic data from the US left markets more convinced of a rate rise from next month’s Fed meeting.
Commodity prices were mixed with oil falling to new lows in New York for the year on ongoing oversupply concerns, but gold ended higher.
The Aussie dollar ended under 74 US cents – around 73.80 early Saturday.
In New York the S&P 500 rose 8.15 points, or 0.4%, to close at 2,091.54.
The Dow Jones Industrial Average added 69.15 points, or 0.4%, to finish at 17,477.40, while the Nasdaq Composite Index was 14.68 points, or 0.3%, higher at 5,048.24.
The S&P 500 ended up 0.7% for the week, while the Dow rose 0.6% and the Nasdaq edged up 0.1%.
The AMP’s Dr Shane Oliver wrote at the weekend that “share markets are at risk of a further correction in the next few months as we are still in a seasonally weak period of the year for shares, uncertainties remain regarding Chinese economic growth and a likely Fed interest rate hike lies ahead.
“In fact, the declining breadth of gains in the US share market, with just two sectors, health care and retail, keeping the market up point to a rising risk of a correction in US shares.
“But beyond the near term, the cyclical bull market in shares likely has further to go: valuations against bonds are good; economic growth is continuing at a not too cold but not too hot pace; and monetary conditions are set to remain easy.
"As such, share markets are likely to remain in a broad rising trend. My year-end target for the ASX 200 remains 6,000,” he wrote.
In Australia, our market will start with a small gain of less than 10 points this morning after trading on the futures market concluded Saturday morning.
The sharemarket slumped into official correction territory on Wednesday with the benchmark S&P/ASX 200 index falling 10% below its April high.
Friday reinforced that trend, energy names and the big banks helped push the benchmark index down 32 points, or by 0.5%, to 5356.5, and 2.2% lower for the week.
