GLOBAL sharemarkets open today in the shadow of the worst week on Wall Street since the depths of the financial crisis almost one year ago.
But market watchers remain hopeful the anxiety in the US, caused by a succession of uncertainty-creating political events, does not signal the end of the bull market that added 50 per cent or more to markets last year.
Reflecting the 2.2 per cent tumble on the Dow Jones industrial average on Friday night, Australian March share price index futures were last night down 87 points at 4619, pointing to a fourth consecutive drop amid what is certain to be thin and volatile trading caused by the Australia Day holiday tomorrow.
"The US Democrats' loss of Ted Kennedy's Massachusetts senate seat, President (Barack) Obama's planned crackdown on riskier bank activities and the Chinese central bank's planned reduction in lending were some of a long list of factors affecting the US market last week," BT Australia chief economist Chris Caton said.
The Dow lost 5.1 per cent in three days to close at 10,172.98 -- its biggest weekly drop since February last year, causing concern it might fall back through the psychologically important 10,000 level that it broke through on November 5.
The corporate bond market also stumbled after surging through the start of the year, helping cash-strapped companies raise money on good terms.
By comparison, Australia's S&P/ASX 200 index shed 117.6 points or 2.4 per cent over the past three trading days to 4750.6, its lowest level since before Christmas. Both the Australian and US markets are now in negative territory for the calendar year.
"The big lift to the (US) market in 2009 was the extraordinary amount of monetary and fiscal stimulus around the world," Miller Tabak equity strategist Peter Boockvar told The Wall Street Journal. "If the economy were robust, we could handle it, but so much of the improvement has been due to stimulus that no one knows what the economy, standing on its own two feet, will look like when support is pulled away."
Dr Caton said there had also been suggestions that Ben Bernanke, chairman of the US Federal Reserve, might not be renominated to the job when his first term expires on January 31.
"I simply can't see Bernanke not getting up," he said, But he noted that online betting on his successful renomination had lowered the likelihood from 95 to 73 per cent after two Democrat senators said they would not support him.
Last week's nerves were a "one-off", he said, adding: "I don't think the bull market is over."
Justin O'Brien, a vice-president at Morgan Stanley Smith Barney in Sydney, said the negative political climate in the US was reinforced by the tendency of US investors to be disappointed by the early earnings results even though they were in line with expectations.
"It's the old story of buy the rumour, sell the news," he said.
"There has been a series of events from which markets have drawn the view that we may be entering a second downward phase. The pessimists can construct a good story."
He noted that the US-based VIXX, or volatility index, had jumped more than 50 per cent on the week to 27.31, well down on early 2009 numbers but reflecting a change of mood nonetheless.
One consequence of the US mood may be a negative for Australia, however. The February gold futures contract on the New York Mercantile Exchange slid $US9.80, or 0.9 per cent, to $US1093 an ounce amid suggestions that Mr Obama's crackdown on banks' proprietary trading might reduce the flow of money into investment and other metals.
In Australia the focus will be on the Australian Bureau of Statistics' CPI announcement for December, due on Wednesday.
Source:theaustralian.com.au/
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