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Market insights: September's arrival and global trading trends

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2023-09-04

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Trading in the US is suspended tonight due to the Labor Day holiday, marking the end of the more relaxed summer period and the anticipation of a more serious trading atmosphere until year-end.

Historically, September has been viewed as a challenging month for US stocks, with October also harboring some uncertainty, evoking memories of significant crashes such as those in 1987 and particularly in 1929.

In a potentially positive development for investor confidence, reports indicate that troubled Chinese developer Country Garden has secured an extension on payments for a $537 million domestic bond that it previously acknowledged it couldn't meet. This move could provide breathing space for Chinese markets and the government to address issues within the property sector.

Chinese markets surged 2.2% last week, buoyed by news of additional support for property buyers and companies from various Chinese government bodies. The confirmation of stamp duty costs for investors, revealed in mid-August, also contributed to the market's positive sentiment.

The August jobs report in the US seems to strike a balance, signaling that the Federal Reserve might not raise rates next week while also raising concerns about the economy's health. With economic growth neither too hot nor too cold, ongoing signs of inflation softening, and a jobs market in a similar state, last Friday saw volatile trading on Wall Street, resulting in modest gains.

By the end of the week, the S&P 500 climbed 8.11 points to 4,515.77, the Dow added 115.80 points to 34,837.71, and the Nasdaq dipped 3.15 points to 14,031.81. The Dow and Nasdaq recorded their best performances since July, with gains of 1.4% and around 3.3% respectively, while the S&P 500 marked a 2.5% increase, its strongest week since June.

This recent upturn in US shares transformed a 4.8% decline earlier in August into a more manageable 1.8% loss for the month. Eurozone shares experienced a 1.4% rise, and Japanese shares surged by 3.4%.

Following global trends, Australian shares advanced 2.3% over the week, supported by lower-than-expected Australian inflation data, which further strengthened the belief that the Reserve Bank of Australia (RBA) will maintain current interest rates. The week's gains helped pare down August's earlier 4% fall to just 1.4%.

Consumer discretionary, material, finance, and industrial shares led the gains for the week. Bond yields eased as expectations for additional central bank rate hikes diminished. Oil, metal, and iron ore prices, along with the Australian dollar (AUD), rose despite a minor increase in the US dollar (USD). However, the AUD slightly softened late on Friday to 64.53 US cents, representing a 0.5% drop for the day.

While the Australian share market faced a decline on Friday, with one of Fortescue Metals' senior executives departing and some sectors underperforming, the energy sector rallied, contributing to a 2.3% jump and providing momentum for further rises.

The S&P/ASX 200 retreated by 27 points, or 0.4%, closing at 7,278.3. Notably, the energy sector saw a significant 2.3% increase driven by reports of upcoming production cuts.

In anticipation of a small gain in today's trading, the overnight futures market indicated a 31-point uptick in the share price index. However, with the US market closed for the holiday, investor caution prevails, while the encouraging news from China provides a positive backdrop.

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