The Markets: Rough August Finally Over
August is over, yippee!
Markets around the world ended August better than they started it (A bit like last May when there was another big sell off).
Gold, silver and bonds gained in the turbulent days of the first three weeks of the month.
Surprisingly another area to gain were grain futures which ended up with a very solid August, flying under the radar as worries continued about the size and quality of US crops.
The past 10 days saw nerves settle and risk back on, as traders say.
As a result commodities such as copper gained, oil however remained soft, gold fell, then rebounded this week, but the steep losses in the first three weeks of August couldn't be made up.
Losses ranged from around 2.9% in Australia to more than 11% in South Korea and a similar fall in Greece.
The major US exchanges lost about 4% to 6%.
The US debt ceiling crisis, the Standard and Poor's downgrade of America's credit rating, fears over Greece, Spain and Italy and an aversion to riskier assets saw a great deal of volatility, and on at least two days, panic as shares went into free-fall.
Investors bolted for gold, sending bullion prices over $US1,900 an ounce. Bond yields sank to record lows, especially in the US, Germany and the UK.
The Swiss franc surged as a safe-haven alternative to the dollar and euro.
The Australian dollar fell, but proved remarkably resilient despite a brief dip under parity with the greenback.
Still, the Aussie fell for the month, the rate with the greenback falling from $US1.0954 on July 31 in Sydney, to $US1.0691 yesterday. It closed at $US1.0694 in New York.
The trade weighted index fell from 78.1 to 76.5, according to Reserve Bank figures.
Gold stood out in August.
Comex futures edged higher Wednesday to gain 12% in August, their best monthly performance since November 2009.
Gold for December delivery lost $Us2.40, or 0.13%, to trade at $1,827.40 on the Comex in New York.
Gold hit a record $US1,891.90 an ounce settlement on August 22 but two days later dropped nearly 6%.
Comex December silver added 4.1% in August, following gold higher, but at a distance.
Silver rose 0.7% on Wednesday to $US41.77 an ounce in New York.
In shares,the Dow shed 4.4% for August, the S&P 500 Index dropped 5.7%, and the Nasdaq Composite Index was down 6.4%.
The Dow is now up 0.3% for the year so far, the S&P 500 however is still 3.18% in the red, while the Nasdaq remains 2.8% negative for the year.
The S&P 500 has rebounded 8.5% from its lows of August, a huge gain in such short a time.
By August 10, the Dow had hit its low of the month to close at 10,720, the lowest level since last September. Other markets bottomed out around the same time.
US bondsmade around 3.5% for the month, according to Merrill Lynch.
Treasury bond yields hit record lows with the two-year note yield hitting 0.16% on August 9 after the US Federal Reserve said it would keep interest rates at near-zero levels until at least mid-2013.
Nine days later, the yield on the 10 year bond hit a record low of 1.97% after the release of poor manufacturing data and July existing home sales.
The 10 year yield was 2.22% Wednesday in New York.
In Australiathe ASX200 index rose 27.3 points, or 0.6% yesterday to close at the day's high of 4296.5, while the All Ordinaries index gained 28.5 points, or 0.7%.
Despite the late surge the ASX 200 still lost 2.9% for the month which was its fifth consecutive monthly fall. The index is also down 13.6% from this year's highs in mid-April.
Billabong was the worst performed of the ASX 200, losing more than 41% in August. APN News and Media shed 21%, Goodman Fielder, 23% and BlueScope Steel 28%.
The gainers were mostly middle ranking resource stocks with Bow Energy the top performer with a near 50% gain. Resolute Mining added 20%, and Perseus Mining over 14%.
But it was one of the better performances by major global markets.
The MSCI AsiaPacific Index gained 1.3% yesterday. It lost 8.7% in August.
South Korea's Kospi climbed 2%, Hong Kong's Hang Seng Index rose 1.6% while Japan's Nikkei Stock Average and China's Shanghai Composite ended the day with fractional gains.
Losses for August ranged from 2.9% for the Australian benchmark to 11.9% for the South Korean index. Japan's Nikkei lost 8.9% the biggest monthly loss since May 2010 and bigger than the loss in march after the quake and tsunami struck.
The Shanghai Composite Index,added less than 0.1% on Wednesday, trimming the month's drop to 5%. It is also down 8.6% for the year so far.
The Hang Seng Index ended up 1.6% at 20,534.9 points, but the index still lost 8.5% for the month.
Still that was more than 6% better than the low for the month, a situation typical of all markets as risk's popularity re-appeared over the last 10 days.
The Stoxx Europe 600 index jumped 2.9% to close at 237.43 overnight.
That still left the index down 10.5% for the month.
London's FTSE 100 index closed up 125.87 points or 2.4% at 5,394.53, on the final trading day in August.
The index, however, was down 7.2% percent over August. Big falls were recorded in other European markets with the Dax in Germany off nearly 20% and Italy down around 18%.
In commodities oil lost ground for the month and settled lower overnight in New York.
Nymex October crude fell 9 USc to $US88.81 a barrel.
That represented a fall of 7.2% for August.
Comex December copper futures jumped rose 6.3 cents, or 1.5%, to close at $US4.2045 a pound in New York on strong buying and solid data from the US and European economies.
Copper however still lost 6.3% in August (but that was halved from a much bigger 15% plus drop earlier in the month) and 5.5% for the year so far.
It hit an eight-month low of $US3.818 a pound on August 9.
Grains however had a strong August and made strong gains despite the sell off in oil and copper.
Their gains were overshadowed by gold.
Chicago corn futures for December delivery fell 0.2%, to $US7.735 a bushel to be up just under 16% for the month.
Chicago wheat futures for December delivery also fell on the day, down 0.8% to $US7.8475 a bushel. That left wheat prices up around 9% for August.
And Chicago soybean futures for November delivery rose 0.4% to $US14.625 a bushel in Chicago, to be up nearly 8% in the month, a solid result.
So what does September bring? Hopefully something a bit better.
But first we have to get through the US jobs report for August Friday night, our time.
But it is also the worst month with an average fall of just over 1%, according to US market statistics.
Three years ago the GFC deepened and markets froze over after Lehman Brothers collapsed.
And after September comes October and anniversaries of the 1929 and 1987 market crashes.
But after August's volatility reminded us of the GFC, hopefully markets will pause and settle.
Copyright Australasian Investment Review.
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