It could still be a volatile few weeks for investors as
September was historically the worst month for the United
States market, Craigs Investment Partners broker Chris Timms
There had already been some weakness earlier this year, but
there could be more to come.
''That said, we view many of these issues as short-term ones
and with the underlying economic picture looking stable, or
even improving in some areas, September could yield some good
buying opportunities as we move into the summer months.''
September also marked the five-year anniversary of a ''pretty
horrendous'' month in 2008 when Lehman Brothers fell, Merrill
Lynch sold and insurance giant AIG only just survived, he
Wall Street was bracing for a wave of economic reports this
week, including the August jobs report, which might prove
decisive in determining whether the economy was strong enough
for the Federal Reserve to dial back its bond purchases in
the middle of this month.
Anxiety about the Fed possibly reducing its $US85 billion
($NZ109.45 billion) monthly stimulus, also known as QE3, had
hurt the stock market, which recorded its steepest monthly
fall since May 2012, Mr Timms said.
But the market's greater anxiety, which had developed in
recent weeks, was whether the Fed would press ahead with a
reduction in support, even as the economy remained fragile.
The recent data had failed to provide evidence of the
convincing growth the Fed said it wanted to see.
Until then, stocks would continue to benefit from the cheap
money resulting from the Fed's bond purchases.
Speculation on the timing of Fed action triggered a bond
market sell-off that sent mortgage rates to two-year highs.
The surge in home borrowing costs during the United States
summer had shown signs of slowing the housing recovery, he
Analysts also were watching to see if the higher rates had
discouraged employers from adding workers.
Mr Timms said there was a looming battle over the US debt
ceiling and federal budget between the two opposing US
There was also uncertainty over who would succeed Ben
Bernanke as chairman of the Fed from February next year.
''We have elections in Australia and Germany to add some
uncertainty about leadership in key economies.
"And now, we've got conflict in Syria adding to the negative
tone as the US appears to be preparing to respond to the
chemical warfare that was used by the Assad regime.''
Australian markets were pricing in just a 7% chance of the
Reserve Bank of Australia cutting interest rates again today,
Mr Timms said.