All it took was for Wall Street to end the losses last night, albeit marginally, and Australian shares came rocketing back this morning as the All Ordinaries index soared 40.5 points to 3977 by midday. The US markets did lose some more ground in early trade last night but the American profit season – 136 of the S&P500 companies are reporting this week – helped turn sentiment around and the Dow Jones industrial average closed 16.26 points higher at 10,071, ending a run of losses that wiped 4 per cent off US equities last week.
This was all the Australian market needed as buyers flooded back on the belief that a 7.5% slump from the peak on March 21 made for a good buying opportunity, especially given the weight of capital deluging into the market from superannution funds.
When you consider that the All Ords has risen 50 per cent from its lows of 2003, a 7.5% correction really is trivial. Crikey sold out in 2003 and swore never to buy stocks again until the market fell below 3000. Alas, we’ve had to revise that up to 4000 and if today’s trend keeps up, we’ll be out of the 3s and back into 4s in the next day or two.