Markets tumble but bull run 'not done yet'
Around $30 billion has been wiped from the value of Australian shares and Asian markets are tumbling on Monday following a selloff on Wall Street on Friday but market analysts have dismissed fears that the bull run in global equities is at an end.
US stocks on Friday posted their worst day in nearly two years after investors were spooked by a payrolls report that showed wages grew at their fastest pace in nearly nine years, fuelling inflation expectations.
Australia's benchmark All Ordinaries stock index was down 1.6 per cent to 6,026.2 points at the end of Monday's session, wiping off about $33 billion in valuations.
Japan's Nikkei slid more than two per cent, while China's blue chip stocks also skidded more than one per cent on Monday.
US futures trade currently points to more falls on Wall St, albeit more moderate in scale, when markets reopen in the US for the Monday session, and bond yields have continued to lift, indicating markets are pricing in the risk of three, or even more, interest rate rises from the Federal Reserve this year.
AMP Capital's Shane Oliver says US markets have been overdue for a correction, having surged more than 50 per cent since Donald Trump's election in November 2016.
"The pullback in the direction-setting US share market should be limited in depth and duration to a correction and we remain of the view that returns from shares will be positive this year," he says.
"However, it's increasingly clear that it's going to be a more volatile year than last year as the Federal Reserve gets more aggressive."
Factors likely to support this view include the continuing high levels of confidence that are helping drive stronger investment and consumer spending in the US, as well as the likelihood of tax cuts and their associated fiscal stimulus boosting US growth in the next 12 months.
CommSec chief economist Craig James, too, expects US economic growth to continue this year.
"It would be a worry if companies weren't making money or if profits weren't rising," he says.
"But this decline is after a period of strength."
He attributes the current phase of selling to traders locking in some of the profits following a stellar earnings period and a US market that has been priced to perfection at around 19 times earnings.
The local Australian share market, however, is more fairly valued and growing corporate earnings as well as steady global demand for commodities could support the current market levels, he said.
The benchmark S&P/ASX 200 touched a 10-year high of 6151 points in January, and despite Monday's heavy selloff, the index has pared back to the level it held on January 31.
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