Shares roared back into life on Friday, managing to claw back most of the losses suffered from Monday's dramatic plunge but the overall market closed down, marking the longest streak of weekly losses since 2014.
Concerns the US Federal Reserve may lift rates soon and that other central banks may reign in monetary stimulus shook financial markets early in the week, wiping almost $US2 trillion off the value of stocks worldwide.
However, investors had calmed down by Wednesday and the market closed up three days in a row, adding $20 billion back on to the local market. The S&P;/ASX200 and the All Ordinaries both finished Friday up 1 per cent.
But given the sharp sell-off on Monday, the benchmark ASX 200 and the broader All Ordinaries both closed the week down 0.8 per cent to 5296.7 points and 5396.7 points, respectively.
"Each time there is a sell-off in stocks, reminding us of early 2016 and August 2015, the probability of a US rate rise declines," said Thomas Lambeth, head of funds management at Peak Asset Management.
"It is our view that the US FOMC has, along with inflation and unemployment, an additional 'secret' mandate which is asset price stability. So long as the probability of a rate rise remains low, we think markets will continue to rally in the short term."
Consumer discretionary stocks, utilities and telcos did most of the heavy lifting on Friday. The banks finished the day higher, helped by a continued recovery in Commonwealth Bank of Australia shares, which slid below $70 and to a three-year low during the week, at which point brokers upgraded the stock and investors piled back over the past few days.
Mining and energy stocks also finished the week substantially higher, except for Rio Tinto, which also finished Friday in the red. A rebound in commodity prices since the start of the year have given mining, oil and gas stocks some solid support.
Whitehaven Coal was the best performing stock on Friday, closing 7.8 per cent higher to $2.48. Supply disruptions, falling Chinese output and increased demand have seen coking coal prices rise above $US200 a tonne.
Stock Watch
JB Hi-Fi this week announced it will acquire rival The Good Guys for $870 million. The stock entered a trading halt on Thursday and then exploded out of the blocks on Friday, leaping 5.3 per cent to close at $30. The deal will be funded through a $394 million capital raising and $500 million of debt. Investors clearly liked that JB Hi-Fi's share of the $4.6 billion home appliances market will jump from 3 percentage points to 29 per cent - outstripping rival Harvey Norman. Shares in the Melbourne-based firm have soared 42 per cent since May, when the prospect of a this deal was first floated by The AFR.
Iron Ore
Australia's largest export has had its longest losing streak in more than five months, prompting investors to forecast another slide below $US50 a tonne. Speculation that iron ore mine ramp-ups and new supply will come online has dampened prices in September, although the bulk commodity's price is still 30 per cent higher in 2016. On Friday the raw material was fetching $US55.97 a tonne.
Unemployment
Figures released Thursday showed employment fell by 39,000 in August following a downwardly revised 25,300 increase in July. But a drop in the participation rate resulted in the unemployment rate falling to a three-year low of 5.6 per cent. While the reported figure disappointed market watchers overall, a lift in full-time jobs bucked this past year's trend where part-time job creation has materially outweighed gains in full-time employment, pointed out Commonwealth Bank.
AUD
Disappointing US economic data boosted the Aussie dollar higher on Thursday night and the local currency managed to hold onto its gains throughout Friday. Three central banks, Bank of Japan, US Federal Reserve and the Reserve Bank of New Zealand, meet next week leaving investors in a wait-and-see mood. The Aussie is near seven-week lows and has come under pressure from investors unwinding carry trades in high-yielding, riskier assets. It was fetching US75.05¢ at market close on Friday.
Bonds
Yields on US, Japanese, German and Australian bonds surged this week, as investors fretted over whether central banks would pull the stimulus pin. The gap between 10- year yields in Australia and the US widened to a six-week high of 42 basis points on Friday. The heavy selling in bond yields has pressured other assets that have climbed with higher bond prices, such as utilities and infrastructure stocks.