Market heads back into black

Investors breathed a sigh of relief as the sharemarket recovered slightly on Friday from the biggest one-day fall in almost five years - although brokers warn the correction has still to run its course due to ongoing jitters about inflation.
Thursday's was the biggest single-day slump since the turmoil following the terrorist attacks on September 11, 2001, as investors panicked about rising global interest rates.
The rout in Asian markets extended to Europe, where Britain's FTSE and Germany's DAX both slumped more than 2.5 per cent. Fortunately, Wall Street weathered the storm overnight on Thursday to finish in the black.
In Australia, the benchmark ASX 200 index rose 58.8 points, or 1.2 per cent, to 4966 on Friday, but slumped 111.2 points, or 2.2 per cent, over the five trading days, making for the second worst weekly fall in eight months.
The broader All Ordinaries rose 48.3 points to 4926.8 on the day, but fell 113.6 points over the week.
Investors are nervously awaiting the outcome of a meeting of the US Federal Reserve at the end of the month, when the Fed will decide whether to raise interest rates for the 17th consecutive time.
Nomura Australia market strategist Eric Betts said the market recovered on Friday as investors took the view that the previous day's sell-off was excessive.
Traditionally, big sell-offs like Thursday's present buying opportunities for investors.
"This is the calm after the storm," he said. "It's gone from manic to panic in the space of a few weeks. It was just a case of people buying anything that wasn't nailed down."
Resources bore the brunt of the sell-off as base metals continued to slide. Heavyweight miner BHP Billiton slumped 6 per cent over the week, but was up 18c to $26.73 on Friday. Rio Tinto fell almost 7 per cent over the five days, but rose 5c to $73.77 on Friday.
The concerns about global inflation have led brokers to conclude that the correction has not ended. Since reaching a record on May 11, the market has fallen 7.4 per cent.
"We've seen evidence of investors moving back into the market, but I don't think people are of the opinion that we have reached the bottom yet," said ABN Amro's head of Sydney sales trading, Justin Gallagher.
"The risks that have moved the market to these levels still exist, and as a result we are likely to see further downside in the short term."
AMP Capital Investors' head of investment strategy and chief economist, Shane Oliver, said strong readings for retail sales, growth in gross domestic product and employment had increased the risks of another interest rate rise here, although he believed the Reserve Bank was unlikely to raise them again this year.
Dr Oliver said investors should expect the rough ride in equities markets to continue and for it to get "a little worse before it gets better". But he said the falls did not signal the start of a bear market.