Anyone peeking at their smartphone during their Australia Day barbeques would have likely predicted a drubbing for the Australian market this week, following equities slumps of 2.5 per cent in Tokyo, 2.1 per cent in Hong Kong, and 1.7 per cent in London.
At the time of writing, however, the US market seems to have shaken off that gloom. Although it dipped well into the red overnight – around 1.1 per cent – with a couple of hours to go, the S&P500 is hovering around Friday's close of 1790.
There is hope, therefore, that the ASX will not experience a big sell-off (though it's likely to begin its shortened week with a fair bit of volatility). There are just too many investors underweight in equities for buying opportunities to go unnoticed – that could see a fair bit of range trading. We shall see.
In Canberra, of course, the Coalition needs to keep talking markets and the economy up. Finishing the week with the ASX higher will help keep Treasurer Hockey's blood pressure lower, for a number of reasons.
Firstly, any kind of capital exodus from Australia is the opposite of what the government needs to deliver on its promise of creating a million jobs over five years. At present, it looks like capital will be moving back from emerging markets to the US and Europe, but most analysts do not expect a similar problem for Australia.
But we just don't know. As explained last week (Abbott must return with a global vision, January 24), the amount of 'free' money from global QE programs that has made it into our equities market is hard to quantify. 'Japanese grannies', for instance, are fickle, though they probably don't want to stay invested in the Nikkei much longer.
Fingers crossed, though – our big ASX players need to stay well capitalised if they are to help the Abbott government meet its jobs pledge. It is already under pressure from the opposition, which earlier this month used the government's own jobs data and projections to argue that only 800,000 jobs will be created within five years.
The second problem a run on the local market would create is less tangible. The 'wealth effect' of soaring asset prices puts a floor under consumer confidence, with the two main components being house prices and superannuation funds.
During the acute phase of the GFC, many workers postponed retirement for a year or two or returned to work where possible to top up their ravaged retirement nest eggs.
Again, the Abbott government does not need that kind of development just now – firms that are not expanding can't employ fresh faces unless the old hands bow out. So seeing the ASX remain strong helps keep super balances up, which will help keep participation rates more or less steady, and thus not push up unemployment (as participation increases, unemployment will rise unless the number of jobs also rises).
And the third reason Treasurer Hockey will be watching the ASX today is because of his debt problems.
There is no direct link between the ASX and the price of government debt, but global investors know that any capital flight from Australia will crimp jobs growth, economic growth and therefore tax receipts. That would push government bond prices down, and yields up.
That would be a nasty development for Mr Hockey, who has just bumped up the Australian government's 'debt ceiling' to $500 billion. It's a rather strange move, because his deal with the Greens previously removed the ceiling altogether – one can only suppose the Treasurer wants to avoid waking up in Las Vegas with a hangover, short-term memory loss and a trillion dollar debt.
Given that the government has just under $300 billion in Commonwealth Government Securities on issue, Joe 'Vegas' Hockey will probably need to put at least $150 billion on our collective credit card before the night is over. And to do that cheaply, he needs Australia to retain a good credit rating, and the confidence of global investors.
And that is what the next few days of trading will give us more insight into.
While there is still room for the Australia to soften (and it's likely to do so), we should all hope the equities market holds up.
Whichever team you support in the bloodsport of Canberra politics, it's in everyone's interest to see the ASX remain strong this week.