Saturday, 17 March 2018

Markets rise as trade war uncertainty “lifted for now”

Markets were mostly higher on Friday.

The S&P 500 rose 0.2 percent and the STOXX Europe 600 rose 0.2 percent but the Nikkei 225 fell 0.6 percent.

“Upward momentum has started to further improve,” said Ivan Ip, an analyst at UOB Kay Hian.

“The fear that the U.S. and China would engage in a trade war weighed on stocks during the week, but that uncertainty has lifted for now,” said David Madden, market analyst at CMC Markets UK.

However, Lukman Otunuga, a research analyst at brokerage FXTM, cautioned that “stock markets still remain exposed to downside risks, as concerns heighten over escalating trade tensions”.

Friday, 16 March 2018

Markets mixed as positive economic trends seen raising interest rate and financial risks

Markets were mixed on Thursday.

The S&P 500 fell 0.1 percent but the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 rose 0.1 percent.

A report on Thursday showed that initial US jobless claims declined by 4,000 to 226,000 in the seven days ended 10 March, near a 50-year low, but this and other recent positive economic data failed to excite some analysts.

“We continue to see positive trends in economic fundamentals but valuations that suggest a lot of good news has already been priced in,” wrote Bruce Bittles, chief investment strategist at Baird, in a note to investors.

“Economic releases, especially leading indicators, still point to an expanding economy, not only in the U.S., but also in Europe and China. But we are closer to the end of the cycle,” said Maris Ogg, president at Tower Bridge Advisors.

Indeed, there are concerns that the world economy is turning too hot.

“When lots of countries are growing strongly, the global economy is at its most vulnerable, thanks to heightened interest rate and financial risks,” said Stephen King, senior economic adviser at HSBC.

Thursday, 15 March 2018

Markets fall on renewed fears of trade war

Markets fell on Wednesday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 fell 0.2 percent and the Nikkei 225 fell 0.9 percent.

Stocks in Europe initially traded higher after European Central Bank President Mario Draghi said its bond-buying program will likely continue if underlying inflation in the region remains subdued.

However, stocks turned down as fears of a potential trade war resurfaced after President Donald Trump announced that his administration will impose tariffs to trim the US trade deficit with China.

With upcoming personnel changes in the Trump administration, Art Hogan, chief market strategist at Wunderlich Securities, suggested that policy mistakes and trade protectionism are concerns.

“Will the new people be more protectionist?” he asked. “Right now the economy and earnings are solid, but are we going to make a trade or policy mistake that could slow earnings or lead into a recession that will turn this market over?”

Wednesday, 14 March 2018

Markets fall after Tillerson exit but no major sell-off expected

Markets mostly fell on Tuesday.

The S&P 500 fell 0.6 percent and the STOXX Europe 600 fell 1.0 percent. However, the Nikkei 225 rose 0.7 percent earlier in the day.

A report on Tuesday showed that the US consumer price index rose 0.2 percent in February, down from 0.5 percent in January.

Karyn Cavanaugh, senior market strategist at Voya Financial, said that the report showed that “inflation is not too hot and not too cold”. She added: “Combined with the fact that there is still slack in the labor market we don’t worry too much about inflation.”

The announcement that US President Donald Trump has decided to replace Secretary of State Rex Tillerson had little lasting impact on the market.

“Investors got used to the game of musical chairs in the White House and realize that it’s not a true economic risk,” said Cavanaugh.

Indeed, most analysts think that the personnel shake-ups in the Trump administration will not result in a major market sell-off unless a full-blown trade war breaks out.

“If you look historically, political headlines tend to bother people for about 15 minutes, and the market tends to move on. Even concerning political headlines tend to not roil the markets for sustained periods in general,” said Jonathan Golub, Credit Suisse chief US market strategist.

Tuesday, 13 March 2018

Markets mixed but “worst of pullback may be behind us”

Markets were mixed on Monday.

In the US the S&P 500 dipped 0.1 percent but the Nasdaq Composite rose 0.4 percent to a record high.

Elsewhere, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 surged 1.7 percent.

“Global markets continue to advance after Friday’s U.S. employment numbers effectively gave the green light to investors to buy equities,” said Rebecca O’Keeffe, head of investment at Interactive Investor, in a note. “Goldilocks appears to be alive and well.”

“The underlying macroeconomic backdrop is still pretty intact, and stocks continue to be supported by good earnings,” said Michael Mullaney, director of global markets research at Boston Partners. However, he added: “I can’t think of an asset class that’s inexpensive, so any values out there are relative.”

Indeed, Ryan Vlastelica at MarketWatch reported that Morgan Stanley thinks that “it will prove difficult for the S&P 500 to trade outside of the 16-18x forward 12 month [price-to-earnings] range for the remainder of 2018” and that the high hit in January and the low reached in February “about established the high and low end of valuations for U.S. equity markets” for the rest of the year.

Still, Vlastelica noted “improvements in market breadth and other technical factors” for the S&P 500. He quoted Sameer Samana, global equity and technical strategist at Wells Fargo Investment Institute, as suggesting that “the worst of the pullback may now be behind us”.

Monday, 12 March 2018

BIS: Despite market turbulence, minimal signs of stress

The Bank for International Settlements released its latest quarterly report on Sunday.

In the report, the BIS noted: “Stock markets across the globe underwent a sharp correction in late January and early February.”

“A sharp increase in long-term US bond yields heralded the stock market stress,” the BIS added. “A firming inflationary outlook was at the root of the increase in US long-term yields during the period under review.”

However, the BIS did not appear too concerned, at least for the United States.

“Despite equity market turbulence and higher yields, financial conditions remained very accommodative in the United States, with minimal signs of overall stress,” it concluded.

Still, in a special feature, the BIS said that its latest set of early warning indicators of banking crises showed that “Canada, China and Hong Kong stand out, with both the credit-to-GDP gap and the DSR flashing red”.