Saturday, 16 November 2019

Markets rise on trade hopes but US manufacturing recession deepens

Markets mostly rose on Friday.

The S&P 500 rose 0.8 percent to a fresh record high while the STOXX Europe 600 rose 0.4 percent. Earlier in Asia, the Nikkei 225 rose 0.7 percent but the Shanghai Composite fell 0.6 percent.

Stocks rose as White House economic adviser Larry Kudlow suggested that a “phase one” trade deal between the US and China was close, with negotiations making “very good progress”.

US economic data released on Friday were mixed though.

US retail sales rebounded in October, rising 0.3 percent after a 0.3 percent decline in September.

However, US industrial output fell 0.8 percent in October, the worst in 17 months.

MUFG chief economist Chris Rupkey remarked that “the economy looks rockier with the manufacturing recession deepening and consumers spending less this quarter than they did earlier in the year”.

Friday, 15 November 2019

Markets mixed as US-China trade deal looks “on shaky grounds”

Markets were mostly lower on Thursday, with MSCI’S All-Country World index fallingt 0.11 percent.

However, the S&P 500 managed to gain 0.1 percent to record another new high.

According to Kristina Hooper, chief global market strategist at Invesco, investors are becoming concerned that the “phase one” trade agreement between the US and China, which had appeared to be imminent, is now instead looking to be “on shaky grounds”.

A report on Thursday showed that Chinese industrial production growth slowed sharply in October, with the 4.7 percent year-on-year rise well below forecasts for 5.4 percent.

Another report showed that the German economy grew just 0.1 percent in the third quarter.

Meanwhile though, technical strategists see potential for much higher US stock prices.

“We believe a continued unwind of crowded defensive positioning that reached its zenith in August can carry the rally through the fourth quarter,” said JP Morgan technical strategist Jason Hunter.

Thursday, 14 November 2019

Markets mixed, Fed policy seen as “appropriate”

Markets were mixed on Wednesday.

The S&P 500 rose 0.1 percent to a record high but the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 fell 0.9 percent.

Marios Hadjikyriacos, investment analyst at XM, said that “with markets having gone on a euphoria rally lately, it might not take much bad news to trigger a notable correction”.

In a testimony before the US Congress, Federal Reserve chairman Jerome Powell said that the central bank sees “the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2% objective”.

However, a report on Wednesday showed that US inflation was slightly higher than expected in October, as the consumer price index rose 0.4 percent.

Wednesday, 13 November 2019

Markets rise amid “fear of missing out”

Markets rose on Tuesday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.8 percent.

Results of a survey by Bank of America Merrill Lynch released on Tuesday showed that fund managers have made a huge switch from cash into stocks.

“Investors are experiencing Fomo—the fear of missing out—which has prompted a wave of optimism and jump in exposure to equities and cyclicals,” said Michael Hartnett, chief investment strategist at BAML.

Technical research strategists at Bank of America Merrill Lynch support the optimism.

“Last week’s push above SPX 3,063 is an uncomfortable breakout for many who viewed the SPX pattern as bearish,” the strategists, Stephen Suttmeier and Jordan Young, wrote.

“History suggests that breakouts from these ranges should be powerful,” they added.

Tuesday, 12 November 2019

Markets fall after Trump deflates trade optimism

Markets were mostly lower on Monday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 was flat and the Shanghai Composite plunged 1.8 percent.

Investor sentiment was dampened by comments by US President Donald Trump over the weekend that recent reports about an agreement to roll back tariffs were not accurate.

“There was a lot of incorrect reporting,” he said. “The level of tariff lift is incorrect.”

Amid high levels of optimism in the markets, the persistent uncertainties over a trade deal could lead to a correction, according to a CNBC report.

“With a full-blown trade agreement still likely many months out into the future if at all, it’s a little hard for me to take there’s this much optimism,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

“The short-term risk is elevated for a pullback in equities and a material advance in volatility,” said Andrew Thrasher, founder of Thrasher Analytics.

Still, DataTrek co-founder Nicholas Colas thinks that stocks still have lots of room to advance.

“2019’s no-growth earnings will make for easy [comparables] in 2020 if the U.S.-China trade war abates,” he wrote on Monday. “Unless U.S.-China trade talks hit a large pothole in coming weeks, that’s the narrative that should continue to drive US equity prices higher through the end of the year.”

Monday, 11 November 2019

After record-breaking run, S&P 500 could rally even higher

The S&P 500 rose 0.8 percent last week, its fifth consecutive weekly gain, and ending on a record high.

Many analysts see further gains for the S&P 500.

Barry Bannister, head of institutional equity strategy at Stifel, sees the rally in stocks lasting until next year.

“The Federal Reserve, by shrinking its balance sheet, and the White House, by pursuing a trade war, skated very close to the edge of the ice and risked a recession. Both are backing off and that’s positive for global sentiment,” said Bannister.

Michael Santoli at CNBC said that the “weight of the evidence points in the more positive direction, based on the global scope of the rally, the cyclical sectors leading the way and the rapid repricing of bonds that have yields emerging from historic depths toward more normal but still unthreatening levels”.

Bill Stone, chief investment officer and managing director at Avalon Investment & Advisory, told CNBC that the major stock indices are likely to rally to even higher highs.

“[R]otation has kicked in. We’ve gotten much more of the cyclical names, the value names, acting better. I think that can help take us to new highs,” he said.