Thursday, 20 October 2016

Markets rise as oil hits highest level in over a year

Markets rose on Wednesday.

The S&P 500 rose 0.2 percent while the STOXX Europe 600 rose 0.3 percent.

US light sweet crude rose 2.6 percent, reaching its highest level since July 2015.

The rise in oil helped the energy sector in the S&P to lead gains in the US, rising 1.4 percent.

Earlier in Asia, the Nikkei 225 rose 0.2 percent but the Shanghai Composite was flat and the Hang Seng fell 0.4 percent after China reported that its economy grew 6.7 percent in the third quarter.

Wednesday, 19 October 2016

Markets rise as higher US inflation mitigated by lower core reading

Markets rose on Tuesday.

The MSCI All-Country World Index rose 0.9 percent. The S&P 500 rose 0.6 percent while the STOXX Europe 600 jumped 1.5 percent.

US Treasuries rose. The 10-year note yield fell three basis points to 1.74 percent after a report showed weaker-than-expected US core inflation reading in September.

Charles Comiskey, head of Treasury trading in New York at Bank of Nova Scotia, said: “The lower inflation report pushed the Fed back a little bit.”

However, the inflation report also showed that the headline consumer price index rose 1.5 percent year-on-year, the most since October 2014.

The overall inflation trend appears to be confirming expectations.

The latest monthly survey of fund managers by Bank of America Merrill Lynch showed that inflation expectations are at a 16-month high, while stagflation fears have reached their highest level since April 2013.

And with fund managers also worried about an EU breakup, a bond crash and Republicans winning the White House, it is little wonder then that their cash balances rose to 5.8 percent of their portfolios in October, up from 5.5 percent last month and approaching levels not seen since November 2001.

Tuesday, 18 October 2016

Markets fall as Fed mulls hot economy

Markets mostly fell on Monday.

The S&P 500 fell 0.3 percent and the STOXX Europe 600 fell 0.7 percent.

In Asia, the Shanghai Composite Index fell 0.7 percent but the Nikkei 225 rose 0.3 percent.

The yield on the US 10-year Treasury note initially rose to 1.814 percent, its highest since early June, before retreating to 1.766 percent.

The Federal Reserve continued to influence markets on Monday, with Vice Chairman Stanley Fischer warning of risk in running a high-pressure economy, something suggested by Chair Janet Yellen last week as plausible.

Monday, 17 October 2016

Stocks at risk from peak in globalisation

The Wall Street Journal reports that slowing world trade growth and moves toward protectionism pose risks for stocks.

U.S. equity prices have been supported for the past three decades by an acceleration of global trade and a freer flow of capital. Those lifted economic growth and allowed companies to take advantage of new markets and economies of scale. The S&P 500 is up nearly ninefold since October 1986, according to FactSet.

But now there is worry that the party is ending. “We believe globalization has probably reached its peak,” said Marino Valensise, head of the multiasset team at Barings, a member of the MassMutual Financial Group with $275 billion in assets under management. “The market won’t like it.”

Earlier this month, a Bloomberg report had highlighted similar views from Bank of America Merrill Lynch.

Some of the hottest trades of the past few years could stage a sharp reversal as global markets face "peaks" in liquidity, free trade, and income inequality.

That's the big-picture call from Bank of America Merrill Lynch, whose analysts argue in a report published Thursday that an apparent fightback against globalization in advanced economies represents a game-changer for global asset-allocation.

Saturday, 15 October 2016

Markets rise as bulls remain unshaken

Markets rose on Friday.

The S&P 500 rose less than 0.1 percent but the STOXX Europe 600 jumped 1.3 percent. The Nikkei 225 rose 0.5 percent.

“Earnings season gave us a little boost this morning, but I think there’s a lot of nervousness here,” said Matthew Peron, head of global equity at Northern Trust Asset Management.

Indeed, the S&P 500 fell 1 percent for the week, and Mark DeCambre at MarketWatch said that October is “shaping up to be the ugliest monthly fall since January”.

Still, some bulls remain unshaken. From Bloomberg:

For Thomas Lee of Fundstrat Global Advisors, the latest gyrations are just turbulence on a ride that will leave the market higher by 9 percent come 2017. RBC Capital Markets LLC’s Jonathan Golub and Bank of Montreal’s Brian Belski, with Lee among the bull market’s biggest cheerleaders, say the rocky start to earnings matters little. They’re declaring the longest profit recession since the financial crisis over, clearing the path for equities to rally into the new year.

Friday, 14 October 2016

Markets fall with Chinese exports

Markets fell on Thursday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.9 percent and the US 10-year Treasury yield fell three basis points to 1.74 percent on concerns over possible slower global growth after the release of weak Chinese trade data.

A report from China on Thursday showed that exports fell 5.6 percent in September from a year earlier while imports rose 2.2 percent.

Julian Evans-Pritchard, a China economist at Capital Economics, said in a note on Thursday that this “could be an early sign that the recent recovery in economic activity is losing momentum”.

Mainland Chinese markets shrugged off the trade data though. The Shanghai Composite rose 0.09 percent while the Shenzhen composite rose 0.24 percent. However, the Hang Seng Index fell 1.27 percent.