Friday, 30 September 2016

Markets mixed amid concern over Deutsche Bank

Markets were mixed on Thursday.

US stocks fell, with the S&P 500 declinig 0.9 percent, but the STOXX Europe 600 was flat after being up earlier in the session.

Oil rose, with West Texas Intermediate oil rising 1.7 percent.

Stocks were hit after Bloomberg News reported that about 10 hedge funds that do business with Deutsche Bank have moved to reduce their financial exposure.

“The Deutsche Bank situation is major,” said Timothy Ghriskey, chief investment officer at Solaris Asset Management.

Ed Al-Hussainy, senior global interest-rate analyst at Columbia Threadneedle Investments, said that Deutsche Bank’s solvency is not a critical risk yet, but “if it does start to happen, it happens pretty quickly”.

Thursday, 29 September 2016

Stocks rise, oil jumps on prospect of production cut

Markets were mostly up on Wednesday.

US energy stocks jumped 4.3 percent to help drive a 0.5 percent rise in the S&P 500. The STOXX Europe 600 rose 0.7 percent.

US crude oil surged 5.3 percent after the Organization of the Petroleum Exporting Countries agreed on the need for a cut in production of crude oil.

“The cut is clearly bullish,” said Mike Wittner, head of oil-market research at Societe Generale SA.

Not everybody agrees.

Ian Taylor, the head of Vitol Group BV, said he “cannot see a good reason for a major increase in the price of oil” since the market remains “way oversupplied”.

While the jump in oil helped boost most stock markets, the Nikkei 225 fell 1.3 percent.

In bond markets, the yield on the US 10-year Treasury note rose to 1.567 percent from 1.556 percent on Tuesday.

Wednesday, 28 September 2016

Stocks rise, may see increased volatility

Stocks rose on Tuesday.

The MSCI world index rose 0.3 percent. The S&P 500 rose 0.6 percent while the STOXX Europe 600 Index added less than 0.1 percent.

The yield on the US 10-year Treasury note fell three basis points to 1.56 percent.

West Texas Intermediate oil fell 2.7 percent.

Oppenheimer technical analyst Ari Wald thinks that stocks are likely to continue to rise.

"We're not seeing the type of euphoria that you typically see at a major top in the market," Wald said on CNBC on Monday.

In contrast, Kathy Lien, a macro strategist and currency trader at BK Asset Management, told CNBC that there could be "a deeper correction in stocks", including a "Christmas collapse".

In any case, with the approach of October, volatility in the stock market could rise.

A CNBC report noted that October has been a volatile month for stocks during an election year. Since 1992, the CBOE Volatility Index has risen in each of the six presidential-year Octobers, spiking an average 21 percent.

Tuesday, 27 September 2016

Stocks fall, US corporate earnings expected to decline again in third quarter

Stock markets fell on Monday.

The S&P 500 fell 0.9 percent, the STOXX Europe plunged 1.6 percent and the Nikkei 225 tumbled 1.3 percent.

The declines were led by bank stocks amid concerns Deutsche Bank will need to raise capital following an anticipated legal settlement with the US Justice Department.

US stocks may continue to struggle after the latest poll by FactSet showed that companies in the S&P 500 are now expected to report an earnings decline again in the third quarter, the sixth consecutive quarter of declines.

The energy sector of the S&P 500 had the largest downward earnings revision for the third quarter, with earnings now expected to decline 66 percent, the largest among all sectors.

However, US crude jumped 3.3 percent on Monday, providing investors some hope that earnings may turn around soon.

“The market is anticipating we’re going to see a resumption of earnings growth, and I think that’s the right perspective,” said David Lefkowitz, senior equity strategist at UBS Wealth Management Americas.

Monday, 26 September 2016

US stock market "vulnerable" to higher rates

The US stock market is turning into a bubble, according to one economist.

In a research note last week, Lombard Street Research chief economist Charles Dumas wrote that money and credit growth in the US is encouraging another bubble in stock markets.

"The Fed has put market sentiment before the economy yet again. It is doing U.S. stocks no favors by provoking an unnecessary bubble with its certain subsequent burst," wrote Dumas.

"When the Fed gets real and makes the necessary increases, this market could prove much more vulnerable than is traditional in the early stages of a rate-hike cycle," he added.

Black Swan investor Mark Spitznagel said as much.

In an interview with CNBC the previous week, Spitznagel said that low rates and high valuation add up to a stock market that is "extraordinarily sensitive to changes in rates".

And to emphasise how high market valuation is, John Hussman wrote today that on normalized profit margins, the cyclically-adjusted market P/E would be at 36.

Saturday, 24 September 2016

Markets fall, economic indices "rolling over"

Markets fell on Friday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 fell 0.7 percent and the Nikkei 225 fell 0.3 percent.

US crude oil fell 4 percent.

Some think the decline willl be short-lived.

Peter Tuchman, a floor broker at the New York Stock Exchange for Quattro M Securities, said the decline on Friday was just a breather after “a big move the last two days”.

“Businesses are still growing revenues, expanding margins, improving productivity and raising dividends, and at the end of the day that determines stock prices,” said Doug Foreman, chief investment officer of Kayne Anderson Rudnick Investment Management.

However, Dan Suzuki, Bank of America Merrill Lynch's senior US equity investment strategist, is cautious on stocks. He told CNBC on Friday that indices that track surprises in economic data “have been rolling over pretty hard since” last July.