Tuesday, 25 September 2018

Markets fall amid trade war fears and Fed rate hike expectations

Markets fell on Monday.

The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.5 percent.

In Asia, the Chinese and Japanese stock markets were closed but the Hang Seng plunged 1.6 percent following a report that China had cancelled planned trade talks with the US.

Bruce McCain, chief investment strategist at Key Private Bank, said that a pullback was expected after US stock markets hit records last week. There is also “a fear that tariffs could bring the economy down” and “a near-certainty that the Fed will raise rates this week”.

Meanwhile, oil prices rose on Monday after major oil producers at a producer meeting over the weekend declined to commit to an additional increase in crude output to address expected supply disruptions.

Monday, 24 September 2018

US stocks maintain bull run as Fed looks set for more rate hikes

US stocks hit record highs last week to confirm an intact bull market as well as a Dow Theory buy. The S&P ended the week up 0.8 percent.

This week, the Federal Reserve's monetary policy meeting will probably be the main focus of markets.

Joseph LaVorgna, chief economist of the Americas at Natixis, suggested that with the economy growing and inflation at or above target, “they're going to do more” rate hikes.

Albert Edwards, global strategist at Société Générale, thinks that the stock market may not be able to withstand further increases in interest rates though.

“The Citi Economic Surprise Index for the U.S. had slumped back towards zero. That convergence of expectations with the data normally means yields should have continued to paddle sideways around 2.8% — and yet we have seen this dramatic rise,” he said.

Friday, 21 September 2018

US stocks hit record high to signal Dow theory buy

Markets were mostly higher on Thursday.

In the US, both the S&P 500 and the Dow Jones Industrial Average hit record highs, gaining 0.8 percent and 1.0 percent respectively.

Elsewhere, the STOXX Europe 600 rose 0.7 percent but Asian markets were flat with both the Nikkei 225 and Shanghai Composite ending little-changed.

“Fundamentally and technically, the market is really strong right now,” said Paul Brigandi, managing director and head of trading for Direxion.

However, Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said that trade friction remains “an ever-growing threat to the world economy” and that “caution is warranted”.

Still, the new highs recorded by the US stock market on Thursday confirmed that the bull market remains intact.

Art Cashin, UBS director of floor operations at the New York Stock Exchange, said that the confirmation “should be a Dow theory buy signal” and “therefore you have six to nine months of a higher stock market”.

Thursday, 20 September 2018

Markets rise but US stocks face trade and other headwinds

Markets rose on Wednesday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 jumped 1.1 percent.

Despite escalating trade tensions between the US and China, Matt Forester, chief investment officer of BNY Mellon’s Lockwood Advisors, said that “without any visible effect on economic data, investors are just looking through the noise”.

In contrast, strategists at JP Morgan see the trade war as a headwind for US stocks. “As half of the trade with China now may be subject to tariffs, there is an increasing probability of corporate earnings being revised lower, dampening the sentiment toward U.S. stocks,” said the strategists led by Marko Kolanovic.

Jack Ablin, chief investment officer at Cresset Wealth Advisors, said that the trade war adds to inflationary pressure that is already building. “The bond market is beginning to get a little concerned about it. Stocks are not there yet,” he said.

And all this comes at a time when the US stock market is already expensive. According to Jim Paulsen, chief investment strategist at The Leuthold Group, the median US stock price-earnings ratio is almost 50 percent more than at the top of the internet stock bubble in 2000.

Wednesday, 19 September 2018

Markets shrug off US-China trade war escalation

Markets rose on Tuesday.

The S&P 500 rose 0.5 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 surged 1.4 percent.

Stocks rose despite an escalation in the US-China trade war as China announced tariffs of 5 to 10 percent on US$60 billion worth of US products after the US announced new tariffs on about US$200 billion in Chinese goods on Monday.

Robert Pavlik, chief investment strategist at SlateStone Wealth, said that “the U.S. economy is strong, earnings are healthy and confidence among consumers and investors remains high”. He is also hopeful that the trade dispute will be settled “amicably”.

Tuesday, 18 September 2018

US raises tariffs on Chinese imports, China to retaliate

The trade war between the US and China looks set to escalate.

On Monday, the US government announced that it will impose 10 percent tariffs on US$200 billion worth of Chinese imports, and those duties will rise to 25 percent at the end of the year.

On Tuesday, the Chinese government announced that it has no choice but to retaliate against the latest round of US tariffs.

"An intensification of the U.S.-China trade spat is a near-term negative for risky assets, raising the specter of an economically damaging trade war in which high tariffs are imposed on most or all U.S.-China trade," wrote Mark Haefele, global chief investment officer at UBS Wealth Management, in a note on Tuesday.