Saturday, 12 July 2014

Markets recover as investors see good time to buy

After the fall on Thursday, markets recovered slightly on Friday.

The S&P 500 rose 0.1 percent while the STOXX Europe 600 rose 0.2 percent. Portuguese 10-year yields fell 12 basis points to 3.85 percent.

Portugal's Banco Espirito Santo sought to reassure investors on Friday, saying that “the potential losses resulting from the exposure to Grupo Espirito Santo do not compromise the compliance with the regulatory capital requirements”.

But investors, especially in the US, seem eager to downplay risks anyway. From Bloomberg:

When the U.S. stock market opened yesterday, the Standard & Poor’s 500 Index (SPX) was poised for the first 1 percent drop in three months. Then the bulls stepped in.

The U.S. equity benchmark pared most of its losses during the day, closing down 0.4 percent amid speculation the initial selloff was overdone. Any slump in the market will be temporary and represents a good time to buy, said Craig Hodges, manager of the $1.4 billion Hodges Small Cap Fund that’s beaten 99 percent of its peers over three years.

“We have a list of 15 to 20 names that we’d like to buy at a cheaper price, and so we kind of like days like today, where some of the weak holders get shaken out of stocks,” he said in a phone interview yesterday from Dallas. “There is still a lot of money on the sideline that’s looking to be put to work.”...

“This is the self-fulfilling condition we’ve all been waiting for,” [Greg] Taylor, a fund manager at Aurion Capital in Toronto, which manages about C$6.6 billion ($6.2 billion), said in a phone interview. “We’re getting our buy tickets ready.”...

“There’s still too much sideline cash,” [Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC] said by phone... “Too many under-invested institutional investors that would quickly come into the market and serve to put a floor in before this got ridiculous.”

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