Thursday, 30 June 2016

Markets rise as Brexit concerns fall

Global stocks rose for a second day on Wednesday.

The MSCI All-Country World Index rose 2.2 percent, bringing its two-day gain to 3.9 percent.

The S&P 500 rose 1.7 percent for a two-day gain of 3.5, erasing its loss for the year in the process.

The STOXX Europe 600 Index surged 3.1 percent. It has recovered 4.7 percent of the 11 percent loss over Friday and Monday.

The FTSE 100 Index erased its post-Brexit plunge with a 6.3 percent surge over the past two sessions as the pound extended its rally from a three-decade low on Monday.

Oil rose, with West Texas Intermediate crude rising 4.2 percent.

Yields on US 10-year Treasuries rose five basis points to 1.52 percent after falling on Monday to their lowest point in almost four years.

“It’s looking increasingly likely that the worse-case scenario, which is what markets initially reacted to, is not the most likely case,” said Brad McMillan, chief investment officer of Commonwealth Financial Network in Waltham, Massachusetts.

Thursday, 23 June 2016

Stocks mixed as traders hedge on Brexit vote

Stocks were mixed on Thursday.

The S&P 500 fell 0.2 percent and the Nikkei 225 fell 0.6 percent but the STOXX Europe 600 rose 0.4 percent while the Shanghai Composite Index rose 0.9 percent.

Investors on Wednesday remained focused on the UK referendum on whether to leave the European Union.

“Players on both sides of the Atlantic continue to hedge going into the ‘Brexit’ vote,” said Tom Carter, managing director at JonesTrading.

Wednesday, 22 June 2016

Stocks gain as UK vote approaches

Most stock markets rose on Tuesday as the UK’s referendum on whether to leave the European Union drew closer.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 rose 1.3 percent but the Shanghai Composite Index fell 0.4 percent.

The yield on the 10-year US Treasury note rose to 1.699 percent from 1.670 percent on Monday.

“Investors aren’t willing to commit to anything ahead of the referendum,” said Remi Olu-Pitan, multiasset fund manager at Schroders.

However, Dennis Gartman thinks that the uncertainty surrounding the UK vote makes the US stock market the "only place to go".

Tuesday, 21 June 2016

Global stocks rise as Brexit fears recede

Stocks surged on Monday as concerns over the UK's exit from the European Union receded.

The S&P 500 rose 0.6 percent, the STOXX Europe 600 surged 3.6 percent and the Nikkei 225 jumped 2.3 percent.

The yield on the 10-year US Treasury note rose to 1.670 percent from 1.616 percent on Friday.

“It’s a reassessment of risk, clear and simple,” said Tom Carter, managing director at JonesTrading.

Indeed, Bryan Rich thinks that a UK exit from the EU is “not going to happen” and “that should clear the way for broad global stock market rallies and a sharp bounce back in yields”.

Monday, 20 June 2016

No panic over Brexit

As the referendum on 23 June on the UK's secession from the European Union approaches, and despite the market volatility of the past week, analysts are not predicting anything dire for stock markets.

From Bloomberg:

Even as global markets teetered last week and polls showed more U.K. voters leaning toward leaving the trading bloc, securities firms surveyed by Bloomberg are predicting the outcome will be largely a non-issue for equities. They’ve left practically untouched predictions that European shares will rise almost 10 percent through the rest of the year.

It is a similar situation for the US stock market.

Citigroup’s Tobias Levkovich noted in a recent report: “With Europe directly accounting for 9% of S&P 500’s constituent sales, of which a good chunk comes from stable businesses in areas like food, drugs and beverages, a Brexit vote is unlikely to be disruptive.”

A recent FactSet report estimated that the overall S&P 500 index has a mere 2.9 percent sales exposure to the UK, with even the most exposed sector having 6 percent of sales coming from the UK.

Saturday, 18 June 2016

Stocks mixed but down for week

Stocks ended a rocky week on a mixed note on Friday.

The S&P 500 fell 0.3 percent to end the week down 1.2 percent.

The STOXX Europe 600 jumped 1.4 percent but still finished the week down 2.1 percent.

The Nikkei 225 rose 1.1 percent but ended the week 6 percent lower, its worst weekly performance since February.

“At this point, people are going to stay where they are,” said Ryan Kelley, a portfolio manager at Hennessy Funds.

“The last thing investors are willing to do is stick out their neck on geopolitical risks in a market they already feel is a bit long in the tooth,” said David Lafferty, chief market strategist at Natixis Global Asset Management.

Friday, 17 June 2016

Japanese stocks plunge but US stocks rise after long losing streak

Japanese stocks plunged on Thursday.

The Nikkei 225 fell 3.1 percent after the Bank of Japan left monetary policy unchanged at its meeting.

Most other Asian markets also fell. The Shanghai Composite fell 0.5 percent.

Elsewhere, the STOXX Europe 600 fell 0.7 percent but the S&P 500 rose 0.3 percent to snap a five-day losing streak.

The S&P 500's bounce on Thursday would not have come as a surprise to some.

According to Bespoke Investment Group, the index's longest streak of losses in 10 months may be signalling a turnaround for US stocks.

The most recent survey by the American Association of Individual Investors (AAII) showed that bearish sentiment surged this past week to 38 percent from 28 percent the week before.

"We view AAII as a contrarian indicator," said George Pearkes, a strategist at the firm. "When bearishness is high or bullishness low, it typically means that the crowd has moved out of the market."

Thursday, 16 June 2016

US stocks fall as Fed leaves rates unchanged

US stocks fell on Wednesday.

The S&P 500 fell 0.2 percent, its fifth consecutive decline.

US stocks fell despite the Federal Reserve leaving interest rates unchanged at its monetary policy meeting and giving indications that fewer rate hikes may be in store than previously expected.

"We do need to make sure that there's sufficient momentum," Fed Chair Janet Yellen said at a news conference.

For the latest meeting, six of 17 policymakers projected just one rate increase this year.

Markets were more positive elsewhere in the world.

The STOXX Europe 600 rose 1 percent while the Nikkei 225 rose 0.4 percent.

The Shanghai Composite Index jumped 1.6 percent even though MSCI decided not to include a group of mainland Chinese stocks in its emerging markets index.

Wednesday, 15 June 2016

Stocks fall, may face "bumpy" summer

Stocks fell again on Tuesday.

The S&P 500 fell 0.2 percent for its fourth consecutive decline. It is now 2.6 percent below its record high.

However, it was the STOXX Europe 600 that has been hit particularly hard on concerns over a possible UK exit from the European Union. It tumbled 1.9 percent on Tuesday and fell 7.4 percent over the past five trading sessions.

Bond yields also fell again on Tuesday. The US 10-year Treasury yield fell to 1.611 percent, the lowest since December 2012, from 1.616 percent on Monday. The 10-year German bund yield fell below zero for the first time ever.

Brian Belski, chief investment strategist at BMO Capital Markets, thinks there will be more near-term volatility. "This summer, heading into the election, it's going to be bumpy," he told CNBC.

In contrast, Ivan Kollar, a portfolio manager at Marketocracy, said in an interview that stocks "are about to embark on the next upswing... which will bring the market to 2400 and beyond".

Tuesday, 14 June 2016

Stocks fall, Chinese and Japanese markets plunge

Stocks fell on Monday.

The S&P 500 fell 0.8 percent while the STOXX Europe 600 tumbled 1.8 percent.

The MSCI Emerging Markets Index fell 1.7 percent as the Shanghai Composite Index plunged 3.2 percent.

Elsewhere in Asia, Japan's Topix index plunged 3.5 percent while the Hang Seng Index fell 2.5 percent.

Safe haven assets rose however. Government bonds gained with US 10-year Treasuries rising for the fifth consecutive day to push the yield down three basis points to 1.61 percent.

Monday, 13 June 2016

US recession risk increased but stock earnings also expected to go higher

Economists think the probability of a US recession has increased. From the Wall Street Journal:

Many economists believe the U.S. faces a non-negligible risk of entering a recession within the next year. Asked to rank the probability of being in recession at some point over the next 12 months, respondents to The Wall Street Journal’s monthly survey of economists, on average, put the odds at 21%. That’s about double what they were a year ago. Not high enough to panic, but high enough to pay attention.

There is a silver lining for stocks though: profits may be set to grow again. From the Wall Street Journal:

... [E]arnings for S&P 500 companies are pegged to decline by 3.5% in the second quarter from a year earlier, according to Thomson Reuters, after falling 5% in the first.

But this expected decline is for pro forma figures... Under generally accepted accounting principles, or GAAP, earnings will likely be much higher than they were a year earlier.

Saturday, 11 June 2016

Markets tumble as Brexit looms

Global stocks fell on Friday.

The MSCI world index sank 1.5 percent, its biggest drop since 8 February.

The S&P 500 fell 0.9 percent, its biggest drop in three weeks.

The STOXX Europe 600 plunged 2.4 percent, its third consecutive decline.

The US 10-year Treasury note yield fell as much as six basis points to 1.63 percent, the lowest on a closing basis since December 2012. German 10-year bund yields fell to an all-time low of 0.01 percent.

West Texas Intermediate crude plunged 3 percent.

Sterling fell as much as 1.9 percent against the dollar, the largest drop since October 2009, after a poll showed 55 percent in the UK wanted to leave the EU while 45 percent wanted to remain.

Friday, 10 June 2016

Stocks and bond yields fall

Stocks fell on Thursday.

The S&P 500 fell 0.2 percent while the STOXX Europe 600 and Nikkei 225 both fell 1 percent.

US crude fell 1.3 percent.

US Treasuries rose on foreign demand. The 10-year Treasury yield fell to 1.678 percent, its lowest settlement since its 2016 trough of 1.642 percent in February.

“I’m not reading the fact that the 10-year yield is so low as an indictment of the U.S. economy,” said Michael Purves, chief global strategist at Weeden & Co. “It’s more a function of aggressive monetary policies overseas.”

However, even as foreigners have been pouring money into US Treasuries, they have been pulling money out of US stocks. Bloomberg reports that foreign investors dumped $128 billion in US stocks over the past year.

Thursday, 9 June 2016

S&P 500 edges closer to record but drawdown risk "elevated"

Markets were mixed on Wednesday even as the S&P 500 edged closer to a record high.

The S&P 500 rose 0.3 percent to close at its highest level since 21 July. It is now just 0.6 percent below its record high.

The MSCI Emerging Markets Index rose 0.8 percent, its fifth consecutive gain, but the STOXX Europe 600 fell 0.5 percent.

Commodities rose on Wednesday. West Texas Intermediate crude jumped 1.7 percent while silver soared 4 percent.

The continued rally in US stocks is not providing any assurance for Goldman Sachs though.

"With the S&P 500 close to all-time highs, stretched valuations and a lack of growth, drawdown risk appears elevated," warned Goldman Sachs Managing Director Christian Mueller-Glissmann.

Wednesday, 8 June 2016

Baron says investors fear stocks as S&P 500 nears record high

Ron Baron told CNBC on Tuesday that investors fear stocks.

That fear, if true, has not stopped the S&P 500 from closing in on a record high. The index rose 0.1 percent on Tuesday to come within 0.9 percent of its record.

Stock markets elsewhere performed even better on Tuesday. The STOXX Europe rose 1.1 percent, the Nikkei 225 rose 0.6 percent and the Hang Seng Index jumped 1.4 percent.

Helping to boost stock prices on Tuesday was a rise in oil. US crude oil rose 1.3 percent to settle above US$50 for the first time since July.

Tuesday, 7 June 2016

US stock market closes in on high, "melt up increasingly probable"

Stocks were mixed on Monday.

The S&P 500 rose 0.5 percent and the STOXX Europe 600 rose 0.3 percent.

However, the Nikkei 225 fell 0.4 percent while the Shanghai Composite Index fell 0.2 percent.

With its advance on Monday, the S&P 500 is 1 percent below its all-time closing high from May 2015.

Technical analysts at HSBC think that the US stock market is getting close to a melt-up.

"The S&P 500 industrials sector has given a bull signal with momentum turning higher on the back of a positive cyclical trend indicator," the analysts wrote.

Also, the analysts noted that the FANG stocks -- Facebook,, Netflix and Alphabet -- have broken through a technical resistance line.

"This is further evidence that a melt up in U.S. stocks is becoming an increasing probability," the HSBC analysts concluded.

Monday, 6 June 2016

Investor bearishness could mean higher stocks

Citibank’s chief US equity strategist Tobias Levkovich thinks that bearishness among investors bodes well for stocks.

In a recent note to clients, Levkovich wrote that the all-pervading bearishness, the flows, and the positioning that has resulted from it “argues for a near 97% chance of a higher S&P 500 by mid-2017”.

“Thus, we remain comfortable with a 2,150 year-end 2016 target and a 2,250 mid-year 2017 objective,” he added.

However, according to the AAII sentiment survey, bullish sentiment jumped 12.4 percentage points to 30.2 percent last week, a six-week high. Bullish sentiment, though, remained below its historical average of 38.5 percent for the 30th consecutive week.

Saturday, 4 June 2016

US stocks fall on weak jobs report

A weak employment report pushed US stocks down on Friday.

The S&P 500 fell 0.3 percent after a report from the Labr Department showed that nonfarm payrolls rose 38,000 in May, the smallest gain since September 2010.

The STOXX Europe 600 fell 0.9 percent.

Earlier on Friday, both the Nikkei 225 and the Shanghai Composite Index rose 0.5 percent.

The US 10-year Treasury yield fell to 1.707 percent from 1.811 percent on Thursday as federal-funds futures placed the odds of a rate increase at the Federal Reserve’s June meeting at 4 percent, down from 21 percent before the jobs report.

The weak employment report also came as economists at JPMorgan see the probability of a recession occurring within the next 12 months at the highest in the current economic expansion.

"Our preferred macroeconomic indicator of the probability that a recession begins within 12 months has moved up from 30% on May 5 to 34% last week to 36% today," JPMorgan's Jesse Edgerton wrote. "This marks the second consecutive week that the tracker has reached a new high for the expansion."

Friday, 3 June 2016

Japanese stocks plunge as sales tax delayed

Japanese stocks plunged on Thursday but stocks elsewhere were mostly higher.

The Nikkei 225 tumbled 2.3 percent after the government moved to delay a sales-tax hike for more than two years.

In a note on Thursday, DBS said that this is the second time the consumption tax hike has been pushed back. "The second delay this time may have increased investors' concerns about economic uncertainties and skepticism about Abenomics," DBS said. "The postponement of the tax hike raises doubts over the sustainability of Japan's public debt".

Elsewhere in Asia though, the Shanghai Composite Index rose 0.4 percent and the Hang Seng Index rose 0.2 percent.

The S&P 500 rose 0.3 percent while the STOXX Europe 600 rose less than 0.1 percent after European Central Bank President Mario Draghi said at a news conference that he expected interest rates to stay at current or lower levels for an extended period.

Thursday, 2 June 2016

US stocks escape global decline but "still very vulnerable"

Stocks were mostly down on Wednesday although the US escaped unscathed.

The Nikkei 225 tumbled 1.6 percent and the STOXX Europe 600 fell 1 percent.

However, the S&P 500 edged up 0.1 percent.

Still, investors remained cautious.

“There’s very little reason to come in and buy risk with both hands,” said John Brady, managing director at futures brokerage RJ O’Brien.

Indeed, Marc Faber, who told CNBC in January that most stocks would drop between 20 and 40 percent, told CNBC again on Wednesday that stocks are “still very vulnerable”.

Wednesday, 1 June 2016

Stocks mixed as analyst views range from double-digit gains to market collapse

Global stocks ended the month of May on a mixed note.

Asian stocks were mostly higher on Tuesday, with the Shanghai Composite Index surging 3.3 percent.

However, the S&P 500 fell 0.1 percent and the STOXX Europe 600 fell 0.8 percent.

Despite Tuesday's decline, the S&P 500 finished May with a 1.5 percent gain and is up 2.6 percent for 2016.

Tom Lee, founder of Fundstrat Global Advisors, told CNBC that "the stock market should have double-digit gains this year".

In contrast, BlackRock has downgraded US and European stocks to neutral, citing elevated US valuations and the higher probability of a midyear interest-rate increase by the Federal Reserve.

Daniel Fisher at Forbes wrote that huge losses during the financial crisis may have distorted the cyclically adjusted price-earnings (CAPE) ratio commonly used to measure valuation though.

However, according to John Hussman, it is not just CAPE but a variety of valuation measures, some better-correlated with market returns, that show that we are now in "a situation from which no resolution is possible other than 0-2% investment returns on a 10-12 year horizon, and a market collapse over the completion of the current market cycle".