Saturday, 19 October 2019

Markets fall, China's economy slows

Markets fell on Friday.

The S&P 500 fell 0.4 percent, the STOXX Europe 600 fell 0.3 percent and the Shanghai Composite tumbled 1.3 percent.

China reported that its economy grew 6.0 percent in the third quarter from a year ago, down from a 6.2 percent pace in the second quarter.

“Unchecked, the US-China trade conflict is set to sink growth well below 6%,” Mizuho Bank’s Vishnu Varathan, head of economics and strategy, wrote in a note.

Friday, 18 October 2019

Markets mixed amid renewed Brexit deal hope

Markets were mixed on Thursday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 dipped 0.1 percent and the Shanghai Composite fell 0.1 percent.

European stocks made early gains on the back of an announcement that the European Union and Britain had clinched a deal on the terms of Britain’s exit from the bloc but eventually closed lower.

“Unfortunately, it is too early,” said Michael Bell, Global Market Strategist at JP Morgan.

“It remains to be seen whether the reaction is short-lived as the politicians go toe-to-toe again at the weekend,” said Richard Hunter, head of markets at Interactive Investor.

Thursday, 17 October 2019

US stocks fall amid falling retail sales and overvaluation

Markets were mixed on Wednesday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 dipped 0.1 percent.

Earlier in Asia, the Shanghai Composite fell 0.4 percent but the Nikkei 225 jumped 1.2 percent.

A report showing a 0.3 percent fall in US retail sales in September raised concerns of a slowdown in consumer spending.

The report pushed the probability of an October interest rate cut by the Federal Reserve up to 90.3 percent from 73.8 percent on Tuesday, based on CME Group data.

Interest rate cuts may be all that is keeping some markets up, according to the International Monetary Fund.

“Equity markets appear to be overvalued in Japan and the United States,” the IMF said in its latest Global Financial Stability report released on Wednesday.

“Declines in interest rates have further motivated investors to search for yield by increasing duration and credit exposures, a development that has boosted asset valuations,” it suggested.

It warned that the search for yield is also “creating an environment conducive to a buildup of vulnerabilities”.

Wednesday, 16 October 2019

Markets rise on hopes for Brexit deal

Markets were mostly higher on Tuesday.

The S&P 500 rose 1.0 percent, the STOXX Europe 600 jumped 1.1 percent and the Nikkei 225 surged 1.9 percent.

Investors were cheered on Tuesday by a report that an agreement over the UK's exit from the European Union is close.

“One by one the major global risks to U.S. economic growth are falling by the wayside which gives investors the green light to back up the truck and buy lots of stocks,” said MUFG chief economist Chris Rupkey.

John Lynch, chief investment strategist at LPL Financial, said that “better days lie ahead”. He said that the US-China trade war “is unlikely to be resolved anytime soon, but we believe any small steps forward could increase business confidence and spark capital investment, lifting corporate profits”.

Tuesday, 15 October 2019

Markets mixed amid concern optimism on US-China trade deal is “premature”

Markets were mixed on Monday.

The S&P 500 dipped 0.1 percent and the STOXX Europe 600 fell 0.5 percent but the Shanghai Composite rose 1.2 percent.

Markets gave up some of the gains made after an announcement on Friday that the US and China had reached a partial agreement on trade.

“There was concern optimism might be premature,” said John Carey, a portfolio manager and director of US equity income at Amundi Pioneer Asset Management.

Nevertheless, JP Morgan analyst David Kelly suggested that “the fact that the negotiators were so anxious to announce a deal suggests that both sides now appreciate the damage being done to their economies by the conflict” and “probably reduces the risk of a re-escalation of the war in the months ahead”.

Indeed, Chinese customs data released on Monday showed that in US dollar terms, Chinese exports fell 3.2 percent in September from the previous year while imports declined 8.5 percent.

Monday, 14 October 2019

US-China trade deal “looks more like a truce”

US President Donald Trump announced on Friday that the US and China have reached a partial deal whereby the latter will purchase between US$40 billion and US$50 billion worth of US agricultural products while the US agreed to suspend a tariff increase on at least US$250 billion in Chinese goods to 30 percent from 25 percent which would have taken place on Tuesday.

The announcement helped push stocks up on Friday but analysts say the deal appears to be more of a “temporary truce”.

“We think the ‘substantial’ first-stage trade deal made by Trump with China looks more like a truce than a genuine deal,” said Christiaan Tuntono, senior economist for Asia Pacific at Allianz Global Investors.

“In terms of the real thorny issues, none of that is thrashed out,” said Mizuho Bank’s Head of Economics and Strategy Vishnu Varathan.

Friday, 11 October 2019

Markets rise on renewed hopes for US-China trade deal

Markets rose on Thursday.

The S&P 500 rose 0.6 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 rose 0.5 percent.

Sentiment was boosted by US President Donald Trump's tweet that he would meet Chinese Vice Premier Liu He on Friday to advance a trade deal.

Stephen Suttmeier, chief equity technical strategist at Bank of America Merrill Lynch, told CNBC that the market is “building some kind of a base” that “resolves to the upside, meaning going to new highs”.

In contrast, Raoul Pal, co-founder of Real Vision financial television, said that the market is entering a “period of illiquidity” and that a stock selloff may be inevitable.

Thursday, 10 October 2019

US stocks rise even as Americans see recession around the corner

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.9 percent and the STOXX Europe 600 rose 0.4 percent. Earlier in the day, the Nikkei 225 fell 0.2 percent.

Slowing growth and fears of a possible recession could hold back stocks though.

The latest Allianz Quarterly Market Perceptions Study in the US showed that 50 percent of respondents see a major recession right around the corner, an increase from 46 percent earlier this year.

35 percent of respondents said that now is a good time to invest in the market, down from over 40 percent at the beginning of the year.

Indeed, Stephen Gallagher, the chief US economist for Societe Generale, thinks that an erosion in corporate profit margins will push the US economy into a recession in 2020.

Wednesday, 9 October 2019

US stocks plunge amid concerns on US-China trade talks

Markets were mixed on Tuesday.

Early in the day, Asian markets rose, with the Nikkei 225 gaining 1.0 percent.

However, western markets failed to sustain the momentum. The STOXX Europe 600 fell 1.1 percent and the S&P 500 plunged 1.6 percent amid concerns that US-China trade talks set to begin on Thursday will fail.

Some support for markets did come from Federal Reserve Chairman Jerome, who said the central bank believes the current economic expansion can be sustained, and that the Fed intends to expand its balance sheet by purchasing short-term US government debt to support overnight bank-to-bank lending.

However, reports of the US blacklisting Chinese companies and imposition of visa bans on Chinese officials involved in the mass detention of Muslims in the Chinese region of Xinjiang weighed on sentiment.

Mike O’Rourke, chief market strategist at JonesTrading, said that while the Fed's move on buying short-term debt was “very QE-like”, the trade-related reports “took the air out of the Fed rally”.

Tuesday, 8 October 2019

Markets mixed as German industrial orders fall

Markets were mixed on Monday.

The S&P 500 fell 0.5 percent and the Nikkei 225 fell 0.2 percent but the STOXX Europe 600 rose 0.7 percent.

European markets rose despite a report on Monday showing that German industrial orders fell 0.6 percent in August.

“The German economy is in the midst of a recession. Today’s data make that clear again,” said Thomas Gitzel, economist at VP Bank Group.

Meanwhile, the risk of a US recession remains low. Results of a survey by the National Association for Business Economics showed that the economy is expected to grow by 2.3 percent in 2019 but slow to 1.8 percent in 2020.

Monday, 7 October 2019

S&P 500 to break out to “new all-time highs”

Stocks fell last week. The S&P 500 fell 0.3 percent, its third consecutive weekly decline. The STOXX Europe 600 fell 3.0 percent.

Oil also fell. West Texas Intermediate crude fell 5.5 percent, its biggest weekly decline since the week ended 19 July. Brent fell 4.4 percent.

However, BTIG strategist Julian Emanuel thinks that stocks will resume rallying in the fourth quarter.

“Similar to 1998, where stocks rallied for 18 months (advancing 68%) from the cyclical low to the point of maximum public bullishness, the 3/2000 ‘Tech Bubble Top,’” Emanuel was quoted by MarketWatch as saying, “we expect the current four-month S&P 500 trading range to resolve with new all-time highs as the prospect of higher interest rates... results in fund flows to stocks and the public’s eventual embracing of the ‘most hated bull market of all-time.’”

Saturday, 5 October 2019

Markets rise after “Goldilocks” US jobs report

Markets rose on Friday.

The S&P 500 surged 1.4 percent, the STOXX Europe 600n rose 0.7 percent and the Nikkei 225 rose 0.3 percent.

A report on Friday showed that the US economy added 136,000 new jobs in September.

“This is the classic definition of a ‘Goldilocks’ report,” said Michael Arone, chief investment strategist at State Street Global Advisors.

Friday, 4 October 2019

Markets mixed, “fears of recession continue to mount”

Markets were mixed on Thursday.

The S&P 500 rose 0.8 percent while the STOXX Europe 600 was flat and the Nikkei 225 plunged 2.0 percent.

A report from the Institute for Supply Management on Thursday showed that its services index fell to 52.6 in September from 56.4 in August.

Similarly, Markit's composite PMI for the euro area fell to 50.1 in September from 51.9 in August as the services PMI declined to 51.6 from 53.5.

MUFG chief economist, Chris Rupkey said that “fears of recession continue to mount”.

Thursday, 3 October 2019

Markets fall, “growing risk the US economy falls into recession”

Markets fell sharply on Wednesday.

The S&P 500 fell 1.2 percent, the STOXX Europe 600 plunged 2.7 percent and the Nikkei 225 fell 0.5 percent.

“The very weak ISM, weak levels of (capital expenditure) plans, and inversion of parts of the US yield curve suggests a growing risk the US economy falls into recession,” Joseph Capurso, senior currency strategist at Commonwealth Bank of Australia, wrote in a note.

Some technical analysts are also concerned of further downside to the market.

Ned Davis Research chief global investment strategist Tim Hayes noted that the comeback in September is becoming “another round of failure”, pointing to a lack of breadth, slowing equity fund inflows and a failure of the yield curve to steepen.

MKM Chief Market Technician JC O’Hara said “the market is not in the best shape to make new highs from its current position” since “shorter term technical indicators started to show some negative divergences”.

Tribeca Trade Group CEO Christian Fromhertz noted: “On the technicals, you’re losing breadth a little bit … we’re starting to see more groups tilt to the downside.”

Wednesday, 2 October 2019

Stocks fall, rate cuts may not help

Markets mostly fell on Tuesday.

The S&P 500 fell 1.2 percent and the STOXX Europe 600 tumbled 1.3 percent. Ealier in Asia, the Nikkei 225 rose 0.6 percent.

US stocks fell after the Institute for Supply Management reported that its manufacturing index fell from 49.1 in July to 47.8 in August, its worst reading since June 2009.

Following the report, the fed funds futures market is now pricing in a 65 percent chance of a quarter-point rate cut on 30 October compared with 40 percent a day ago.

However, UBS thinks that rate cuts will not save the stock market this time.

“The Fed-easing rallies of the 1990s were made possible by a strong inverse correlation between interest rates and P/Es. This relationship no longer exists today,” UBS equity strategist Francois Trahan said in a note on Tuesday.

Tuesday, 1 October 2019

Markets mostly higher amid mixed economic data

Markets were mostly higher on Monday.

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

However, the Asian markets mostly declined, with the Shanghai Composite falling 0.9 percent.

Economic data on Monday were mixed.

In the US, the Chicago PMI fell to 47.1 in September from 50.4 in August.

In the euro area, the unemployment rate fell to 7.4 percent in August from 7.5 percent in July.

In China, the Caixin/Markit factory PMI rose to 51.4 in September from 50.4 in August while the official Chinese manufacturing PMI rose to 49.8 from 49.5.

Monday, 30 September 2019

Prepare for the end of the bull market

Last week, Lakshman Achuthan and Anirvan Banerji, co-founders of the Economic Cycle Research Institute, wrote in a CNN article that a recession in the US is still on the table.

“Growth in the Economic Cycle Research Institute's U.S. Leading Employment Index (USLEI)...has plummeted to its worst reading since the Great Recession,” they wrote.

They concluded that “the message is clear that the economy will keep slowing and the risk of a recession is still growing”.

In the meantime, Mark Hulbert at MarketWatch suggested that investors prepare for the end of the bull market.

“You might start reducing your exposure to stocks now, even if you think the bull market has room to run. That’s because stock returns in the last months of a bull market tend to be mediocre at best. So don’t try to hang on for that last penny of profit,” he wrote.

Hulbert said that recession risks are relatively high now. He cited an econometric model based on the yield curve which showed that the probability of a recession in the next 12 months is between 30 and 40 percent.

Hulbert acknowledged that there is no certainty that the bull market is coming to an end though and suggested that investors reduce their equity exposure gradually or shift stock holdings from more speculative to more conservative positions.

Saturday, 28 September 2019

Markets, US economic data mixed

Markets were mixed on Friday.

The S&P 500 fell 0.5 percent but the STOXX Europe 600 rose 0.5 percent.

Earlier in Asia, the Nikkei 225 fell 0.8 percent but the Shanghai Composite rose 0.1 percent.

News that the US is considering curbs on portfolio investments into China weighed on markets.

US economic data were mixed.

Consumer spending and income rose 0.1 percent and 0.4 percent respectively but were below expectations.

Durable goods orders rose 0.2 percent, better than expected, but excluding defense orders, they fell 0.6 percent.

“The economic data today was skewed toward the positive side and it helped,” said Paul Zemsky, chief investment officer at Multi Asset Strategies.

“Income growth was solid, but spending was disappointing, that tells me that people and companies are getting defensive and preparing for uncertain times,” said Mike Loewengart, vice president of investment strategy at E-Trade.

Friday, 27 September 2019

Markets mixed with economic data “skewed to the negative”

Markets were mixed on Thursday.

The S&P 500 fell 0.2 percent but the STOXX Europe 600 rose 0.6 percent.

In Asia, the Shanghai Composite fell 0.9 percent but the Nikkei 225 rose 0.1 percent.

Sahak Manuelian, managing director of equity trading at Wedbush Securities, noted that economic data this week, “by and large, has been skewed to the negative”.

Paul Kitney, chief equity strategist of Asia Pacific research at Daiwa Capital Markets, noted that global trade volumes have declined for three consecutive months year-on-year, “the first time since the global financial crisis”.

Thursday, 26 September 2019

Markets mixed as Trump hints at end to trade war

Markets were mixed on Wednesday.

The S&P 500 rose 0.6 percent but the STOXX Europe 600 fell 0.6 percent and the Nikkei 225 fell 0.4 percent.

While concerns over a possible impeachment inquiry against US President Donald Trump persisted, the latter provided investors with a positive distraction on Wednesday by saying that a deal to end the protracted US trade war with China could happen “sooner than you think”.

John Carey, Amundi Pioneer’s director of equity income, said that while there is some “political risk” in the market, in the near term, “people are looking at corporate earnings and the economy and feeling reasonably secure that the bottom isn’t falling out just yet”.

Wednesday, 25 September 2019

Markets mixed amid political concerns in the US and Europe

Markets were mixed on Tuesday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 was flat and the Shanghai Composite rose 0.3 percent.

US stocks fell amid worries that President Donald Trump will face an impeachment inquiry over his alleged political pressure on Ukraine's leader Volodymyr Zelensky to investigate Democratic presidential hopeful Joe Biden’s family.

US stocks were also weighed down by disappointing consumer confidence data. The Conference Board's consumer confidence index fell to 125.1 in September from 135.1 in August.

In Europe, uncertainty over Brexit lingered as the UK Supreme Court ruled that the British prime minister’s suspension of parliament was unlawful.

Tuesday, 24 September 2019

Eurozone economy “close to stalling” but US economy picks up pace

Markets were mostly lower on Monday.

The S&P 500 was flat but the STOXX Europe 600 fell 0.8 percent and the Shanghai Composite fell 1.0 percent.

Weighing down markets was a report that showed that the flash eurozone manufacturing purchasing managers index fell to an 83-month low of 45.6 in September from 47.0 in August. The flash eurozone services PMI fell to an 8-month low of 52.0 from 53.5 in August

“The eurozone economy is close to stalling as a deepening manufacturing downturn shows further signs of spreading to the services sector,” said Chris Williamson, chief business economist at IHS Markit.

However, the flash US manufacturing PMI rose to a five-month high of 51.0 in September from 50.3 in August while the flash services index edged up to 50.9 from 50.7.

Also, the Chicago Fed national activity index rose to 0.1 in August from -0.41 in the previous month.

Monday, 23 September 2019

With S&P 500 close to record high, money markets may be signalling troubles ahead

The S&P 500 fell 0.5 percent last week.

Despite the decline, the S&P 500 remains just 1.2 percent below its record high set in late July.

“It’s good that we’re challenging the records, but I don’t know if we have enough momentum to stay around these levels,” said JJ Kinahan, chief market strategist at TD Ameritrade.

Somewhat more confident is Edward Yardeni, president of Yardeni Research.

“I’ve got 3,500 as my target for next year,” he told CNBC on Friday. “We’ll get there on higher earnings with maybe somewhat higher valuation as the perception continues to be that interest rates aren’t going up much, if at all.”

However, John Tobey at Forbes warned that developments in money markets last week signalled possible troubles ahead.

“… something just went bump in the other room, where bond and money managers play,” he wrote. “In this case, that undesirable bump was the repo market being unable to function within the Fed’s desired interest rate range.”

Tobey said the real concern is the unexpected declines in Fed deposits, which required the Fed to “throw large amounts of money into the system” from Tuesday onward.

Tobey suggested that it may not be a good scenario “when the Fed begins throwing money into the system in the hopes of solving whatever the problem is and keeping those guys in the other room from running for the exits”.

Saturday, 21 September 2019

Markets mixed along with news on trade war

Markets were mixed on Friday.

The S&P 500 fell 0.5 percent but the STOXX Europe 600 rose 0.3 percent and the Shanghai Composite rose 0.2 percent.

Kate Warne, principal investment strategist with Edward Jones, said she expects stocks to move higher, “but not on a smooth path”.

“There are lots of signs the economy is slowing, but very few signs it’s slowing quickly,” she said.

Warne also said that a lot will depend on how trade negotiations play out in October.

On Friday, a report said that the US Trade Representative’s office had exempted several big-ticket items produced in China from tariffs but this was followed by the cancellation of a scheduled visit to US farm states next week by Chinese trade officials.

“Even if we see a deal on tariffs, we think the tariffs probably will remain higher than where they were before 2017 and all of the other restrictions are going to remain in place as well,” said Shaun Roache, chief economist of Asia Pacific at S&P Global Ratings.

Friday, 20 September 2019

Markets higher, Fed policy may be “too tight”

Market were mostly higher on Thursday.

The S&P 500 was flat but the STOXX Europe 600 rose 0.6 percent and the Nikkei 225 rose 0.4 percent.

The Bank of Japan and the Bank of England both left interest rates unchanged on Thursday.

Meanwhile, National Securities chief market strategist Art Hogan predicts that the Federal Reserve will not be cutting rates again this year.

“They may well be at neutral right now,” he said. “The market is going to be OK with it,” he added, as he sees further economic growth ahead for the US.

In contrast, Barry Bannister, chief equity strategist at Stifel, thinks that “the policy setting remains too tight” and that there is now a risk of recession.

“Our view is either to expect more flight to safety because a recession looms, or await more weakness that coerces policy makers to go further,” he said.

Thursday, 19 September 2019

Markets mixed as Fed fails to signal “extensive sequence of rate cuts”

Markets were mixed on Wednesday.

The S&P 500 closed flat, as did the STOXX Europe 600. In Asia, the Shanghai Composite rose 0.3 percent while the Nikkei 225 fell 0.2 percent.

At its monetary policy meeting that concluded on Wednesday, the Federal Reserve cut the fed funds rate by 25 basis points to a range of 1.75 percent to 2 percent.

During the press conference following the meeting, Fed Chairman Jerome Powell said further interest rate moves would depend on economic conditions.

“If the economy does turn down, then a more extensive sequence of rate cuts will be appropriate,” he said. “We don’t see that. It’s not what we expect.”

Joseph Zidle, Blackstone's chief investment strategist, warned that failure by the Fed to follow through with more interest rate cuts could rattle markets.

“The markets are set up for a disappointment. They’re going to have to re-rate their expectations,” he said.

Wednesday, 18 September 2019

Markets mixed but “Fed coming to the rescue again”

Markets were mixed on Tuesday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 fell less than 0.1 percent and the Shanghai Composite plunged 1.7 percent.

Oil fell after surging on Monday. West Texas Intermediate crude fell 5.7 percent and Brent fell 6.5 percent.

Ahead of the Federal Reserve's monetary policy decision on Wednesday, the yield on the US 10-year Treasury note fell to 1.81 percent from 1.843 percent on Monday.

US economic data on Tuesday were positive, with industrial production showing a 0.6 percent rise in August and the National Association of Home Builders’ monthly confidence index rising one point to 68 in September.

Nela Richardson, investment strategist at Edward Jones, said that the Federal Reserve is likely to help keep the economic expansion going and therefore allow stocks to rise further.

“This bull market could tread on even though we are in the latter stages of it,” Richardson said. “Remember that it is rising interest rates that haunt markets not lower rates.”

“The Fed is coming to the rescue again,” said Troy Gayeski, co-chief investment officer at SkyBridge Capital.

Tuesday, 17 September 2019

As oil surges, stocks fall but “resilient” market “could rip up”

Markets mostly fell on Monday after a weekend attack on Saudi Arabia’s oil-production facilities.

The S&P 500 fell 0.3 percent and the STOXX Europe 600 fell 0.6 percent while the Shanghai Composite was little-changed.

Oil prices surged. West Texas Intermediate and Brent crude jumped 14.7 and 14.6 percent respectively.

“While U.S.-China trade and U.S. oil supply growth have been the primary price drivers we see a return of the political risk premium as the market has been arguably complacent about risk events,” said Jon Rigby, an analyst at UBS.

Other analysts remain sanguine though.

“It will take a lot to disrupt the bull case for U.S. stocks and today’s selloff that stemmed from the Saudi oil field attacks could see buyers eventually re-emerge,” wrote Edward Moya, senior market analyst at brokerage Oanda.

Doug Cote, chief market strategist at Voya Investment Management, suggested that the small decline in stocks showed how resilient the market is. “Any good news, and this market could rip up,” he said.

Monday, 16 September 2019

Oil prices surge after attack on Saudi oil facilities

Crude oil prices are rising after attacks against Saudi Arabian oil facilities over the weekend.

Yemen’s Iran-aligned Houthi group said it attacked two oil plants in Saudi Arabia on Saturday, knocking out more than half the latter’s oil output.

Brent crude surged as much as 18 percent at one point on Sunday, while crude-oil strategist Phil Flynn at Price Futures Group saying that the attack was a “big deal”.

“We could be dealing with a significant game-changer for oil markets over the short to medium term as security levels continue to flash red,” said Stephen Innes, Asia-Pacific market strategist for AxiTrader.

Saturday, 14 September 2019

Markets mixed as US retail sales rise

Markets were mixed on Friday.

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

A report on Friday showed that US retail sales rose 0.4 percent in August.

“This morning’s number was above expectations but more importantly it’s the sixth straight month of positive growth for retail sales which is a really encouraging,” wrote Mike Loewengart, vice president of investment strategy at E-Trade Financial.

Also supporting markets on Friday was a report that China is adding US agricultural products like soybeans and pork to the list of imports exempted from tariffs.

This move follows reports on Thursday that the US could consider an interim agreement on the trade dispute with China, raising hopes for an eventual resolution.

Friday, 13 September 2019

Markets rise as Trump delays China tariffs, ECB increases monetary stimulus

Markets rose on Thursday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 rose 0.7 percent.

Markets rose after US President Trump announced on Wednesday that, “as a gesture of goodwill”, he would delay the implementation of a tariff hike from 25 percent to 30 percent from 1 October to 15 October.

However, Tom Essaye, president of the Sevens Report, said that “just a delay won’t be a positive catalyst—the market already expects more” while James McCormack, global head of sovereign ratings at Fitch Ratings, said that “we’re some distance from real resolution”.

Markets were further buoyed on Thursday by news that the European Central Bank will cut its deposit rate from -0.4 percent to -0.5 percent and restart open-ended purchasing of long-term government bonds at a pace of €20 billion a month.

In a press conference following the decision, ECB President Mario Draghi urged governments to take fiscal measures to supplement the central bank’s monetary stimulus.

Indeed, ING Chief Economist Carsten Brzeski suggested that “without fiscal stimulus, Draghi’s final stunt will not necessarily lead to a happy end”.

Also, Artur Baluszynski, head of research at Henderson Rowe, said the ECB pushing rates further into negative territory is “essentially a tax on euro zone banks, and for the already weakened bank-financed economy like the euro zone, this move could spell more trouble”.

Wednesday, 11 September 2019

Markets little changed as US investors rotate into cyclicals

Markets were mostly little changed on Tuesday.

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

“The big story is the continuing rotation that we saw begin a couple days ago,” said Willie Delwiche, market strategist with RW Baird. “If we can actually move away from narrow, defensive leadership into cyclical and small-cap leadership, that would be a healthy development for the market.”

MarketWatch reported that over the weekend, Andrew Sheets, chief cross-asset strategist at Morgan Stanley, had written in a note that the global economy may be poised for an upside surprise.

“In this scenario, yields and inflation expectations would rise meaningfully, as markets assume less easing is needed and better days lie ahead,” he said.

Sheets added that “the market isn’t positioned” for a reacceleration in growth and that the resultant market movements “could be large”.

Tuesday, 10 September 2019

Markets “vulnerable to a pullback”, US economy entering “debt hole”

Markets were mixed on Monday.

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

The US 10-year Treasury yield rose 8 basis points to 1.632 percent, its highest since 13 August.

Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research, noted that “the fact that we’re this close to an all time high puts us in a dangerous situation and makes the market vulnerable to a pullback”.

Federal Reserve data released on Monday showed consumer borrowing in the US rose at the fastest rate in almost two years in July.

However, this comes at a time when total potential debt for the US is already running at 1,832 percent of GDP, based on calculations by AB Bernstein.

The debt measure included not only traditional levels of public debt like bonds but also financial debt as well as future obligations for so-called entitlement programs, some of which are not set in stone.

“While the picture is dire, such numbers don’t prove we are doomed or that a debt crisis is inevitable,” said Philipp Carlsson-Szlezak, chief US economist at AB Bernstein, in his report.

Still, many are worried about today's debt levels.

“We are quickly approaching a situation where we have dug ourselves a debt hole which is doing to have profoundly negative effects on the economy for probably decades going forward,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

“In the next credit cycle downturn, then, the generally lower credit quality of today’s speculative-grade population means that the default count could exceed the Great Recession peak of 14% of all rated issuers,” said Christina Padgett, a Moody’s senior vice president.

Monday, 9 September 2019

China exports shrink, US recession chance climbs amid trade war

China’s exports unexpectedly fell in August, according to a report on Sunday.

Chinese customs data showed that August exports fell 1 percent from a year earlier after having risen 3.3 percent in July.

Exports to the US fell 16 percent year-on-year, worse than the 6.5 percent decline in July.

China's imports fell 5.6 percent in August from the previous year, its fourth consecutive decline.

Steven Zhang, chief economist and head of research at Morgan Stanley Huaxin Securities, attributed the sharp decline in exports to the US to the China-US trade war.

“The global economy is approaching the turning point of a recession, and external demand will for sure become worse and worse,” he said.

Indeed, the chance of a recession in the US over the next 12 months climbed to 38 percent in August, according to a New York Federal Reserve model based on the US Treasury yield curve.

“Anything over 30% is very bad,” said Nicholas Colas, co-founder of DataTrek Research.

“Trade policy represents the No. 1 risk. If things continue to escalate, that poses a real threat to the business cycle,” said James McCann, senior global economist at Aberdeen Standard Investments.

Saturday, 7 September 2019

Markets rise despite weak US employment report as China cuts reserve requirement

Markets rose on Friday, with the S&P 500 edging up 0.1 percent.

A report from the Labor Department showed that the US economy added 130,000 jobs in August, down from 159,000 in July.

Despite the slower job growth, Michael Arone, chief investment strategist for State Street Global Advisors, said that “there is underlying strength to this report, including average weekly hours worked picking up, the labor-force participation rate rising and strong wage growth”.

Arone also said that the jobs report will “strengthen the case that the Fed should cut rates at the next meeting”.

In the meantime, markets were buoyed by an announcement by the People's Bank of China on Friday that its reserve requirement ratio for banks would be cut by 50 basis points and it would further reduce that ratio by 100 basis points for some qualified banks.

Friday, 6 September 2019

Markets rise, “will rally into the end of the year”

Markets rose on Thursday.

The S&P 500 jumped 1.3 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 surged 2.1 percent.

China’s Commerce Ministry issued a statement on Thursday morning saying that the two sides agreed to resume trade negotiations early next month.

US economic data on Thursday were mostly positive. The private sector added 195,000 jobs in August while the ISM nonmanufacturing index rose to 56.4 in August from 53.7 in July.

However, Markit's services PMI fell from 53.0 in July to 50.7 in August, below the “flash” estimate issued two weeks ago.

Still, Mislav Matejka, JP Morgan’s chief global equity strategist, thinks that the US economy “is not headed for a recession” and that “the market will rally into the end of the year”.

Thursday, 5 September 2019

Markets rise, S&P 500 expected to advance further by year end

Markets rose on Wednesday. The S&P 500 rose 1.1 percent and the STOXX Europe 600 rose 0.9 percent.

Earlier in Asia, the Nikkei 225 rose 0.1 percent and the Hang Seng jumped 3.9 percent after Hong Kong Chief Executive Carrie Lam said she would scrap an extradition bill that sparked months of protests in the city.

Oil rose. West Texas Intermediate crude surged 4.3 percent and Brent jumped 4.2 percent.

The Federal Reserve's beige book released on Wednesday showed that, overall, the US economy expanded at the same “modest pace” seen in earlier reports this year as a majority of business owners “remain optimistic about the near-term outlook”.

Wall Street also remains relatively optimistic, with the 17 top stock prognosticators tracked by CNBC’s Market Strategist Survey expecting the S&P 500 to rise 2.2 percent from current levels on average by the end of the year.

Wednesday, 4 September 2019

Markets mixed as US manufacturing data add to fears of more weakness ahead

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 0.2 percent while the Nikkei 225 was flat.

US economic data on Tuesday were mixed.

The ISM manufacturing index fell to 49.1 in August from 51.2 in July but Markit's manufacturing PMI for August came in at 50.3, above an initial estimate of 49.9.

Jim O’Sullivan chief US economist with High Frequency Economics, wrote that while the ISM data does not yet signal a recession, it was “weaker than expected” and “will undoubtedly add to fears that more weakness is ahead”.

US construction spending rose 0.1 percent in July, below expectations but rebounding partially from a 1.3 percent fall in June.

Tuesday, 3 September 2019

Stocks mixed, risk assets may be driven “a lot higher” by year’s end

Markets were mixed on Monday.

The STOXX Europe 600 rose 0.3 percent and the Shanghai Composite jumped 1.3 percent but the Nikkei 225 fell 0.4 percent.

US markets were closed for a holiday.

Economic data were relatively positive.

The Caixin/Markit China manufacturing PMI for August was 50.4, better than expected and indicating an expansion, in contrast to the government PMI released over the weekend.

While the eurozone manufacturing PMI showed a contraction in August, it rose to 47.0 from 46.5 in July.

Leuthold Group’s chief investment strategist Jim Paulsen told CNBC last week that he expects a breakout for stocks by year’s end as the economy improves.

He said that with “all of the policy stimulus we’ve introduced...I think it’s going to start to improve economic reports”.

“If we find out it turns out better than feared, many, many portfolios are under allocated to risk assets and will have to re-adjust themselves trying to get more risk which could drive risk assets a lot higher,” he said.

Monday, 2 September 2019

US and China raise tariffs, China plans more support for economy as manufacturing weakens

A new round of tariffs were imposed on Sunday by the US and China on each other's goods.

The US began imposing 15 percent tariffs on a variety of Chinese goods including footwear, smart watches and flat-panel televisions while China began imposing new duties on US crude oil.

Meanwhile, the trade war between the two countries may already be impacting the Chinese economy.

A report on Saturday by China’s National Bureau of Statistics showed that its manufacturing purchasing managers' index fell to 49.5 in August from 49.7 in July.

The report was followed by an announcement by the State Council on Sunday that the government plans to provide more support for its economy, including investing in infrastructure projects and regional development.

Saturday, 31 August 2019

Markets rise as tumbling sentiment triggers “buy signal”

Markets rose on Friday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 jumped 1.2 percent.

US economic data on Friday were mixed.

Personal income in July rose by a less-than-expected 0.1 percent but the 0.6 percent rise in personal spending was in line with the consensus.

The core PCE price index rose 0.2 percent in July while the year-on-year increase was 1.4 percent.

The Chicago Federal Reserve’s purchasing managers index for August came in at 50.4, up from 44.4 in July.

The University of Michigan’s revised index of consumer sentiment for August was 89.8, down from an initial reading of 92.1 and below the 98.4 reading in July.

Vasu Menon, executive director of investment strategy at Singapore’s OCBC Bank, said that while the bank has been “telling our clients to somewhat de-risk portfolios a month ago”, it also noted that “fundamentals are not that bad right now”.

“What’s dragging the market down is sentiment,” Menon said.

Indeed, Bank of America Merrill Lynch said in a research note on Friday that its flagship sentiment indicator had tumbled from 2.4 to 1.3. That has triggered a contrarian “buy signal” for risk assets.

Friday, 30 August 2019

Stocks may decline further, signs indicate “excessive optimism”

Markets were mostly higher on Thursday.

The S&P 500 rose 1.3 percent and the STOXX Europe 600 rose 1.0 percent. However, the Nikkei 225 fell 0.1 percent.

Some analysts think that stocks may see further declines.

“I don’t think stocks are out of the woods yet,” Sven Henrich, founder and lead market strategist of NorthmanTrader, told CNBC on Tuesday.

Heinrich said that if “the central banks lose control and we actually do go into a global recession...it can head all the way down to 2,100 on the S&P”.

Scott Wren, Wells Fargo Investment Institute’s senior global equity strategist, told CNBC on Wednesday that the S&P 500 may decline another 5 percent and fall through the 200-day moving average.

However, that could represent a “buying opportunity”.

“Our year-end target is 3,030 on the S&P. So, clearly we’re constructive here,” he said.

And Wren is apparently not the only one who is optimistic over the longer term.

Ned Davis, founder of Ned Davis Research, said that a longer-term view of equity valuations and allocations indicates “excessive optimism”.

Davis wrote in a note that the S&P 500 is trading at about 16.3 times forward earnings, below the average valuation during the past five years but higher than they have been 80 percent of the time going back to 1928.

Thursday, 29 August 2019

US yield curve inverts further but stocks have time to soar

Markets were mixed on Wednesday.

The S&P 500 rose 0.7 percent and the Nikkei 225 rose 0.1 percent but the STOXX Europe 600 fell 0.2 percent.

US Treasury yields fell. The 30-year yield hit an all-time low of 1.907 percent while the spread between the 10-year and 2-year yields inverted further.

“We’re in a fragile equilibrium: rallying bond markets are propping up equity valuations, but the balance holds only if global growth does not break out to the downside,” said UBS economist Arend Kapteyn in a note.

However, Stephen McBride, chief analyst at RiskHedge, wrote in a Forbes article that there is time for stocks to soar.

“From the time the yield curve first inverts, a recession hits 20 months later, on average,” he wrote. “Twenty months is a long time. And in those 20 months after the yield curve inverts, stocks usually perform well.”

Wednesday, 28 August 2019

Markets mixed, "downside risks are increasing"

Markets were mixed on Tuesday, with the S&P 500 falling 0.3 percent but most other markets gaining.

Germany's economy contracted 0.1 percent in the second quarter from the previous quarter.

"Downside risks are increasing for both the global economy and markets," UBS Wealth Management Chief Investment Officer Mark Haefele said in a note as he announced a shift to an "underweight" recommendation on equities.

Nevertheless, Haefele said UBS still thinks the US can avoid a recession in 2020.

A slowdown in the US is becoming evident though.

US economic data on Tuesday showed that the Case-Shiller home price index rose 2.1 percent in June over the past 12 months, down from a 2.4 percent increase the previous month, while the Conference Board’s consumer confidence index fell to 135.1 in August from 135.8 in July.

Tuesday, 27 August 2019

Markets mixed amid signs of waning confidence

Markets were mixed on Monday.

The S&P 500 rose 1.1 percent, the STOXX Europe 600 was flat and the Nikkei 225 plunged 2.2 percent.

US President Donald Trump said on Monday that negotiations with China would begin again after the US received two “very good calls” from Beijing.

Economic data on Monday pointed to further slowing of economic growth.

US durable goods orders rose 2.1 percent in July but fell 0.4 percent when transport items are excluded.

The Chicago Fed National Activity Index fell to -0.36 in July from 0.03 in June.

In Germany, the Ifo business confidence index fell to 94.3 in August, its weakest level since November 2012, from 95.7 in July.

Confidence in corporate America may also be declining.

According to TrimTabs Investment Research, corporate insiders have sold an average of US$600 million of stock per day in August. This puts August on track to be the fifth month of the year in which insider selling tops US$10 billion. TrimTabs said that the only other times that has happened was 2006 and 2007, the period before the last bear market in stocks.

"It signals a lack of confidence," said Winston Chua, an analyst at TrimTabs. "When insiders sell, it's a sign they believe valuations are high and it's a good time to be outside the market."

Monday, 26 August 2019

US faces stagflation risk, “problem is in the president”

The S&P 500 fell 1.4 percent last week, its fourth consecutive weekly decline.

The S&P 500 ended the week with a 2.6 percent plunge on Friday after China announced new tariffs on US$75 billion worth of US goods in retaliation for US plans to institute tariffs on US$300 billion worth of Chinese imports.

The Chinese announcement was immediately followed by US President Donald Trump announcing that he was ordering US companies “to immediately start looking for an alternative to China”.

This was followed by another anouncement on Friday that the US will raise existing duties on US$250 billion in Chinese products to 30 percent from 25 percent on 1 October and the tariffs on another US$300 billion in Chinese goods, which are scheduled to take effect on 1 September, will now be 15 percent instead of 10 percent.

With the continuing escalation in the US-China trade war, investors will be increasingly looking at the Federal Reserve to cut interest rates to support the economy and asset markets.

However, Alan Blinder, former vice chair of the Federal Reserve board, warned that the trade war is likely to generate a supply shock for the US economy and thus be stagflationary, resulting in both slower economic growth and higher inflation.

In such an environment, central bankers attending the Federal Reserve’s central banking conference in Jackson Hole acknowledged that there is little they can do.

“We are experiencing a series of major political shocks,” said Reserve Bank of Australia Governor Philip Lowe.

“There’s only so much a monetary policy action can do,” said Cleveland Fed President Loretta Mester.

“The problem is in the president of the United States,” former Fed Vice Chair Stanley Fischer said bluntly. “How the system is going to get around some of the sorts of things that have been done lately, including trying to destroy the global trading system, is very unclear. I have no idea how to deal with this.”

Saturday, 24 August 2019

US stocks plunge after US-China trade war escalates

US stocks fell sharply on Friday, the S&P 500 plunging 2.6 percent.

Elsewhere, the STOXX Europe 600 fell 0.8 percent while the Nikkei 225 rose 0.4 percent.

Markets fell after China announced new tariffs on US imports and US President Donald Trump responded by ordering US companies “to immediately start looking for an alternative to China”.

Federal Reserve Chairman Jerome Powell did provide some support for the market in his speech at the meeting of central bankers at Jackson Hole.

“We have seen further evidence of a global slowdown,” he noted.

US economic data on Friday added to the evidence: new home sales in July fell 12.8 percent.

Friday, 23 August 2019

Markets mixed, US manufacturing PMI falls below 50

Markets were mixed on Thursday.

In the US the S&P 500 slipped 0.1 percent but the Dow Jones Industrial Average rose 0.2 percent.

Elsewhere, the STOXX Europe 600 fell 0.4 percent but in Asia, the Shanghai Composite rose 0.1 percent while the Nikkei 225 rose less than 0.1 percent.

US stocks were held down by reports from IHS Markit showing that its purchasing managers index for US manufacturing fell to 49.9 in August from 50.4 in July while its services index fell to 50.9 from 53.0.

Thursday, 22 August 2019

Markets rise, “don't need” another rate cut

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.8 percent and the STOXX Europe 600 rose 1.2 percent but the Nikkei 225 fell 0.3 percent.

The minutes of the Federal Reserve 30-31 July monetary policy meeting released on Wednesday showed that most Fed members who supported the rate cut agreed with Fed Chairman Jerome Powell’s assessment that it was a “mid-cycle adjustment” and thus not the start of an aggressive monetary easing campaign.

While traders are pricing in a near-certain interest rate cut during the Fed's September meeting, the curve between the 2-year Treasury yield and 10-year yield inverted briefly after the release of the minutes.

“Looks like the Fed is going to be stubborn, and the yield curve is starting to price that in,” noted Andy Brenner of National Alliance.

However, Jon Hill, rate strategist at BMO, said: “Cutting this early in the cycle before economic data turns could lead to excessive risk taking.”

Indeed, Bank of America Corp.’s CEO Brian Moynihan told CNBC that the US economy will keep growing.

“The U.S. consumer continues to spend and that will keep the U.S. economy in good shape,” he said.

Byron Wien, vice chairman of private wealth solutions at Blackstone, thinks similarly.

“This is a 70% consumer economy — and the consumer is spending; unemployment is low; wages are rising,” he told CNBC on Wednesday.

Wien added that the stock market also does not need another Fed rate cut.

“If you look at the market over the past week, stocks don’t need any help. They are roaring ahead, without the Fed doing anything,” Wien said.

Wednesday, 21 August 2019

Markets fall with Treasury yields

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.7 percent and the Shanghai Composite fell 0.1 percent.

US 10-year Treasury yields fell about 5 basis points, which Art Cashin, director of NYSE floor operations at UBS, said may have contributed to the fall in stocks.

“For the past two weeks whenever yields move down, stocks move down,” said Cashin.

Bianco Research president James Bianco told CNBC last Friday that the market needs to see the Federal Reserve respond with aggressive rate cuts.

“We’re the only place on the planet now you can get more than a 2% yield among developed countries,” Bianco said. “Powell should probably open the door for the possibility of a 50 basis point cut at the September meeting.”

Kyle Bass, founder and chief investment officer of Hayman Capital Management, does think that the Federal Reserve will keep cutting rates and eventually bring US interest rates all the way down to zero.

Tuesday, 20 August 2019

Markets rise but US recession widely expected by 2021

Markets rose on Monday.

The S&P 500 rose 1.2 percent, its second consecutive gain of more than 1 percent. Elsewhere, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 rose 0.7 percent.

However, the rally may not last.

“The market is preparing for a bad outcome,” Mike Wilson, chief US equity strategist at Morgan Stanley, told MarketWatch in an interview.

“The hope of Fed cuts has been propping up the markets all year, but rate cuts aren’t good for the market if you’re going into recession,” said Wilson.

While some economists think that the US consumer could prop up the economy, Wilson noted that the University of Michigan’s consumer sentiment index fell 6.3 points in August and weekly hours worked has fallen to near two-year lows.

Also, the trade war between the US and China is likely to weigh down the economy as “the likelihood of a deal has gone down dramatically”.

Indeed, many other economists think that the US economy may be entering recession within the next few years.

According to a survey by the National Association for Business Economics, 2 percent of economists surveyed expect a recession to begin this year, 38 percent expect a recession next year and 34 percent expect one in 2021.

Monday, 19 August 2019

Stocks seen falling further

The S&P 500 fell 1.0 percent last week. It was its third consecutive weekly decline.

Bank of America-Merrill Lynch chief equity technical strategist Stephen Suttmeier told CNBC last week that the S&P 500 needs to fall another 5 percent and panic needs to get more extreme before it bottoms.

“The correction is going to continue,” he said, suggesting that it could take weeks for stocks to find a floor.

Cresset Capital chief investment officer Jack Ablin told CNBC last week that the stock market could stay weak even longer.

Ablin said that trade tensions will create more danger and volatility deep into 2020. “I’m not too hopeful about a trade deal,” he said.

Saturday, 17 August 2019

Markets rise but “US stock market hasn’t hit correction low”

Markets rose on Friday.

The S&P 500 jumped 1.4 percent, the STOXX Europe 600 rose 1.2 percent and the Shanghai Composite rose 0.3 percent.

US economic data on Friday were mostly weak. The University of Michigan’s consumer sentiment survey fell to 92.1 in August from 98.4 in July. US housing starts fell 4 percent but building permits rose 8.4 percent.

European stocks were lifted by indications that the German government would allow deficit spending if necessary to combat a recession.

Meanwhile, Mark Hulbert at MarketWatch said that US stocks could fall further.

Hulbert noted that sentiment did not deteriorate enough during the recent market decline to build enough “wall of worry” among investors to support a tradable rally.

“The U.S. stock market hasn’t yet hit a correction low,” he wrote. “The bulls have begun to retreat, which is a step in the right direction. But contrarians are betting that more bulls will have to throw in the towel before a tradable bottom is at hand.”

Friday, 16 August 2019

Risk of recession “greater than ever” but rate cuts could save markets

Markets were mixed on Thursday.

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

Earlier in Asia, the Shanghai Composite rose 0.2 percent but the Nikkei 225 fell 1.2 percent.

The US 10-year Treasury yield fell 6.2 basis points to 1.534 percent, its lowest since August 2016.

US economic data on Thursday were mixed. Retail sales rose 0.7 percent in July but industrial production fell 0.2 percent.

China on Thursday threatened to take “necessary countermeasures” against planned additional US tariffs against its imports.

“Tariff escalation risks continue to aggravate the current weakness in global manufacturing, with risk now threatening to infiltrate the resilient service sector and labor market,” wrote Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo.

Kathy Lien, managing director of FX strategy at BK Asset Management, said that “the risk of recession this cycle is greater than its ever been”.

Still, Mark Mobius thinks that central banks will save markets by cutting interest rates.

“Everyone seems to be racing to the bottom. Which is actually going to result in the market doing very well,” he told MarketWatch on Thursday.

Thursday, 15 August 2019

US stocks plunge, yield curve inverts amid weak economic data

Markets were mostly lower on Wednesday.

The S&P 500 plunged 2.9 percent and the STOXX Europe 600 tumbled 1.7 percent.

Earlier in the day, the Nikkei 225 rose 1.0 percent.

The yield on the 10-year US Treasury note fell below that of the 2-year US Treasury note for the first time in more than a decade.

Oil fell as a US government report showed that domestic crude inventories rose for a second week in row. West Texas Intermediate crude declined 4.2 percent.

Concerns over the economy weighed on markets after data showed that Chinese industrial production growth slowed to 4.8 percent year-over-year in July, its lowest rate since 2002, and Germany's economy contracted 0.1 percent in the second quarter.

“The global economy would likely see a recession if the US escalates tariffs on China to 25% for an extended period,” Morgan Stanley equity analyst, Michael Wilson wrote in a note.

Wednesday, 14 August 2019

US and European stocks rise but buying the dip likely to be “a losing proposition”

Markets were mixed on Tuesday.

The S&P 500 jumped 1.5 percent and the STOXX Europe 600 rose 0.5 percent.

However, Asian stocks fell. The Hang Seng plunged 2.1 percent amid escalating anti-government protests while the Nikkei 225 fell 1.1 percent.

US and European stocks rose after the US government backed off on imposing tariffs on some Chinese imports from 1 September.

However, some analysts remain cautious.

Andrew Hunter, senior US economist at Capital Economics, said that the US decision to delay some of the China tariffs was “obviously designed to avoid a politically-damaging rise in consumer prices ahead of the holiday season” and “should not be misinterpreted as a sign that trade tensions are easing”.

Meanwhile, Fiona Cincotta, senior market analyst at City Index, said that the protests in Hong Kong “are adding to an already tense geopolitical picture amid ongoing U.S.-Sino trade tensions”.

In Europe, the ZEW indicator of German economic sentiment fell to -44.1 in August, down from -24.5 in July and marking the lowest reading since December 2011.

And with purchasing managers indices already having fallen to the low 50s, UBS strategists Francois Trahan and Samuel Blackman said that buying the dip in stocks is likely to be “a losing proposition”.

Tuesday, 13 August 2019

US stocks fall as recession risk raised

Markets were mixed on Monday.

The S&P 500 fell 1.2 percent, the STOXX Europe 600 fell 0.3 percent but the Shanghai Composite rose 1.5 percent.

The US 10-year Treasury yield fell 9.1 basis points to 1.64 percent, its lowest level since October 2016.

“We think the failed breakout last week for the S&P 500 confirms we are still mired in a cyclical bear market,” said Mike Wilson, Morgan Stanley’s chief US equity strategist, in a note on Monday.

Bank of America raised its estimated chance of a US recession to 1-in-3 in the next 12 months as some of its economic indicators are “flashing yellow”.

However, JP Morgan’s head of global equity strategy Mislav Matejka said that it is too early to expect the next US recession and investors should be optimistic on equities.

“The current macro setup has more similarities to the ’15-’16 mid-cycle correction episode rather than the end of the cycle, in our view,” he said.

Monday, 12 August 2019

Investors' sentiment at extreme but stock market decline may not be over

The S&P 500 fell 0.5 percent last week in volatile trading.

It opened the week with a 3 percent plunge on Monday as a weakening renminbi prompted the US to label China a currency manipulator, rebounded on the following three days, then dipped at the end of the week.

Tom Aspray at Forbes wrote that sentiment fell to extreme levels last week. According to the American Association of Individual Investors survey, the percentage of investors who were bullish fell to 21.66 while the percentage who were bearish rose to 48.20, levels last seen before the December lows.

While Aspray acknowledged that the extreme sentiment could be an indicator of a market bottom, he noted that “technical studies...do not yet suggest that a bottom is in place”.

Aspray also noted the plunge in interest rates, with “no signs from the charts that the decline is over yet”.

Christopher Harvey, Wells Fargo Securities’ head of equity strategy, told CNBC that fear over ultra-low US rates and negative rates abroad could spark another deep sell-off.

“If you have a loss of confidence with the rate market, that’s going to spill over into equities,” he said last week.

Nevertheless, Harvey still sees the S&P 500 gaining 6 percent from Friday's close by the end of the year.

Saturday, 10 August 2019

Markets mostly lower but Japan rises on better-than-expected growth

Markets were mostly lower on Friday.

The S&P 500 fell 0.7 percent despite an afternoon rally which saw it recovering from sharp morning declines.

The STOXX Europe 600 fell 0.8 percent, with the FTSE MIB in particular plunging 2.5 percent after the leader of the ruling League party, Matteo Salvini, pulled his support for the country's governing coalition on Thursday and called for fresh elections.

Elwin de Groot, Rabobank’s head of macro strategy, said that the latest political development “leads to uncertainty because obviously we don’t know when it will be possible for Italy to improve their budget because they’ve only just come to an agreement with Brussels, which could very easily be upended”.

In Asia, the Shanghai Composite fell 0.7 percent but the Nikkei 225 rose 0.4 percent after Japan reported a better-than-expected economic growth of 0.4 percent in the three months ending June.

Commenting on the Japanese GDP report, Kathy Matsui, vice chair and chief Japan strategist at Goldman Sachs Japan, said that “the domestic demand part of the economy was particularly robust” and suggested “that both consumption and private (capital expenditure) remain kind of the engines of Japan’s economy at least for the foreseeable future”.

Friday, 9 August 2019

Stocks jump as China exports rise but “trends remain sharply lower”

Markets rose on Thursday.

The S&P 500 surged 1.9 percent, the STOXX Europe 600 jumped 1.7 percent and the Nikkei 225 rose 0.4 percent.

Markets were boosted by data from China, which showed that exports for July unexpectedly rose 3.3 percent from the previous year.

Also, fears on the currency front were at least temporarily quelled after the People’s Bank of China set the onshore renminbi reference rate at 7.0039 against one US dollar.

However, Mark Newton, technical analyst at Newton Advisors, said in a Thursday research note that “while the near-term trends in both equities and Treasury yields have begun to stabilize slightly, trends remain sharply lower and it wouldn’t take much to turn both trends back to the downside for a retest of recent lows”.

Thursday, 8 August 2019

Stocks turn around from sharp fall, oil plunges

Markets were mixed on Wednesday.

The S&P 500 rose 0.1 percent after recovering from a sharp fall earlier in the session while the STOXX Europe 600 rose 0.2 percent. However, the Nikkei 225 fell 0.3 percent.

JJ Kinahan, chief market strategist at TD Ameritrade, said: “A thinly-traded market can sometimes exacerbate moves, and August trading tends to be light – its typically a sleepy month.”

Oil prices fell on Wednesday after US inventory data showed an unexpected increase in supplies for last week. West Texas Intermediate crude fell 4.7 percent and Brent fell 4.6 percent.

“Selling pressure has started to build, and as a result, crude oil has entered in bear market territory,” said Naeem Aslam, chief market analyst with TF Global Markets.

Wednesday, 7 August 2019

US stocks rebound but more weakness and volatility expected

Markets were mixed on Tuesday.

The S&P 500 rebounded 1.3 percent after the previous day's tumble. However, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.7 percent.

Despite the rebound in US stocks on Tuesday, some analysts think that there is room for markets to fall again.

JP Morgan head of global and European equity Mislav Matejka wrote in a note on Monday that given the escalating trade war between the US and China as well as the time of the year, “markets could experience a few weeks worth of a pullback”.

However, he suggested that “one should use the prospective weakness as an opportunity to add” as “global equities will advance further before the next U.S. recession strikes”.

In contrast, Nomura macro and quant strategist Masanari Takada said in a note on Tuesday that “any near-term rally...would be best treated as an opportunity to sell in preparation for the second wave of volatility that we expect will arrive in late August or early September”.

Takada added that “the second wave may well hit harder than the first” and that “it would be a mistake to dismiss the possibility of a Lehman-like shock as a mere tail risk”.

Tuesday, 6 August 2019

Markets tumble as US-China trade war escalates further

Markets fell sharply on Monday.

The S&P 500 plunged 3.0 percent, the STOXX Europe 600 tumbled 2.3 percent and the Nikkei 225 fell 1.7 percent.

Market losses accelerated over the course of the day as China allowed its currency to fall to a more-than-10-year low versus the US dollar.

That provoked the US to label China a currency manipulator.

“Secretary Mnuchin, under the auspices of President Trump, has today determined that China is a Currency Manipulator,” the Treasury Department said in a release.

This despite the fact that “it’s not intervening consistently or persistently to weaken the currency” said Marc Chandler, chief market strategist at Bannockburn, who suggested that “many people in the private sector may not conclude it is a currency manipulator”.

Indeed, Hedge fund manager and Hayman Capital Management founder Kyle Bass suggested that China is actually supporting its currency by selling US dollars and buying its own currency.

“If they were to ever free float their currency, I think it would drop 30% or 40%,” said Bass.

In any case, Chandler said that this is “another step in the currency war” and “makes trade more difficult”.

As a result, John Higgins, chief markets economist at Capital Economics, said that “investors are right to mark down the prices of global equities in the expectation of a further escalation of the trade war”.

Monday, 5 August 2019

US stocks could see continued volatility

The S&P 500 fell 3.1 percent last week, its biggest weekly loss since December last year.

The decline in US stocks was accompanied by increased volatility, the CBOE Volatility Index spiking on Wednesday and Thursday.

Nomura strategist Masanari Takada said in a note to clients Friday that “a jittery global equity market is on its way to seeing two volatility spikes in August, one early in the month and one towards the end of the month”, and suggested that investors “refrain from bargain-hunting in global equities” until after that.

Phil Orlando, chief equity market strategist at Federated Investors, said he expected “some increased choppy volatility over the course of the next couple of months before we turn up and get back to record highs at the end of the year”.

Saturday, 3 August 2019

Markets fall amid escalating trade tensions

Markets fell on Friday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 plunged 2.5 percent and the Nikkei 225 plunged 2.1 percent.

The US 10-year Treasury yield fell 2.9 basis points to 1.864 percent, its lowest since 7 November 2016.

After US President Donald Trump announced additional tariffs on Chinese imports on Thursday, the US-China trade war looks likely to escalate even further as China’s spokesperson at the foreign ministry, Hua Chunying, said at a daily press briefing that Beijing may have to take countermeasures.

And the US-China trade war is not the only trade tension ongoing. On Friday, Japan’s cabinet approved a plan to remove South Korea from a so-called “white list” of countries that enjoy trade privileges with Tokyo following a dispute over compensation for wartime forced labour. In response, South Korea’s finance minister said the country will take steps to drop Japan from its list of countries with fast-track export status.

Friday, 2 August 2019

US stocks fall, oil plunges after Trump announces new tariffs on China

Markets were mixed on Thursday.

The S&P 500 fell 0.9 percent and the Shanghai Composite fell 0.8 percent but the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 rose 0.1 percent.

US stocks fell after President Donald Trump announced plans to impose additional tariffs on Chinese imports.

In addition, US manufacturing indices from the Institute for Supply Management and IHS Market showed declines to 51.2 and 50.4 in July, the lowest since August 2016 and September 2009 respectively.

Oil prices fell. West Texas Intermediate crude plunged 7.9 percent while Brent tumbled 7 percent.

“Perceptions of slowing economic growth that could likely bode ill for oil demand growth as well, especially with new tariffs about to be imposed on Chinese imports into the U.S., undermined sentiment in crude oil,” said Marshall Steeves, energy markets analyst at IHS Markit.

Thursday, 1 August 2019

Fed disappoints investors despite cutting interest rates

The Federal Reserve cut the fed funds rate by 25 basis points on Wednesday as widely expected.

Nevertheless, the S&P 500 tumbled 1.1 percent anyway after the Fed failed to signal that further cuts were on the way.

“There is nothing in the statement about growth cooling here at home, and there is not a whole lot to suggest another rate cut is coming down the pike,” said Mike Loewengart, vice president of investment strategy at E*Trade.

Indeed, Chris Rupkey, chief financial economist at MUFG Union Bank, said that the rate cut on Wednesday may already have been too much.

Calling the rate cut an “unwise decision”, Rupkey noted that it was made “despite a strong economy with no recession signs apparent anywhere out on the horizon”.

Former Philadelphia Fed President Charles Plosser told FOX Business that the Fed may have felt compelled to cut, having given an indication earlier that a potential rate cut was in the foreseeable future after a tumultuous December 2018.

“I think the Fed has talked themselves into a corner here where I think they had to deliver on a 25 basis point cut today because they will be afraid of the market reaction,” he said.

Wednesday, 31 July 2019

Markets mixed as US-China trade tension rises with Trump warning

Markets were mixed on Tuesday.

The S&P 500 fell 0.3 percent and the STOXX Europe 600 plunged 1.5 percent.

However, earlier in Asia, both the Nikkei 225 and the Shanghai Composite rose 0.4 percent.

Investors became concerned after US President Donald Trump warned China that if no trade agreement is reached before the US presidential elections and he is re-elected next year, the terms of an agreement would be much tougher than what is currently being discussed.

Meanwhile, though, Goldman Sachs has raised its year-end target for the S&P 500 to 3,100 from 3,000.

“The dovish Fed pivot has driven the equity market rally in 2019, and we expect low interest rates will continue to support above-average valuations going forward,” wrote David Kostin, the bank’s chief US equity analyst.

Kostin did acknowledge that policy uncertainty, arising, for example, from the US-China trade war, is a risk to stocks.

Indeed, Morgan Stanley chief economist, Chetan Ahya said that “easing won’t suffice to power a strong recovery”. Rather, “the key to reviving corporate confidence and growth lies in addressing the fundamental economic headwind of the day ... trade tensions today”.

Tuesday, 30 July 2019

Stocks mixed, sterling falls on prospect of no-deal Brexit

Markets were mixed on Monday.

The S&P 500 slipped 0.2 percent and the Nikkei 225 fell 0.2 percent but the STOXX Europe 600 was flat.

As US stocks pulled back from record highs, Michael Wilson, chief equity strategist at Morgan Stanley, wrote in a note to clients: “We think this latest surge will fail again, as we don’t expect a Fed cut to rekindle growth the way market participants may be hoping, and now pricing.”

In Europe, sterling fell over 1 percent, touching a 28-month low.

Sterling fell after Michael Gove, a member of newly-elected UK prime minister Boris Johnson's cabinet who is in charge of planning for a no-deal Brexit, wrote in the Sunday Times: “No deal is now a very real prospect.”

Monday, 29 July 2019

Narrow US stock market rally at risk from volatility spike

The S&P 500 rose 1.7 percent last week, ending at a record high.

Sven Henrich, founder and lead market strategist at NorthmanTrader, noted that the stock market's rally to all-time highs has been accompanied by falling volatility as measured by the CBOE Volatility Index or VIX.

“The VIX follows some very specific patterns that show compression,” he told CNBC on Friday, pointing to a series of lower highs and lower lows in the VIX.

Henrich said that when volatility “compresses too much, then we see these spikes” in the VIX.

Henrich added that the Federal Reserve's monetary policy decision this week, widely expected to be a rate cut, could be the trigger for such a spike.

Henrich also said that “while we see the Nasdaq making new highs, there’s no visible expansion in new highs versus new lows in these indicators”, indicating that “participation [is] waning in favor of a few individual stocks on the Nasdaq”.

Brendan Coffey at Forbes made a similar point for the market as a whole.

Coffey noted that the Russell 2000 has started lagging the S&P 500 “by an unusually wide amount”.

He said that it is “still a bull market, but there are signs it may be going to pasture”.

Saturday, 27 July 2019

US stocks hit record highs as economy grows better than expected

Markets mostly rose on Friday.

The S&P 500 rose 0.7 percent to a record high and the STOXX Europe 600 rose 0.3 percent.

However, Asian markets were mixed, with the Shanghai Composite rising 0.2 percent but the Nikkei 225 falling 0.5 percent.

A report on Friday showed that the US economy grew at a 2.1 percent rate in the second quarter, better than economists expected.

US corporate results announced on Friday were also generally better than expected. Alphabet in particular jumped 9.6 percent after announcing a massive buyback programme.

Indeed, Blackstone chief investment strategist Joseph Zidle told CNBC that the Federal Reserve may not cut rates as much as many are expecting.

“Inflation is not nearly as weak as the market expects,” he said. “Economic growth is slowing, but I think we’re going to avoid a recession for a long time.”

Zidle added that that could lead to increased volatility due to a “rerating of risk assets”.

In contrast, Richard Bernstein Advisors portfolio strategist Dan Suzuki told CNBC that correction risks are rising because growth is slowing.

“When the Fed has historically cut rates, unless you had some kind of combined effort from the fiscal stimulus side of things, it’s been generally more of a bearish sign than it has a bullish sign,” said Suzuki.

Friday, 26 July 2019

US and European stocks fall despite ECB expecting interest rates “at their present or lower levels”

Markets were mixed on Thursday.

The S&P 500 fell 0.5 percent, the STOXX Europe 600 fell 0.6 percent but the Shanghai Composite rose 0.5 percent.

The European Central Bank prepared markets for more easing measures on Thursday, saying that it expects its key interest rates to remain “at their present or lower levels” at least through the first half of 2020.

ECB President Mario Draghi said at a press conference on Thursday that “a significant degree of monetary stimulus continues to be necessary to ensure that financial conditions remain very favorable and support the euro area expansion.”

However, not everyone was impressed by the announcement.

“No meat on the bone on what the package/stimuli might entail,” wrote Piet Christiansen, senior ECB/euro-area analyst at Danske Bank, in a tweet.

Meanwhile, some positive economic data from the US also failed to boost stocks. Durable goods orders rose 2 percent last month while new applications for jobless benefits fell to 206,000 during the week ended 20 July.

“P/E expansion is responsible for almost all the price appreciation this year, and stocks are starting to look a little pricey. Not yet to scary levels, but something to watch,” wrote Ed Keon, chief investment strategist at QMA, a quantitative equity arm of PGIM.