Markets fall as oil plunges

Markets fell on Wednesday.

The S&P 500 fell 0.7 percent while the STOXX Europe 600 fell 0.5 percent.

Earlier in Asia, markets had been more positive. The Nikkei 225 and the Shanghai Composite Index both rose 0.3 percent.

Stocks fell later though as oil prices declined. US crude oil prices fell 3.4 percent on Wednesday, helping to push energy stocks in the S&P 500 down 1.5 percent.

According to Guggenheim’s Subash Chandra and Marshall Coltrain, however, these stocks could fare a lot better in 2016.

Stocks rebound on oil, sharp gains possible ahead

After mostly falling on Monday, stock markets rebounded on Tuesday.

In particular, the S&P 500 jumped 1.1 percent, helped by a 2.9 percent surge in US crude oil.

“Most of the gains on Wall Street are linked to oil price moves and it looks likely that the trend of tight correlation between stocks and oil will continue in early 2016,” said Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research.

That correlation could turn out to be a positive for stocks in 2016.

According to Chris Kimble, historically, crude oil tends to trade sharply positive after a big plunge. “I really think, looking at 30-year and 40-year charts, that commodities are at an important threshold,” he told MarketWatch.

Chinese stocks plunge, US may already be entering recession

Markets were mostly down on Monday, led by Chinese stocks.

The Shanghai Composite Index plunged 2.6 percent after data released on Sunday showed that profits at Chinese industrial companies fell 1.4 percent in November from a year earlier, marking a sixth consecutive month of decline.

Most other Asian stocks also fell but Japanese stocks showed resilience as the Topix index rose 0.9 percent on Monday even though a report early that day showed that the nation’s industrial output fell 1 percent in November from a month earlier.

In the West, the STOXX Europe 600 fell 0.5 percent and the S&P 500 slipped 0.2 percent as US crude prices fell 3.4 percent.

“We’re just following the price of oil,” said Peter Cardillo, chief market economist at brokerage First Standard Financial.

Or maybe there is more to the fall in US stocks.

In an interview with Bloomberg on Monday, Marc Faber said that “I believe that we’re already entering a recession in the United States” and US stocks will fall in 2016.

Markets go nowhere in 2015

2015 has been a difficult year for investors, with most markets going nowhere, as Bloomberg notes:

In fact, if you judge the past year by which U.S. investment class generated the largest return, a case can be made it was the worst for asset-allocating bulls in almost 80 years, according to data compiled by Bianco Research LLC and Bloomberg. With three days left, the Standard & Poor’s 500 Index has gained 2.2 percent with dividends, cash is up less, while bonds and commodities are showing losses.

Markets mixed but junk bond stabilisation could provide lift to stocks

Markets were mixed on Tuesday.

The S&P 500 rose 0.9 percent, the STOXX Europe 600 fell 0.1 percent and the Shanghai Composite Index gained 0.3 percent.

US stocks were boosted by higher oil prices. US oil prices rose 0.9 percent on Tuesday.

Junk bonds also mostly rose. The iShares iBoxx $ High Yield Corporate Bond ETF rose 1.2 percent.

Indeed, Chris Kimble sees "signs that Junk bonds are trying to get up off the mat", and that "would likely provide a lift to stocks as well".

Markets mixed but analysts see positive 2016 for US stocks

Markets were mixed on Monday.

The S&P 500 rose 0.8 percent but the STOXX Europe 600 fell 1.1 percent.

In Asia, the Nikkei 225 fell 0.3 percent but the Shanghai Composite Index jumped 1.7 percent.

Oil fell, WTI futures for February delivery declining 0.7 percent, but gold rose 1.5 percent.

Whether stocks can mount a sustained rally in the remaining days of the year remains a question mark.

“It is difficult to have meaningful rallies when there is so much volatility,” said Colin Cieszynski, chief market strategist at CMC Markets.

“Historically, a Santa rally starts about now and continues until the first few days of January,” said Jeffrey Saut, chief investment strategist at Raymond James.

However, analysts expect next year to be positive. Market professionals surveyed by CNNMoney estimate the S&P 500 will end 2016 at 2,194, up 9 percent from the latest close.

BoJ plans purchase of ETFs that don't exist

The Bank of Japan unveiled new measures to stimulate the Japanese economy on Friday.

The measures include lengthening the average maturities of Japanese government bonds it buys to seven to 12 years from seven to 10 years currently, establishing a new programme to buy 300 billion yen in ETFs that target companies investing “proactively in physical and human capital”, and increasing the maximum amount of real-estate investment trusts it can buy to 10 percent of each issue from five percent currently.

Investors were not too impressed by the move. While the Nikkei 225 initially climbed as much as 2.7 percent after the announcement, it subsequently reversed course to close down 1.9 percent.

Indeed, as a Bloomberg article noted:

Markets were roiled Friday after the Bank of Japan unveiled measures including purchasing exchange-traded funds that track companies which are “proactively making investment in physical and human capital”...

The only problem is such ETFs have never been made in Japan...

Realistically, trying to encourage more capital investment is always going to be a tall order for Japan. Such investments primarily work by leveraging the workforce. The problem is that Japan's labour force is shrinking and the country is ageing rapidly.

According to the National Institute of Population and Social Security Research, Japan’s population is set to drop by more than 700,000 a year on average between 2020 and 2030, by which time almost a third of the population will be 65 or older.

Stocks tumble, risk of debt defaults remains low near-term

Stocks ended the week with sharp falls.

The S&P 500 plunged 1.8 percent, the STOXX Europe 600 fell 1 percent and the Nikkei 225 sank 1.9 percent.

The yield on the US 10-year Treasury note fell to 2.197 percent from 2.236 percent.

Oil fell, US crude falling 0.6 percent and Brent falling 0.5 percent.

“I think it’s a relative safety trade going into the weekend,” said Weston Boone, managing director of institutional trading at Stifel Nicolaus.

However, there may not be a need to rush to safety just yet.

While falling commodity prices have triggered a widening of junk bond spreads on concern over the ability of companies to service their debt, credit strategists at Société Générale think that default rates in the US high yield market will remain less than 4 percent next year.

"The U.S. energy and mining companies have extended the life of their debt, and face only $5 billion worth of bond redemptions this year (concentrated in the second-half)," the strategists wrote. "However, redemptions rise quite sharply in 2017, 2018 and 2019, so the sector will need refinancing over this period."

US stocks reverse gains, falling oil prices a risk to credit markets

US stocks fell on Thursday. The S&P 500 sank 1.5 percent, giving up its gains from Wednesday.

Stocks elsewhere were somewhat more positive. The STOXX Europe 600 jumped 1.2 percent while the MSCI Asia Pacific Index rose 0.7 percent.

However, other markets mostly followed the US stock market down.

Oil fell, West Texas Intermediate oil futures sliding 1.6 percent.

Gold and industrial metals also fell. Gold futures for February delivery plunged 2.5 percent.

As risk assets fell, US Treasuries rose. The 10-year yield dropped seven basis points to 2.23 percent.

Goldman Sachs expects oil prices to fall further, which could in turn further strain credit markets.

"In our view, oil prices remain the epicenter of both credit risk and credit risk sentiment," wrote Charles Himmelberg, chief credit strategist at Goldman Sachs.

While Himmelberg noted that "corporate leverage has risen over the past 4-5 years to levels that have not prevailed since the 1990s", low interest rates mean that servicing the debt is not overly onerous.

Indeed, Goldman economist Zach Pandl said: "For the broader economy, while developments in credit markets bear close monitoring, we do not yet see a case for a more far-reaching credit crunch."

Fed hikes rates, stocks rise but oil companies at risk

The Federal Reserve raised interest rates for the first time in almost a decade on Wednesday. Bloomberg reports:

The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials.

Treasuries fell on Wednesday. The yield on the two-year note in particular reached a 5-year high of 1.021 percent.

However, stock investors reacted positively. The S&P 500 rose 1.5 percent.

Gold, silver and copper also rose but oil fell after US crude inventories were reported to have risen to the highest level for this time of year since 1930.

Indeed, Nick Cunningham thinks the Fed rate hike "couldn’t come at a worse time for the oil and gas industry".

He said that "the oil boom was fueled by loose money from the Fed".

Higher interest rates will raise the cost of money and make borrowing more expensive.

"If that means more drillers lose their access to finance, or are unable to tap finance at reasonable rates, more companies could go bankrupt," he wrote.

Also, higher interest rates will strengthen the US dollar, and with crude oil priced in dollars, the Fed hike "could put downward pressure on oil prices".

Stocks, junk bond funds rally

Markets rallied on Tuesday.

The S&P 500 rose 1.1 percent and the STOXX Europe 600 jumped 2.6 percent.

Oil rose. West Texas Intermediate crude jumped 2.9 percent while Brent crude gained 1.4 percent.

US Treasuries and German bonds fell but junk-bond funds rallied. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF and SPDR Barclays High Yield Bond ETF both advanced for the first time in four days.

The risk premium on the Markit CDX North American High Yield Index narrowed the most since October.

Views on the outlook for high-yield debt are mixed. From Bloomberg:

Jim Reid, a strategist at Deutsche Bank AG, wrote Monday that this month’s turmoil, including Third Avenue Management’s suspension of cash redemptions from a mutual fund that invested in high-yield debt, may be a harbinger of things to come. Berwyn Income Fund’s George Cipolloni said the similarities between markets now and those before the financial crisis are too big to ignore...

“I don’t see any systemic risks out of this,” said Fred Cannon, a KBW Inc. bank analyst...

Five years after the Dodd-Frank Act, banks are better-capitalized and have smaller inventories of thinly traded debt, and the firms wouldn’t be materially affected by any contagion from declines in high-yield bonds, according to market participants.

Stocks mixed, oil rebounds as investors see great buying opportunity ahead

Markets finished mixed on Monday.

The S&P 500 ended up 0.5 percent as US oil prices rose 1.9 percent.

However, the STOXX Europe 600 plunged 1.8 percent.

In Asia, the Nikkei 225 fell 1.8 percent but the Shanghai Composite Index jumped 2.5 percent.

While oil ended up on Monday, Business Insider reports that many investors remain wary.

Oaktree Capital cofounder Howard Marks said last week at the Goldman Sachs Financial Services Conference in New York that there is “nothing intelligent to be said about the future of the price of oil”.

“There will be more pain in that area,” Blackstone co-CEO and cofounder Steve Schwarzman said at the same event.

However, investors also recognize a buying opportunity.

David Rubenstein, co-CEO of the Carlyle Group, said last week that “the greatest energy investing opportunities we’ve ever seen” could lie ahead.

Stocks fall, limited gains seen next year

Stock markets fell sharply last week.

The S&P 500 fell 3.8 percent, the STOXX Europe 600 fell 4 percent and the MSCI Asia Pacific Index fell 2 percent.

The decline last week left the S&P 500 down 2 percent for the year so far and analysts think that next year will be little better for stocks.

From WSJ's MoneyBeat blog:

Stock prognosticators by nature are an optimistic bunch, but not now.

Their forecasts for 2016 are downright gloomy, with many warning clients to expect more volatility and limited gains.

Markets tumble as hits keep coming with no where to hide

Markets fell sharply on Friday.

Oil continued its relentless decline. Brent plunged 4.5 percent to its lowest level since 2008. West Texas Intermediate fell 3.1 percent.

"The hits keep on coming," said John Kilduff, a partner at hedge fund Again Capital. "There’s no end in sight for the global glut."

And the hits to oil pushed stocks sharply lower on Friday. The S&P 500 fell 1.9 percent, the STOXX Europe 600 tumbled 2.0 percent and the MSCI Emerging Markets Index plunged 2.2 percent.

The iShares iBoxx $ High Yield Corporate Bond exchange-traded fund tumbled 2.7 percent. “The meltdown in High Yield is just beginning," wrote billionaire investor Carl Icahn.

Indeed, Kevin Kelly, chief investment officer at Recon Capital Partners, told Bloomberg: “There’s no where to hide”.

US stocks rise but fall in oil could have severe consequences

US stocks rose on Thursday. The S&P 500 edged up 0.2 percent.

Other markets continued to fall, however.

The STOXX Europe 600 fell 0.3 percent, its third consecutive decline.

Asia also saw losses, with the Nikkei 225 in particular tumbling 1.3 percent. The Shanghai Composite Index fell 0.5 percent.

There was also no respite for oil. US crude oil fell 1.1 percent.

With oil prices now at the lowest since 2009, Henrik Drusebjerg, chief strategist at Carnegie Investment Bank thinks there will be “severe consequences” for energy companies.

Stocks fall, debt burden worsens for oil firms

Stocks fell again on Wednesday.

The S&P 500 fell 0.8 percent, pushing the index into negative territory for the year.

Reports of a possible merger between DuPont and Dow Chemical helped the energy sector rise 1.3 percent on Wednesday but there is little doubt that the sector as a whole remains under distress.

From Bloomberg:

As crude plunged to the lowest in more than six years, the average yield on the debt of speculative-grade oil and gas borrowers climbed to 13.4 percent, the highest since the waning days of the global financial crisis in 2009 and the widest divergence ever relative to the broader U.S. junk bond market, Bank of America Merrill Lynch index data show. That’s likely to push more companies to ask their bondholders to restructure debt to avoid bankruptcy, according to corporate-turnaround adviser Stroock & Stroock & Lavan LLP.

Markets fall but drop in oil prices may boost economy

Markets fell on Tuesday, again weighed down by weak commodity prices.

The S&P 500 fell 0.7 percent, with the energy sector in particular falling 1.5 percent.

The STOXX Europe 600 fell 1.8 percent. Some of Europe’s biggest miners were hit especially hard. Glencore tumbled 6.9 percent, Anglo American plunged 12 percent and Rio Tinto dropped 8.4 percent.

In Asia, the Shanghai Composite Index sank 1.9 percent while the Nikkei 225 fell 1 percent.

Oil continued its decline on Tuesday. Brent crude fell 1.2 percent while US crude oil fell 0.4 percent.

Some economists, though, think that lower oil prices will boost the economy.

Peter Dixon, an economist at Commerzbank, said that the drop in oil prices “does help to stimulate demand by leaving a little bit of money in the pocket and providing a feel-good factor”.

Michala Marcussen, global head of economics at Societe Generale, estimates that since 2014, the world has enjoyed a windfall equivalent to 2 percent of gross domestic product it would otherwise have spent on crude.

US stocks dragged down by oil

US stocks fell on Monday. The S&P 500 declined 0.7 percent, dragged down by energy stocks after oil prices fell to the lowest in almost seven years.

Crude-oil futures in New York fell 5.8 percent after a meeting of the Organization of the Petroleum Exporting Countries ended last week with no agreement to cut production.

The STOXX Europe 600 gave up gains of over 1 percent during the session on Monday to close up 0.5 percent.

In Asia, the Nikkei 225 rose 1 percent while the Shanghai Composite Index gained 0.3 percent.

While oil prices have been tumbling for much of this year, some see a bottom next year. From Bloomberg:

Crude prices will start to recover in 2016 as output from the U.S. and other non-OPEC producers declines, according to the heads of ConocoPhillips and Saudi Arabian Oil Co., the world’s largest oil exporter.

Tighter US labour market may put pressure on corporate margins

The strong US employment report last Friday sent stocks surging but Citigroup may have a different perspective.

From Zerohedge:

First it was Goldman, then JPM, then Credit Suisse, and now it is Citi's turn to turn decidedly downbeat on stocks for next year and just cut its weighing on global equities to neutral. The main reason for Citi's bearishness...: margin sustainability, and rather the dramatic drop in corporate profits in recent months.

Quoting Citi:

Corporate profits as a share of GDP have been at all-time highs, which is just another way of saying the rewards to labour have been at all-time lows. But change may be afoot in the form of modest labour market tightening in the US... Modest nominal wage acceleration combined with global disinflation (price taking by US firms) and lack of productivity growth may mean margins come under pressure from labour costs...

Given the surge back towards the all-time highs in the S&P 500, we think that the best might be over for US equities and that indices might range trade more in 2016. We have downgraded US equities to neutral. This takes our overall equity weighting down to neutral, in many respects an extension of what we’ve been doing for most of this year as richer and richer asset markets, against a global background of economic risks, have made us more cautious.

US stocks surge after strong employment report but economy may have seen its best

US stocks surged on Friday.

The S&P 500 jumped 2.1 percent after a report showed that the US economy added 211,000 jobs in November, more than economists had forecasted.

Other stock markets did not perform as well on Friday. The STOXX Europe 600 fell 0.4 percent while China’s stocks fell for the first time in five days, with the Shanghai Composite Index retreating 1.7 percent.

Despite the unexpectedly strong jobs data, the US 10-year Treasury yield fell four basis points to 2.27 percent.

That perhaps did not surprise Marios Maratheftis, Standard Chartered’s chief economist. After raising its interest rate this month for the first time since 2006, he thinks that the Federal Reserve will be cutting again before the end of 2016.

“We’ve seen the best for the U.S. economy,” Maratheftis told Bloomberg Television this week. “The Fed will actually be forced to cut.”

In contrast, the median expectation of economists polled by Bloomberg is for the Fed to raise its benchmark rate to 1.25 percent from near zero by the end of next year.

Markets fall after ECB disappoints

Markets tumbled on Thursday.

The S&P 500 fell 1.4 percent while the STOXX Europe 600 plunged 3.1percent.

Government bonds fell, pushing US 10-year Treasury yields up 14 basis points to 2.32 percent and yields on 10-year German notes up 20 basis points.

Markets sold off after the European Central Bank disappointed investors with the scale of additional stimulus following its monetary policy meeting.

“There were huge expectations for Mr. Draghi and the ECB to provide further stimulus at today’s meeting and in the market’s mind they fell short of those expectations,” said Ryan Larson, head of equity trading at RBC Global Asset Management US Inc.

Stocks fall but holidays could bring more upbeat mood

US stocks fell on Wednesday. The S&P 500 fell 1.1 percent, giving up its gains from Tuesday.

Elsewhere, the STOXX Europe 600 slipped less than 0.1 percent while the MSCI Asia Pacific Index fell 0.2 percent. The Shanghai Composite Index, though, ended up 2.3 percent after a volatile session.

Yields on the US 10-year Treasury note climbed four basis points to 2.18 percent but yields on Spanish and Finnish debt fell to record lows.

West Texas Intermediate crude futures plunged 4.5 percent.

Wednesday's decline notwithstanding, this is the beginning of December, a period which historically has been good for stocks.

According to Mark Hulbert, the average recommended equity exposure among short-term stock market timers monitored by the Hulbert Financial Digest during December is 50.7 percent, markedly higher than the 44.3 percent average across all 12 months of the year.

Hulbert also noted that year-end seasonal strength in stocks became more pronounced in the UK and US around the times that Christmas in the respective countries became public holidays.

Hulbert concluded that "Wall Street’s mood during December is more upbeat than it is in the rest of the year" and that "it’s the holidays that deserve at least some of the credit".

US manufacturing shrinks, stocks jump

US manufacturing contracted in November. The Institute for Supply Management reported on Tuesday that its manufacturing index fell to 48.6, the lowest level since June 2009, from 50.1 in October.

The negative news for the economy, however, was shrugged off by US investors. Indeed, the S&P 500 jumped 1.1 percent on Tuesday, its biggest gain since 18 November.

In contrast, the STOXX Europe 600 fell 0.3 percent on Tuesday even though the eurozone manufacturing purchasing managers index rose to 52.8 in November from 52.3 the previous month.

Earlier in Asia, the Shanghai Composite Index edged up 0.3 percent while the Nikkei 225 surged 1.3 percent.

Markets mixed, Asia could see better returns in 2016

Markets were mixed on Monday.

The S&P 500 fell 0.5 percent to trim its gain for November to just 0.05 percent.

The STOXX Europe 600 rose 0.5 percent on Monday to finish November with a gain of 2.7 percent.

In Asia, the Shanghai Composite Index rose 0.3 percent on Monday after a volatile session to finish the month with a gain of 1.9 percent while Japan’s Nikkei Stock Average fell 0.7 percent on Monday but gained 3.5 percent for the month.

Asian markets' gains are likely to continue in 2016, according to Credit Suisse strategists Sakthi Siva and Kin Nang Chik.

They say that after the expected impending rate hike by the Federal Reserve, Asian equities could rally as they did in the six months after the first US tightening in 1994 and 2004.

They also say that Asian equities have become cheap and return on equity may be bottoming.

Chinese stocks plunge, then recover

China's stock market recovered from early losses on Monday to finish with a slight gain.

After falling 5.5 percent on Friday, the Shanghai Composite Index kicked off the new week with another plunge, losing as much as 3.2 percent during the session.

However, the losses were erased late in the session. The Shanghai Composite Index ended up 0.3 percent.

Most other Asian stock markets also fell on Monday. Japan’s Topix index fell 0.9 percent, the KOSPI index in Seoul plunged 1.8 percent and Australia’s S&P/ASX 200 Index declined 0.7 percent.

The falls on Monday followed a report on Sunday that China’s Citic Securities Co., Haitong Securities Co. and Guosen Securities Co. are being probed for alleged breaches of rules on margin and short-selling contracts.

Chinese stocks plunge

Chinese stocks fell sharply on Friday but other markets mostly shrugged off the fall.

The Shanghai Composite Index plunged 5.5 percent, its biggest decline since August, after a report showed a decline in industrial profits and regulators clamped down on brokers.

Other emerging markets were also hit, with the MSCI Emerging Markets Index falling 1.4 percent.

However, the STOXX Europe 600 fell just 0.2 percent and the S&P 500 rose less than 0.1 percent.

The yield on US 10-year Treasury notes fell one basis point to 2.22 percent while Germany’s two-year yield dropped to a record minus 0.42 percent.

Global stocks rise, flattish US market unlikely to remain calm next year

Global stocks mostly rose on Thursday.

The STOXX Europe 600 rose 0.9 percent. It had risen 1.4 percent on Wednesday and is now at a three-month high.

In Asia, the Nikkei 225 rose 0.5 percent but the Shanghai Composite Index fell 0.3 percent.

US stock markets were closed on Thursday.

US stocks have been flattish in 2015 but are unlikely to repeat such a performance next year. Barron's cites Sam Stovall, US stock strategist at S&P Capital IQ, as saying that two consecutively calm years for the US stock market are rare.

Indeed, some analysts are comparing this year's market with 2011 and 1937, comparisons that suggest that next year is unlikely to be calm. From the WSJ's MoneyBeat blog:

Market watchers have been noting similarities between this year and 2011 for several months now. But another year might be a better comparison: 1937.

The distinction is an important one. If you buy the 2011 comparison, you may conclude that stocks are going to rocket higher from here. If you’re inclined to favor the 1937 analogy, you may want to prepare for a downturn.

Stocks rebound from early falls after Turkey downs Russian plane

US stocks finished little changed on Tuesday.

The S&P 500 closed 0.1 percent higher after falling as much as 0.8 percent earlier in the session following news of Turkey’s downing of a Russian warplane.

The STOXX Europe 600 Index fell 1.2 percent, paring an earlier loss of as much as 2 percent.

The MSCI Asia Pacific Index rose 0.2 percent, as did the Shanghai Composite Index.

US 10-year Treasury yields were little changed at 2.24 percent.

However, yields on Germany’s two-year notes fell below minus 0.4 percent for the first time while yields on similar-maturity Austrian, Belgian and Finnish securities slipped to record lows.

Stocks fall, China remains worry

Stocks fell on Monday.

The S&P 500 fell 0.1 percent, the STOXX Europe 600 fell 0.4 percent and the Shanghai Composite Index fell 0.6 percent.

Despite the rebound in markets in recent months, China remains a source of worry for many. From Bloomberg:

David Tepper says a yuan devaluation may be coming in China. John Burbank warns that a hard landing there could spark a global recession...

“The downside scenario for China seems more intimidating than ever before,” billionaire Dan Loeb wrote on Oct. 30 to investors at Third Point.

Stocks rise heading into jolly season

Despite all the anguish following the Paris attack last week, US stocks ended this week on a positive note.

The S&P 500 rose 0.4 percent on Friday to finish the week up 3.3 percent, the best weekly performance in 2015.

The STOXX Europe 600 also rose 3.3 percent this week after edging up 0.2 percent on Friday.

The advance this week sets the stock market up for what could be a jolly season:

According to analytics service Kensho, in the last ten years, the S&P 500 has averaged a gain of 1.9 percent in the week of Thanksgiving, ending positive six times.

Markets mixed, China lowers rates as debt rises

Markets were mixed on Thursday.

After jumping 1.6 percent on Wednesday for its biggest gain in four weeks, the S&P 500 slipped 0.1 percent on Thursday, weighed down by a 1.5 percent fall in the health-care sector.

Elsewhere, though, stocks rose. The STOXX Europe 600 rose 0.4 percent and the Shanghai Composite Index jumped 1.4 percent.

Chinese stocks could see further gains going forward after the People's Bank of China announced on Thursday that it would lower short-term borrowing costs for smaller banks.

However, Chinese borrowers may already be addicted to cheap loans. The amount of loans, bonds and shadow finance arranged to cover interest payments will probably rise 5 percent this year to a record 7.6 trillion yuan, according to Beijing-based Hua Chuang Securities.

“We will see more defaults and rising bad loans in the financial system,” said Zhou Hao, a senior economist at Commerzbank AG in Singapore.

That could spell trouble for the Chinese economy and, in turn, the world eonomy. According to Oxford Economics, world growth would "slow sharply" if China's economy experiences a hard landing.

European stocks surge but US stocks slip

Markets were mostly higher on Tuesday.

The STOXX Europe 600 jumped 2.5 percent. France saw the biggest gains, with the CAC 40 surging 2.8 percent.

In Asia, Japan's Nikkei 225 index rose 1.2 percent and Hong Kong's Hang Seng index gained 1.2 percent but the Shanghai Composite Index slipped 0.1 percent.

In the US, the S&P 500 rose early in the trading session but gave up the gains to close 0.1 percent lower.

Markets shrug off Paris attack, Japan back in recession

After early jitters on Monday, markets mostly ended the day up.

The S&P 500 closed 1.5 percent higher while the STOXX Europe 600 reversed early losses to close 0.3 percent higher.

Safe havens like gold, the US dollar and the Japanese yen also rose.

The yen rose despite a report on Monday showing that the Japanese economy shrank an annualised 0.8 percent in July-September, marking a second straight quarter of contraction, technically putting Japan in recession.

Markets react to Paris attack

Markets are falling early on Monday after the terrorist attack in Paris on Friday. From Bloomberg:

Europe’s common currency weakened 0.5 percent against the dollar as the deadly violence in Paris on Friday heightened concern that geopolitical tension will weigh on trade and consumer confidence. China led losses in Asian equity markets after authorities tightened curbs on the use of borrowed money to buy shares. Index futures in the U.S. and the U.K. dropped. Gold advanced the most in a month, while Treasuries climbed for a fifth day.

Some analysts think the long-term impact will be limited though.

“Global markets may turn to risk-off in the short term as geopolitical risk rises,” said Kiyoshi Ishigane, chief strategist at Mitsubishi UFJ Kokusai Asset Management in Tokyo. “But I think the impact to the global economy is limited, even if there is some impact on the French and EU economies.”

Markets fall but stock valuations stll a headwind

Markets tumbled on Thursday.

The S&P 500 fell 1.4 percent and the STOXX Europe 600 fell 1.6 percent.

Asia escaped the declines earlier on Thursday though. The MSCI All-Country Asia Pacific Index rose 0.4 percent.

Commodities also fell on Thursday. West Texas Intermediate oil fell 2.8 percent while copper fell 2.4 percent to a six-year low.

US Treasuries rose. The yield on the US 10-year note fell two basis points to 2.32 percent.

Despite the recent pull-back in stocks, many analysts expect to see a year-end rally.

"My inclination is whatever pullback we get out of here, I'm looking for a buying opportunity," John Kosar, chief strategist at Asbury Research, said. "By year-end, we could challenge or exceed the 2015 highs on the S&P 500."

Valuations remain a headwind for US stocks though. Despite the recent market decline, the forward four-quarter P-E ratio remains at a relatively high 16.5.

“With valuations at the high end it becomes difficult to be an aggressive buyer (of stocks) against a backdrop of still-slower revenue and sales growth and a Federal Reserve seemingly intent on a December liftoff,” Quincy Krosby, a market strategist at Prudential Financial, told USA TODAY.

Negative interest rates loom

Markets were mixed again on Wednesday.

The STOXX Europe 600 rose 0.7 percent while the Shanghai Composite Index gained 0.2 percent.

However, the S&P 500 fell 0.3 percent.

Oil, gold and the US dollar all fell on Wednesday.

Euro-area government bonds rose, pushing German two-year note yields to a record low, as investors increasingly see a likelihood of additional European Central Bank monetary stimulus.

Indeed, the trend towards even lower rates may persist. From Bloomberg:

“There’s a very real chance unorthodoxy becomes the new orthodoxy,” said Alan Ruskin, global head of Group-of-10 currency strategy at Deutsche Bank AG in New York.

While financial markets are focused on the Federal Reserve’s looming rate increase, policy makers and economists are already changing their attitude toward negative rates.

European Central Bank President Mario Draghi is open to reducing the rate he charges banks to leave money in his coffers overnight further into negative territory. Bank of England Governor Mark Carney has also revised his thinking to say the U.K. benchmark could fall below 0.5 percent if needed having previously worried deeper cuts would roil money markets.

Meantime, Fed Chair Janet Yellen said last week that “if circumstances were to change” then “potentially anything, including negative interest rates, would be on the table.” One of her policy-setting colleagues has already advocated them for next year.

Markets mixed, Fed rate hike may weaken economy

Global stock markets were mixed on Tuesday.

The US stock market managed to eke out a gain, with the S&P 500 rising 0.2 percent to end a four-day losing streak.

However, the Shanghai Composite Index slipped 0.2 percent after a four-day, 10 percent rally.

The MSCI All-Country World Index fell for a fifth consecutive day, losing 0.2 percent.

Commodities also mostly fell but West Texas Intermediate crude oil halted its four-day slide, rising 0.8 percent.

The US dollar and US Treasuries rose, with the yield on the 10-year note falling one basis point to 2.34 percent.

The rise in the US dollar, though, has been driven by expectations of an interest rate hike by the Federal Reserve. The latter would not be good for stocks, bonds or the economy, according to Jeffrey Gundlach.

“I have a hard time believing a Fed tightening will help the economy,” Gundlach said on Monday during a conference call with investors. “I think volatility will increase and the economy will weaken.”

Markets fall, China faces deflationary pressure

Markets fell on Monday.

The S&P 500 fell 1.0 percent while the STOXX Europe 600 fell 1.1 percent.

Earlier on Monday, the Shanghai Composite Index did manage to extend its rally for a fourth consecutive day though, rising 1.6 percent.

Commodities were weak, the Bloomberg Commodity Index falling 1.2 percent. West Texas Intermediate crude for December delivery declined for a fourth day, falling 1 percent.

Indeed, data out of China on Tuesday indicated deflationary pressure.

China's consumer price index rose 1.3 percent in October from a year earlier, down from 1.6 percent in September. The producer price index fell 5.9 percent, its 44th consecutive monthly decline.

"The risk of deflation has accentuated," said Liu Li-Gang, the chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. "This requires the PBOC to engage in more aggressive policy easing."

Less certain is Zhu Qibing, an analyst at China Minzu Securities Co. "But this year, the effectiveness of monetary policy in boosting demand has been limited," he said. "So even if the central bank has room, it may not cut interest rates again until next year."

US employment surges, December rate hike looking likely

US nonfarm payrolls increased 271,000 in October, the biggest this year, the Labor Department reported on Friday. The jobless rate fell to a seven-year low of 5 percent.

Stock investors shrugged off the news. Even as traders raised their expectations on a December rise in rates to a 68 percent chance from 56 percent, the S&P 500 dipped less than 0.1 percent.

“The report is pretty good across the board,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. “December is now a very high likelihood for the Fed to hike rates.”

US stocks fall on possible rate hike but European and Chinese stocks rise

US stocks fell on Wednesday. The S&P 500 lost 0.4 percent after Federal Reserve Chairwoman Janet Yellen hinted to the House Financial Services Committee that a 25 basis point rate hike in December was still on the cards.

The odds of a rate hike in December moving to 60 percent from about 52 percent on Tuesday, according to the CME Group Fed Watch tool.

Earlier, comments by European Central Bank President Mario Draghi that the bank is ready to provide more stimulus in December to boost inflation if needed helped push the STOXX Europe 600 up 0.5 percent.

In Asia, the Shanghai Composite Index jumped 4.3 percent on speculation that authorities in China will open a trading link between Hong Kong and Shenzhen by the end of the year.

Stocks extend rally but long-term trends could be about to reverse on demographic change

Global stock markets mostly continued their rallies on the first trading day of November.

The S&P 500 rose 1.2 percent to the highest level since 10 August. It is now just 1.3 percent below its all-time high. The Nasdaq 100 also rose 1.2 percent to its highest level since 2000.

The Stoxx Europe 600 rose 0.3 percent but the MSCI Asia Pacific Index fell 1.1 percent, the most in more than a month, on Chinese data which showed manufacturing contracted again last month.

Still, Monday's performance suggests the bull market may still be alive, a bull market that a Bloomberg report says has benefitted Wall Street much more than Main Street.

In a report sent to clients on Sunday, Bank of America Corp. strategists totted up the results of 606 global interest-rate cuts since the collapse of Lehman Brothers Holdings Inc. and the $12.4 trillion of central bank asset purchases following the rescue of Bear Stearns Cos.

The results represent a clear victory for Wall Street over Main Street, according to the team of Michael Hartnett, BofA’s chief investment strategist.

For every job created in the U.S. this decade, companies spent $296,000 buying back their stocks, according to the New York-based bank.

An investment of $100 in a portfolio of stocks and bonds since the Federal Reserve began quantitative easing would now be worth $205. Over the same time, a wage of $100 has risen to just $114.

However, another Bloomberg report suggests that things may be about to change.

[A]ccording to Charles Goodhart, professor at the London School of Economics and senior economic consultant to Morgan Stanley, demographics explain the vast majority of three major trends that have shaped the socioeconomic and political environments across advanced economies over the past few decades. Those three would be declining real interest rates, shrinking real wages, and increasing inequality...

So what now, as the conditions that fostered these long- decades-defining demographic trends dissipate?

As dependency ratios rise, with a greater share of retirees relative to workers, "all three trends could reverse," argues Goodhart.

Stocks rally strongly on short-covering

Stocks had a strong October.

The S&P 500 rose 8.3 percent last month, the best monthly gain since 2011. The STOXX Europe 600 rose 8 percent.

However, John Hussman thinks that this rally was a "last gasp" of the bull market.

"Our own measures of market internals remain unfavorable, and trading volume has been persistently weak, suggesting that the rebound may be more reflective of short-covering than a resumption of the insistent yield-seeking speculation observed prior to mid-2014," he wrote.

Similarly, Paban Raj Pandey thinks that a decline in short interest has provided a "tailwind" for stocks but still thinks that the rally may not last.

"When it is all said and done, buyers need to be willing to put new money to work. That is what is lacking," he wrote. "Corporate buybacks may soon pick up, but equity flows and margin debt are not cooperating. Mid- and small-caps are severely lagging large-caps."

"Hardly a recipe for the continuation of a short squeeze," he added.

Stocks little changed, China ends one-child policy

Stock markets were mostly little changed on Thursday.

Asia was an exception, with the MSCI Asia Pacific Index falling 1.1 percent. The Shanghai Composite Index, though, rose 0.4 percent.

For the longer term, however, the more significant event coming out of Asia on Thursday was the announcement that China will end its one-child policy and allow all couples to have two children.

The announcement was made at the close of a key Communist Party meeting that was focused on financial reforms and maintaining growth between 2016 and 2020.

The move by China has the potential to raise its birth rate, which will increase demand in the short term and supply in the long term, both of which are important for China to stabilise its economic growth.

It should be noted, though, that after a 2013 population reform that allowed couples to have a second child if one parent is an only child, just 6.7 percent of those eligible in Beijing applied to have a second child.

Stocks rise after Fed meeting, China's stock market returning to "normalcy"

Stocks were mostly up on Wednesday after the Federal Reserve monetary policy meeting.

In a statement following its policy meeting, Fed officials suggested they had become less concerned about financial-market volatility and international economic growth.

While stocks initially dipped after the meeting, they recovered subsequently to leave the S&P 500 up 1.2 percent at the end of the day.

In Europe, the STOXX Europe 600 closed 1.1 prcent higher.

However, earlier in Asia, markets were mixed. The Hang Seng Index fell 0.8 percent and the Shanghai Composite Index lost 1.7 percent but Japan’s Nikkei 225 rose 0.7 percent.

Wednesday's decline notwithstanding, China's stock market has been looking positive lately. From Bloomberg:

Less than five months after China’s equity bubble burst, the Shanghai Composite Index is surging once again.

This month’s 11 percent rebound is one of the biggest surprises in global markets after international money managers all but gave up on Chinese stocks in the wake of a $5 trillion crash, according to JPMorgan Chase & Co. What’s even more remarkable is that the gains look like the result of buying from ordinary investors, rather than the government-run funds who sought to prop up prices during the rout.

Some analysts think that the rally in China's stock market will be sustained.

“We do expect the market to post better gains for the rest of the year amid policy initiatives, including rate cuts,” said Audrey Goh, a strategist at Standard Chartered Plc. “There are some signs of normalcy coming back.”

Stocks fall, may pose threat to global economy

Markets fell on Tuesday.

Stocks fell, with the S&P 500 losing 0.3 percent. West Texas Intermediate oil fell 1.8 percent to the lowest in two months. US 10-year note yields fell three basis points to 2.03 percent.

The MSCI Emerging Markets Index fell 0.7 percent, with Bhanu Baweja, the UBS Group AG strategist who correctly called this year’s rout, saying in a note on Tuesday that emerging-market currencies will decline again “before long” while emerging-market stocks will start underperforming their peers in advanced economies again.

That could be bad news for the global economy. A recent report from Oxford Economics said: “A sharp correction in global equity prices would pose a significant threat to the global economy.”

Stocks rally on central bank boosts

The rally in global stocks continued last week.

The S&P 500 rose 2.1 percent last week, its fourth consecutive weekly gain. The gain brought it within 2.6 percent of its all-time high reached on 21 May.

The STOXX Europe 600 surged 3.9 percent last week, rising for a third consecutive week.

In Asia, the Shanghai Composite Index rose 0.6 percent last week for its third consecutive weekly gain.

The rally in stocks was boosted by central banks last week. On Friday, the People’s Bank of China cut interest rates and banks’ reserve requirements, just a day after the European Central Bank indicated that it would bolster monetary stimulus if needed.

The continuing rally and central back actions have brought optimism back to some analysts.

“Stocks are back,” said Robert Pavlik, chief market strategist at Boston Private Wealth. “We’re back on track as far as a cheap money, quantitative easing, risk-on trade is concerned.”

“There’s likely to be continued policy support from central banks around the world and the headwinds, particularly the slowdown in China’s growth, may be behind us,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds.

Still, some skepticism remains.

Leo Grohowski of BNY Mellon Wealth Management thinks this may just be a relief rally. “My growing concern is the equity market participants here in the U.S. are still too complacent around December and there being a less than a 50-50 chance of a rate liftoff,” he said.

And while China's central bank may have taken action last week to boost monetary stimulus, the action may actually underscore how precarious China's economic situation is.

“If the economy was growing so close to the target, there would be no need for stimulus,” Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, told Bloomberg. “The Chinese government is obviously really worried by what they see and they feel compelled to act.”

“I don’t think this is the start of a new move in Chinese equities higher,” said Ajay Rajadhyaksha, head of macro research at Barclays. The country needs economic “growth numbers to improve sharply, and that does not seem to be happening.”

Japan not lacking in money

The Japanese government has acknowledged that there is a limit to what monetary policy can do to boost inflation in Japan. From Bloomberg:

“Prices aren’t rising in Japan not because of a lack of money, but because of a lack of demand,” Japanese Finance Minister Taro Aso told reporters in Tokyo on Friday. “The economy is fine, but looking at inflation, the effect of a halving of oil prices has been pretty huge.”

US stocks fall but short interest shows near term positive

US stocks fell for a second day on Wednesday, with the S&P 500 falling 0.6 percent.

The US stock market was dragged down by a 0.9 percent drop in the S&P 500 Health Care Sector Index after Valeant Pharmaceuticals International tumbled following a report by Citron Research examining a specialty pharmacy the company uses to facilitate drug sales to patients.

Yields on US 10-year Treasuries fell four basis points to 2.03 percent.

Oil in New York also fell to a three-week low and gold slid the most this month.

Encouragingly for equities, however, Bloomberg reported that JPMorgan Chase has calculated that the US stock market still has $90 billion in short sales left to cover, “a clear near term positive for stocks”.

Gene Peroni of Advisors Asset Management said: “Given there’s a little clarity to the Fed not raising rates until next year, oil stabilizing, banking stocks coming up even though earnings are mixed, the indications are there is real buying going on.”

China's small-cap stocks rebound

Despite the pummelling that Chinese stocks have received in general, at least some parts of the stock market are still showing signs of froth. From Bloomberg:

Investors traded 5 billion shares on the ChiNext Composite Index on Oct. 16, more than at any point during this year’s rally. The Shenzhen gauge, dominated by small technology companies, is up 34 percent from its Sept. 15 low. Traders have borrowed extra debt to buy the city’s stocks for seven days straight...

The ChiNext Composite trades at 90 times profit, more than five times the valuation multiple for the Shanghai Composite Index, data compiled by Bloomberg show. The large-cap index has rebounded 16 percent since its August low.

For Rabobank Group’s Michael Every, the divergence is a reminder of the power of China’s 90 million individual investors, who favor momentum over fundamentals.

“It’s greed and short-term memory loss," said Every... “Equities are still over-priced everywhere.”

Markets jump as Fed rate hike expectations tumble

Markets rallied strongly on Thursday as expectations for a rate hike in 2015 by the Federal Reserve receded.

The MSCI All-Country World Index rose 1.4 percent, the S&P 500 jumped 1.5 percent, as did the STOXX Europe 600, and the MSCI Asia Pacific Index surged 1.9 percent.

The probability of a Fed interest rate increase by its December policy meeting has dropped to 30 percent from 70 percent at the start of August, according to futures data compiled by Bloomberg.

Despite that, yields on US 10-year notes rose five basis points to 2.02 percent on Thursday.

US stocks fall but now may be "perfect time to buy"

US stocks fell on Wednesday. The S&P 500 fell 0.5 percent, its second consecutive decline.

However, some analysts remain undaunted.

LMM Investments chairman and chief investment officer Bill Miller told CNBC that now is a perfect time to buy US stocks.

According to Miller, positives for equities included moderate economic growth, low interest rates and low inflation. By not raising interest rates, the Federal Reserve has essentially given investors a "free lunch".

Also positive about US stocks is Brian Rogers, chairman and CIO of T. Rowe Price.

"There are really a lot of high quality companies selling at good valuations, good dividend yields, [and] not particularly expensive in today's world," he said.

Markts mixed, Chinese imports plunge again

Markets were mixed on Monday.

The S&P 500 eked out a 0.1 percent gain while the MSCI Asia Pacific Index rose 0.6 percent.

However, the STOXX Europe 600 fell 0.3 percent.

Commodities fell, with oil plunging 5 percent.

The latest data showed that the lingering caution in markets may be warranted.

China reported on Tuesday that its imports plunged 17.7 percent in yuan terms in September, worse than the 14.3 percent decrease in August and an 11th consecutive decline.

However, exports fell 1.1 percent in September in yuan terms, better than the 6.1 percent drop in August.

Markets rally but may not last

Markets rallied strongly last week.

The MSCI All-Country World Index rose 4.4 percent. The S&P 500 rose 3.3 percent. The STOXX Europe 600 jumped 4.3 percent. The MSCI Emerging Markets Index surged 7 percent.

The Bloomberg Dollar Spot Index, which measures the US dollar's performance against a basket of 10 major counterparts, fell 1.4 percent last week, with the US currency slumping to a three-week low against the euro.

Conversely, emerging-market currencies performed well last week. The rupiah completed its best week since 2001 and the ringgit appreciated the most since 1998.

The rebound in emerging markets could hold, according to Geoffrey Barker, manager of the Counterpoint Asian Macro Fund.

“Much depends on China,” Barker said in an an e-mail to Bloomberg. “I doubt that another plunge in emerging-market currencies is imminent because it is too soon to argue for a hard landing in China.”

Indeed, Thomas Schroeder, founder and managing director of Chart Partners Group Ltd, thinks that Chinese stocks will climb in the next few months. “As oil starts to move and materials follow, investors will by default feel more positive about China,” he said.

However, he also thinks the rebound will not last, citing technical patterns. “This is a bear market rally.”

World stocks rise amid calls to maintain monetary stimulus

World stocks rose on Thursday after the release of the minutes of the last Federal Reserve monetary policy meeting showed that it wanted to wait for evidence that a global economic slowdown was not seriously affecting the US economy before raising interest rates.

The cautious stance of central banks appears to be pervasive. From Reuters:

Central banks have little room for error in a low-growth world in which over-leveraged and commodity-dependent emerging economies and a slowing China are major risks, top international financiers told the International Monetary Fund's meeting.

Despite $7 trillion in quantitative easing from banks in industrial nations since the global financial crisis, the world is stuck in a "new mediocre" growth pattern, IMF chief Christine Lagarde said on Thursday.

Maintaining loose monetary seems to be the preferred stance.

The IMF has urged the Fed and the Japanese and European central banks to wait for more signs of recovery before tightening. Lagarde on Thursday repeated her plea to Yellen to stay her hand.

This is despite the seemingly never-ending series of bubbles pervading the global financial landscape. Bloomberg reports possibly the latest one in China:

As a rout in Chinese stocks this year erased $5 trillion of value, investors fled for safety in the nation’s red-hot corporate bond market. They may have just moved from one bubble to another.

So says Commerzbank AG, which puts the chance of a crash by year-end at 20 percent, up from almost zero in June. Industrial Securities Co. and Huachuang Securities Co. are warning of an unsustainable rally after bond prices climbed to six-year highs and issuance jumped to a record.

Global markets rally on US rebound

Global markets rallied on Wednesday as US stocks rebounded from the previous day's fall.

The MSCI All-Country World Index jumped 1 percent for a sixth day of gains, the S&P 500 rose 0.8 percent, the STOXX Europe 600 edged up 0.1 percent and the MSCI Asia Pacific Index jumped 2.1 percent.

The Bloomberg Commodity Index fell 0.2 percent though as oil fell.

Yields on US 10-year Treasuries increased four basis points to 2.07 percent.

US stocks end rally, IMF cuts global growth outlook

The US stock market ended its 5-day rally on Wednesday. The S&P 500 fell 0.4 percent with biotechnology stocks in particular being hit hard over concerns with drug pricing and company earnings.

Commodities escaped the falls though. Indeed, the Bloomberg Commodity Index rose 1.7 percent to its highest level since 31 August. West Texas Intermediate crude oil jumped 4.9 percent.

Still, the fall in commodity prices earlier on may already be hurting emerging economies, according to the International Monetary Fund. From Bloomberg:

A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund to cut its outlook for global growth this year to 3.1 percent from a July forecast of 3.3 percent. Next year the world economy will expand 3.6 percent, less than the 3.8 percent projected in July.

Markets rise, Fed rate hike delay seen critical

Global markets rose again on Monday.

The S&P 500 climbed 1.8 percent, the STOXX Europe 600 rose 3.0 percent and the MSCI Emerging Markets Index jumped 2.1 percent.

Commodities also rose, with copper rising 1.5 percent and oil gaining 1.6 percent.

The gains in markets were mostly attributed to the view that the Federal Reserve will keep interest rates lower for longer.

“The Fed pushing out interest-rate hike expectations to next year has been critical,” Michael Purves, chief global strategist at Weeden & Co.

That view did not help US Treasuries on Monday though. Ten-year Treasuries ended five days of gains as yields rose six basis points to 2.06 percent.

Growing risk of recession as central banks lose credibility

John Hussman wrote in his latest article that the US economy is close to a recession.

"On Friday, the Bureau of Labor Statistics reported that non-farm payrolls for September grew by 142,000, versus a consensus that expected over 200,000 new jobs," he wrote. "At the same time, August job growth was revised lower from 173,000 to 136,000 jobs. All of this is very much in line with the deterioration that we’ve observed for months in leading measures of economic activity."

"With a clear breakdown in market internals, and leading economic measures deteriorating, we should be aware of the growing potential for a recession," he opined.

Hussman also said that while investors might view weaker economic prospects as a good thing because of the likelihood that the Federal Reserve will refrain from raising interest rates or even initiate another round of quantitative easing, he warned: "An about-face by the Fed driven by economic weakness would more likely – after a brief celebration – contribute to panic that the Fed had lost credibility and control. We believe the Fed already has neither."

Indeed, a Bloomberg article suggested that not just the Fed but the world's central banks are losing credibility.

"Even after hundreds of interest-rate cuts and trillions of dollars in quantitative easing, the bond market’s outlook for inflation worldwide is approaching lows last seen during the financial crisis," the article said.

“There’s a lack of faith in monetary policy -- you’ve thrown the kitchen sink at it, you’ve cut rates to zero, you’re printing money -- and still inflation is lower,” Lee Ferridge, the head of macro strategy for North America at State Street Corp, was quoted as saying. “It leads to a risk-off environment.”

Investors lose faith in oil but Jim Rogers sees sign of rebound

Bloomberg reports that oil bulls are losing faith in its recovery.

Speculators reduced their net-long position in West Texas Intermediate crude by 9.1 percent in the week ended Sept. 29, according to data from the Commodity Futures Trading Commission. Longs dropped from a 12-week high while shorts increased.

While US crude output is down 514,000 barrels a day from a four-decade high reached in June, Russia’s production of crude and condensate rose to 10.74 million barrels a day last month, 1 percent more than a year earlier and breaking a record set in June.

"The US producers are the only ones doing their part to reduce the global glut," John Kilduff, a partner at Again Capital LLC, said.

Rob Haworth, a senior investment strategist in Seattle at US Bank Wealth Management, told Bloomberg by phone: "The managed money has been positive about the market but things look grim. We’re at a tough time for oil on a seasonal basis as well."

Amid the widespread pessimism, though, West Texas Intermediate crude futures have, after plunging to $37.75 a barrel on 24 August 24, averaged $44.99 after that, staying above $44 since the start of September. Jim Rogers sees this as a sign of a possible rebound.

“When there’s bad news and something doesn’t decline, it usually means it’s at a bottom and will be turning,” Rogers said in an interview on Thursday. “Whether we’re at a turning point or not, I don’t know yet, and I’m watching this very closely.”

Rogers also sees opportunities for investors in other raw materials, particularly agriculture.

Markets mixed but US gains raise hopes for rally

Markets were mixed on Thursday, the first day of October and the fourth quarter.

The MSCI All-Country World Index rose 0.4 percent, the S&P 500 added 0.2 percent, the STOXX Europe 600 fell 0.4 percent and the MSCI Asia Pacific Index rose 1.6 percent.

While US stocks rose for the third consecutive day on Thursday, some analysts are not convinced that a bottom has been made.

“We need to see fewer companies hit new lows, and more companies hit new highs,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co. “Without it, it looks suspect.”

However, others are more hopeful.

“The extremely oversold global equity index sentiment readings that have been realized over the past week tend to occur near medium-term trend reversals,” J.P. Morgan analyst Jason Hunter wrote.

“The consensus is that equities are going through a 1998-like fall correction followed by a rally in the fourth quarter,” said Martin Roberge, an analyst at Canaccord Genuity. “We agree.”

Markets suffer steep falls, Fed to rescue?

Markets have not performed well in 2015, according to a Bloomberg report.

Rounding out its steepest quarterly descent in four years, the MSCI All Country World Index of shares is down 6.6 percent in 2015 including dividends. The Bloomberg Commodity Index has slumped 16 percent, while a Parker Global Strategies LLC index of currency funds dropped 1.8 percent. Fixed income has failed to offer much of a haven: Bank of America Corp.’s global debt index gained just 1 percent, less than the 2.5 percent increase in world consumer prices shown in an International Monetary Fund index.

US stocks have not been spared from losses. The S&P 500 finished the quarter with a 6.9 percent decline despite jumping 1.9 percent on Wednesday.

However, the Federal Reserve "put" may help mitigate further losses. From another Bloomberg report:

Federal Reserve officials often behave as if they have a mandate to take financial stability into account when they make interest-rate decisions, according to a research paper co-authored by Boston Fed President Eric Rosengren.

“Frequent mentions of financial instability terms at the FOMC, particularly during bust periods, result in a statistically significant reduction in the funds rate,” the paper said.

US stocks halt declines but emerging markets see asset selloff

US stocks ended a five-day fall on Tuesday with the S&P 500 edging up 0.1 percent.

However, the recent declines have left analysts less optimistic about US stocks. From CNBC:

Wall Street's consensus view remains that the market will close higher in 2015, expected to bounce after testing the year lows, but some strategists say the odds are growing that the market will end the year with losses.

Emerging markets face bigger concerns.

Bloomberg reported that investors sold $40 billion of emerging market assets in the third quarter, the fastest pace since the height of the global financial crisis.

A report from the International Monetary Fund released on Tuesday showed that corporate debt of non-financial firms in emerging markets rose to more than $18 trillion in 2014 from $4 trillion in 2004.

The report said that the "upward trend in recent years naturally raises concerns" and that "emerging markets should be prepared for corporate distress and sporadic failures in the wake of monetary policy normalization in advanced economies".

Glencore leads global markets down

Markets fell sharply on Monday.

The global market rout was led by a 29 percent plunge in the stock price of commodity trader Glencore, which pushed the Bloomberg World Mining Index to its lowest level in almost seven years.

The MSCI All-Country World Index fell 2.1 percent to its lowest level in two years. The S&P 500 fell 2.6 percent, bringing it just 0.8 percent away from its low from last month. The Stoxx Europe 600 fell 2.2 percent.

While stocks fell, government bonds rose. US 10-year Treasury yiels fell seven basis points to 2.10 percent while German 10-year bund yields fell six basis points to 0.59 percent.

In other markets, West Texas Intermediate crude futures fell 2.8 percent while the yen strengthened against all 16 of its major peers.

Bears dominate US stock trading

Bloomberg reports that bears are winning out when it comes to daily US stock trading.

Volume on days when the S&P 500 fell has been 27 percent heavier than when the index rose this month. That is about eight times the average gap in the past decade, according to data from Bloomberg and Bespoke Investment Group.

The bearish trend continued on Thursday with the S&P 500 falling 0.3 percent. That, though, still represented a rebound from a decline of 1.5 percent earlier in the day.

Some think the declines are likely to resume.

“We’re seeing down volume overwhelming up volume,” said Katie Stockton, chief market strategist at BTIG. “It’s one more check in favor of a retest of August’s lows.”

Others think the declines are nearing an end.

“You’re getting people piling on and selling on the downtrend,” said Aaron Clark, a portfolio manager at GW&K Investment Management. “That could get reversed pretty quickly. Given where valuations and fundamentals are, you’re more likely to be close to the bottom than another big leg down.”

China growth target likely to be cut but stocks may have seen the worst

Bloomberg reports that China is likely to further cut its target for economic growth next year.

Government leaders will announce a growth objective between 6.5 percent to 7 percent for 2016, according to eight of 15 economists in a Bloomberg News survey conducted Sept. 17-22. Four said they expect a 6.5 percent goal.

Still, Bloomberg reports that HSBC thinks further losses by Chinese stocks are limited after leveraged traders cut $218 billion of positions.

“We’ve seen the worst" for mainland stocks, said Steven Sun, Hong Kong-based head of China equity strategy at HSBC, who has a neutral position on yuan denominated shares. “The whole deleveraging process is largely over."

Markets fall, face more volatility, but emerging markets "looking attractive"

Global markets fell sharply on Tuesday.

The S&P 500 fell 1.2 percent and the STOXX Europe 600 plunged 3.1 percent.

Earlier on Tuesday, however, Asian markets held up better. The MSCI Asia Pacific excluding Japan Index lost 0.3 percent while the Shanghai Composite Index gained 0.9 percent.

Stocks may face further falls. Wells Capital Management chief investment strategist Jim Paulsen told CNBC on Tuesday that the S&P 500 could "head towards 1,800".

However, Russ Koesterich, BlackRock’s global chief investment strategist, said in a note on Tuesday that while it is too early to call a bottom to emerging markets and there could be more volatility ahead, valuations have become attractive.

“For investors with little or no exposure to this asset class, this may be a reasonable time to start slowly re-establishing positions,” he said.

With so many bears, is it time to buy stocks?

In a report last week, Bloomberg noted that investor sentiment has fallen, and this could be a positive sign for stocks.

The report noted that at the start of September, the bull-to-bear ratio in Investors Intelligence’s survey of newsletter writers fell to a four-year low of 0.9. It also noted that since 1963, the Standard & Poor's 500 Index has risen an average 11 percent in the year after newsletter writers were as pessimistic as they are now compared with an annualised return of 8.3 percent.

Bloomberg further noted that in the three previous times during the last 6 1/2 years when bearish newsletter writers surpassed bullish ones -- in April 2009, August 2010 and October 2011 -- the S&P 500 followed up with two straight quarters of gains each time, with the gains exceeding 20 percent.

An explanation for the positive potential of stocks when sentiment is weak was given by Bob Doll, chief equity strategist at Nuveen Asset Management. “The nervousness means people have stepped to the sidelines. The question is, who is left to sell? Everybody who has cash is a potential buyer.”

In other signs of bearishness among investors, the Bloomberg report noted that the “cost to hedge against stock losses is soaring, valuations are contracting, and bearishness among professional stock handicappers is rising the most in three decades”.

An earlier report by Baijnath Ramraika, CEO & CIO at Multi-Act EquiGlobe Limited, reached conclusions similar to Bloomberg's.

Analysing a market timing technique that buys and sells the S&P 500 whenever sentiment is at a bearish or bullish extreme and starting to reverse, he found that buy signals were associated with an average annualised return of 13.5 percent while sell signals produced an annualised return of 0.2 percent.

Baijnath had one important caveat though. He noted that his model was on buy signal during much of the great financial crisis. Therefore, he suggested that “it is not a tool to be used without regard to other factors”.

Fed leaves rates unchanged

The Federal Reserve left interest rates unchanged at its monetary policy meeting on Thursday.

“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Fed said in its statement released after the meeting.

Despite the Fed's delay in hiking rates, there was little to cheer for investors. Stocks fell, the S&P 500 edging down 0.3 percent.

Interest rates futures, though, show that traders now see a 49 percent chance of a Fed rate hike at its December meeting, down from 67 percent earlier Thursday.

Is emerging Asia facing a repeat of 1997?

The recent weakness in the markets of emerging Asian countries has led many analysts to wonder whether we are seeing a repeat of the 1997 financial crisis. Some think that things could even be worse now.

From Bloomberg:

If the 1997 Asian financial crisis was a heart attack for emerging markets, the current situation is akin to chronic cardiovascular disease, according to Macquarie analysts led by Viktor Shvets and Chetan Seth...

[T]he Macquarie analysts reckon the current situation might actually be worse...

The crux of their argument is that despite the difficulties of 1997, its effects were mitigated by rising global leverage, liquidity, and trade shortly thereafter. This time around, those factors might not be there.

However, other analysts are more sanguine.

“Things are fundamentally different now compared with 1997,” said Tomo Kinoshita, chief economist at Nomura Securities. “Authorities have introduced quite rigid prudential measures to avoid a currency crisis. The depreciation in the currency is a positive factor for the exports and general competitiveness of those Asian nations.”

“The region still has many buffers, so we are not in a repeat of the Asian crisis context,” said Anoop Singh, former director of the Asia and Pacific Department at the International Monetary Fund.

Europe and US markets shrug off plunge in Chinese stocks and possible Fed hike

Chinese stocks fell again on Tuesday, the Shanghai Composite Index plunging 3.5 percent. It had fallen 2.7 percent on Monday.

However, markets elsewhere mostly shrugged off the fall in China. In Europe, the STOXX Europe 600 rose 0.8 percent while in the US, the S&P 500 rose 1.3 percent.

Investors in the US were possibly more focused on a possible interest rate hike by the Federal Reserve on Thursday.

However, the WSJ MoneyBeat blog says that while historically, stocks tend to be volatile around increases in interest rates, equities typically do well during the tightening cycle and a year after the initial rate rise.

Citing data from BMO Capital Markets, MoneyBeat says that since 1982, there have been seven tightening cycles. In each case, the S&P 500 was higher a year after the initial rate increases. On average, the index rose 6.4 percent in the 12 months following the rate hike.

Chinese stocks plunge

Chinese stocks plunged on Monday, the Shanghai Composite Index falling 2.7 percent, the most in three weeks.

The market was down 4.7 percent at one point on Monday.

Reports over the weekend had shown that China's industrial output rose 6.1 percent in August from a year earlier while fixed asset investment excluding rural households climbed 10.9 percent in the first eight months. Both missed economists' forecasts.

US stocks were little affected by the Chinese plunge but the S&P 500 still finished down 0.4 percent on Monday.

As investors wait for Fed decision, sharp market losses may already be "baked in cake"

MarketWatch reports that US stocks rose last week, with the Standard & Poor's 500 Index gaining 2.1 percent.

“At this point, everyone is fixated on the Federal Reserve’s policy meeting, and until the meeting, volatility will remain high,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

While many investors may indeed be fixated on the Fed's monetary policy meeting, John Hussman says that in reality, "the correlation between central bank policy rates and subsequent GDP growth is next to nothing".

And for investors specifically, Hussmans says that "poor stock market returns and the likelihood of 40-55% market losses from the recent peak are already baked in the cake".

Can central banks influence inflation expectations?

If inflation expectations affect future inflation, can central banks control inflation through it?

A Bloomberg report suggests not.

A new paper, based on a survey of company managers in New Zealand, suggests central bankers may have much less control over inflation expectations than they'd like to believe, mostly because the public just isn't listening.

The "absence of even basic knowledge about the central bank of New Zealand on the part of business leaders suggests that monetary policies designed to operate through changes in the public’s expectations, as induced primarily via communications policies, are unlikely to be very successful," writes Saten Kumar, from Auckland University of Technology, and co-authors in a paper being presented Thursday at the Brookings Institution in Washington.

US stocks fall, Chinese stocks could rally temporarily

US stocks fell on Wednesday, cutting short a global rally.

The S&P 500 fell 1.4 percent, reversing early gains that had followed advances elsewhere. The Shanghai Composite Index rose 2.3 percent on Wednesday, the Nikkei 225 surged 7.7 percent, its biggest daily percentage gain since 2008, and the STOXX Europe 600 rose 1.3 percent.

The rally in Chinese stocks could last a while more though, albeit temporarily. From Bloomberg:

Tom DeMark, who predicted last month’s selloff in Chinese stocks, said the Shanghai Composite Index may rise more than 4 percent before resuming its decline.

The benchmark gauge could climb to 3,390, staging a temporary rebound similar to its rally in July, according to DeMark, founder of DeMark Analytics LLC...

“This decline that we are anticipating is something that may be drawn out,” DeMark...said on Wednesday. “We are convinced that we will see a rally” in the short term, but “we see the markets eroding again,” he said.

Markets rally with Chinese stocks

Markets rallied strongly on Tuesday, thanks to signs of stability in China.

The Shanghai Composite Index finished the day up 2.9 percent after being down 2.3 percent earlier in the session. The S&P 500 jumped 2.5 percent and the STOXX Europe 600 rose 1.2 percent.

Brent crude jumped 4 percent, copper surged the most in two years and US 10-year Treasury yields rose seven basis points to 2.19 percent.

Still, Sumanta Dey at Reuters reminds us that Chinese imports from the rest of the world fell nearly 14 percent in August compared to a year ago, the tenth straight month of falling imports -- an ominous sign for the global economy.

Do China's assets protect it from financial crisis?

Malcolm Scott at Bloomberg wrote that according to Bloomberg Intelligence economists Tom Orlik and Fielding Chen, as of 2013, total assets in China were about 900 percent of gross domestic product, versus debt of about 220 percent.

"On that score, China's balance sheet looks a lot rosier, suggesting prospects for 'financial Armageddon' may be overblown," he wrote.

However, Scott wrote that Orlik and Chen also noted that strong assets don't mean China is immune to a crisis. "It's likely that prices are inflated, and when confidence evaporates, everything from houses to stocks and land can be hard to sell," he wrote.

Indeed, high asset values are often fuelled by credit growth and may be a reflection of the debt problem rather than a mitigating factor.

A recent paper by Oscar Jorda of the Federal Reserve Bank of San Francisco, Moritz Schularick of the University of Bonn, and Alan M. Taylor of the University of California-Davis concluded that "when credit growth fuels asset price bubbles, the dangers for the financial sector and the real economy are much more substantial" and that "the damage done to the economy by the bursting of credit-boom bubbles is significant and long-lasting".

Is China's market turmoil like Japan's in the 1960s?

Bloomberg has a report that says that “China's Turmoil Could be Just a Blip”.

China’s economic slowdown and market crash often evoke comparisons with Japan’s bust in the 1990s...

Yet a more apt parallel may instead be its neighbor’s experience of the 1960s. That’s according to Paul Sheard, chief global economist at ratings company Standard & Poor’s in New York, who worked in Japan between 1976 and 2006...

Here’s what happened: The Japanese economy soared in the build-up to the 1964 Tokyo Olympics... The stock market went on a roller-coaster ride as growth boomed then slowed, and got walloped when policy makers tightened credit.

After a big sell-off in 1963, authorities intervened...

The interventions...eventually worked. Shares began to rally, and economic development continued apace...

Like Japan five decades earlier, China is still at a middling stage of economic development, meaning the economy has significant room to grow.

Still, as the article notes, there are differences.

China is facing a shrinking labor force, quite different to Japan in the 1960s. China’s economy is also more open than Japan’s was then, leaving it vulnerable to capital outflows that are now complicating its exchange-rate policy.

The demographic difference in particular will probably be critical in the longer term.

ECB revamps QE, stocks rally

While the Federal Reserve is preparing to raise interest rates, the European Central Bank looks like expanding monetary stimulus. From Bloomberg:

Mario Draghi unveiled a revamp of quantitative easing and signaled officials might expand stimulus if the rout in financial markets continues to weigh on growth and inflation.

The European Central Bank president said in Frankfurt on Thursday that the Governing Council raised the share of bonds the ECB can buy to 33 percent of each issue from 25 percent, and that policy makers are ready to make more adjustments to ensure the full implementation of the 1.1 trillion-euro ($1.2 trillion) program. A weaker global outlook prompted an across-the-board reduction of the institution’s growth and consumer-price forecasts through 2017. The euro slid to a two-week low.

The announcement initially pushed stocks up. The STOXX Europe 600 rose 2.4 percent on Thursday and the S&P 500 briefly rose more than 1 percent.

However, the latter fell back later in the day to finish up just 0.1 percent.

US 10-year Treasury yields fell two basis points to 2.16 percent while West Texas Intermediate crude rose 1.1 percent.

Markets rally but recovery may take a while

Markets finally had a good session on Wednesday.

The S&P 500 rose 1.8 percent, the STOXX Europe 600 gained 0.3 percent and the Shanghai Component Index recovered from an early 4.7 percent drop to end the session down 0.2 percent.

West Texas Intermediate crude rose 1.9 percent, the Bloomberg Dollar Spot Index rose 0.3 percent and yields on 10-year US Treasury notes rose three basis points to 2.19 percent.

A fuller recovery from the recent losses could take a while though. A Bloomberg report suggests that it could take until the end of 2015 for stocks to return to levels last seen in May.

Indeed, some analysts think that the market may not have found its bottom.

“My gut instinct is that we may not have seen the end of this,” said David Joy, chief market strategist at Ameriprise Financial Inc. “I’m not convinced the downside volatility is over.”

Markets fall but analysts remain optimistic on US stocks

August may be over but market turmoil is not.

China started the ball rolling downhill on the first day of September. The Shanghai Composite Index fell 1.2 percent on Tuesday. It was down 4.8 percent at one stage of the trading session before recovering on suspected government buying.

A report on Tuesday had shown that the official manufacturing purchasing managers’ index fell to 49.7 in August from 50 in July.

The STOXX Europe 600 Index fell 2.7 percent on Tuesday while the S&P 500 plunged 3.0 percent.

Despite the continuing declines, many analysts remain optimistic on US stocks. Among 21 brokerages tracked by Bloomberg, 17 have not changed their projections for the Standard & Poor’s 500 Index after August’s selloff, maintaining forecasts that imply a 12 percent rally by the end of the year.