Saturday, 30 January 2016

Stocks jump following BoJ move

Markets jumped on Friday, boosted by the Bank of Japan's decision to implement negative interest rates.

The S&P 500 surged 2.5 percent, the STOXX Europe 600 climbed 2.2 percent, the Nikkei 225 jumped 2.8 percent and the Shanghai Composite Index surged 3.1 percent.

Despite the strong finish to the month, the S&P 500 ended January down 5.1 percent, its worst month since August.

Friday, 29 January 2016

Markets mixed, BoJ rates go negative

Markets were mixed on Thursday.

The S&P 500 rose 0.6 percent but the STOXX Europe 600 fell 1.6 percent and the Shanghai Composite Index fell 2.9 percent.

US stocks were boosted by higher oil prices. US crude rose 2.8 percent on Thursday on hopes of production cuts.

Meanwhile, Friday's trading could prove interesting after the Bank of Japan adopted a negative interest rate policy.

At its monetary policy meeting on Friday, the BoJ decided to put an interest rate of -0.1 percent on current accounts held at the central bank while maintaining its ongoing asset purchase plan.

Thursday, 28 January 2016

Fed sees need to monitor market turmoil

The Federal Reserve tacitly aknowledged at its monetary policy meeting on Wednesday that the global market turmoil poses a risk to its outlook for the economy.

The Fed said in its statement after the meeting that it is “closely monitoring global economic and financial developments” while “assessing their implications for the labor market and inflation, and for the balance of risks to the outlook”.

The Fed left the target for its benchmark rate unchanged at 0.25 percent to 0.5 percent.

While some economists said the Fed statement makes an interest-rate hike at the next monetary policy meeting in March less likely, the dovish turn did not seem to encourage equity investors, as the S&P 500 fell 1.1 percent even though WTI oil rose 2.7 percent.

Wednesday, 27 January 2016

US and European stocks rise but Chinese stocks face more falls after plunge

US stocks rose on Tuesday.

The S&P 500 gained 1.4 percent, boosted by a 3.7 percent jump in oil prices.

The STOXX Europe 600 rose 0.9 percent.

The rise in oil helped US and European stocks shrug off a 6.4 percent plunge in the Shanghai Composite Index earlier on Tuesday.

The worst may not be over for Chinese stocks. According to Bloomberg, technical indicators suggest that China stocks may fall another 10 percent.

Tuesday, 26 January 2016

Stocks follow oil down as latter follows pattern of subprime crash

Markets ended a rally on Monday as both stocks and oil fell.

Asian stock markets rose early in the day following the strong US market performance on Friday. The MSCI Asia Pacific Index gained 1.1 percent.

However, the STOXX Europe 600 fell 0.6 percent and the S&P 500 tumbled 1.6 percent as oil turned down.

West Texas Intermediate crude plunged 5.8 percent and Brent crude lost 5.2 percent.

Monday followed the recent pattern of oil and stocks moving together. According to The Wall Street Journal, the correlation between daily moves in the price of Brent and the S&P 500 stock index over the past 20 trading days is at 0.97, higher than any calendar month since 1990.

That correlation could prove ominous for stocks.

Analysts at Bank of America Merrill Lynch think that there is a parallel between the subprime mortgage crash in 2007 and the recent disorderly fall in the price of oil. Via Bloomberg:

The pattern of the decline in the price of oil that began in mid-2014 is remarkably similar to the 2007-2009 pattern of the price decline of ABX, the credit derivative index that referenced subprime mortgages... The ABX history suggests that oil will see more declines in the next couple of months and find a floor somewhere in the low 20s in the March-April time frame...

Monday, 25 January 2016

Stocks cheaper, but maybe not cheap enough

Alex Rosenberg at CNBC thinks that after the recent selloff, stocks may actually be cheap.

One measure of the forward P/E of the S&P 500 shows it to be 15, lower than the 15-year average forward P/E ratio of 15.7.

John Hussman is unimpressed.

In his latest article, he says that after the market decline of recent weeks, "valuation measures remain roughly 80-90% above the norms that have been reached or breached by the completion of every market cycle in history".

In addition, the 12-year prospective S&P 500 total return remains at just 2.5 percent annually in nominal terms

Saturday, 23 January 2016

Markets surge, expected to extend rebound

Global stocks and oil surged on Friday, ending a volatile week on a high note.

The S&P 500 jumped 2 percent, the STOXX Europe 600 surged 3 percent and the MSCI Emerging Markets Index climbed 3.3 percent.

Brent crude rose 8 percent and West Texas Intermediate crude climbed 8.1 percent.

“It’s a classic oversold bounce after Draghi’s comments yesterday and the noise on Japanese stimulus overnight, the question is where do we go from here,” said Veronika Pechlaner, who helps oversee $10 billion at Ashburton Investments, part of FirstRand Group.

The answer appears to be up for many analysts. Bloomberg reports that forecasters expect the S&P 500 to extend its rebound from the Wednesday low to 19 percent by December while European strategists see the region’s benchmark finishing 2016 about 18 percent higher than Friday’s close.

Friday, 22 January 2016

Markets rally, may not be sustainable

Markets rose on Thursday.

The S&P 500 gained 0.5 percent, the STOXX Europe 600 jumped 1.9 percent and the Nikkei 225 surged 3.3 percent.

US crude-oil prices rose 4.2 percent.

The European Central Bank left its key interest rates unchanged at its monetary policy meeting on Thursday but President Mario Draghi's remark that officials will “review and therefore possibly reconsider” the bank’s monetary policy at their next meeting in March may have boosted investor sentiment.

However, confidence in tne longer-term outlook for markets appears weak.

“I don’t think the downside is done,” said Peter Tuchman, floor broker for Quattro M. Securities. “The market just cannot sustain a rally.”

Thursday, 21 January 2016

Markets plunge but US stocks manage late rally

Markets tumbled on Wednesday.

In Asia, the Nikkei 225 plunged 3.7 percent, taking its fall from its June 2015 peak to 21.3 percent and confirming a bear market. The Shanghai Composite fell 1.0 percent.

In Europe, the STOXX Europe 600 plunged 3.2 percent, hitting its lowest level since December 2014.

The US stock market also opened on a very weak note on Wednesday, the S&P 500 falling as much as 3.7 percent at one point.

However, a late rally helped the S&P 500 close down just 1.2 percent to its lowest level since April 2014.

In other markets, US crude oil plunged 6.7 percent to its lowest settlement since May 2003 while the yield on the US 10-year Treasury note fell seven basis points to 1.99 percent.

While the intra-day reversal on Wednesday gave some investors hope that at least a short-term bottom has been reached, others remain cautious.

Scott Minerd, chief investment officer of Guggenheim Partners, thinks that the S&P 500 will drop another 10 percent to 1,650 and oil could fall as low as $20 a barrel. Jeffrey Rottinghaus, a vice president and portfolio manager at T. Rowe Price, said stock prices could fall another 10 percent as the US economy slips into a mild recession.

Jeffrey Gundlach, co-founder of DoubleLine Capital, expects "a protracted decline in the S&P 500".

In contrast, Omar Aguilar, chief investment officer for equities at Charles Schwab Corp, thinks that the US economy "is stable" while Mihir Worah, co-manager of the Pimco Total Return Fund, expects oil prices “to move higher from current levels”.

David Herro, manager of the $24 billion Oakmark International Fund, said: “I don’t think the drop in equity prices is at all warranted by economic fundamentals.”

Wednesday, 20 January 2016

Stocks rise as some see buying opportunity

US stocks were little changed on Tuesday, the S&P 500 closing less than 0.1 percent higher.

An early rally in stocks faded as oil resumed its decline. West Texas Intermediate crude fell 3.3 percent on Tuesday.

Stocks were more positive elsewhere on Tuesday. The Shanghai Composite jumped 3.2 percent and the STOXX Europe 600 rose 1.3 percent.

A sustainable rally may take a while to develop though, according to Wells Capital Management's Jim Paulsen.

Paulsen told CNBC on Tuesday that the S&P 500 will "break below those August lows and probably break 1,800".

However, at that level, the market becomes "a very good value buy again".

Aberdeen Asset Management thinks so too.

In an interview with Bloomberg, its chief investment officer Anne Richards said that the selloff “may be the best buy opportunity we’ve seen in a long time”.

Tuesday, 19 January 2016

China 2015 growth slowest since 1990, analysts see more selling pressure for stocks

A report on Tuesday showed that China's economy grew 6.8 percent in the fourth quarter from the same period of 2014.

That left full-year growth at 6.9 percent, the least since 1990.

Weakening economic growth is making analysts more pessimistic about China's stock market. From Bloomberg:

Analysts from Bocom International Holdings Co. and Wells Fargo Funds Management say the index may drop 14 percent from Friday’s close to 2,500. Zhongtai Securities Co. sees the gauge losing as much as 300 points, or 10 percent, before bottoming out. Phillip Securities and Central China Securities Co. expect more selling pressure even after the Shanghai Composite sank 3.5 percent to 2,900.97 on Friday, falling 21 percent from its December high.

The Shanghai Composite Index did rise 0.4 percent on Monday though.

Monday, 18 January 2016

Is a US recession imminent?

Is the US economy approaching a recession?

John Hussman thinks so. In his latest market commentary, he wrote that a US recession is "not only a risk but an imminent likelihood".

Hussman pointed out that there had already been a long period of poor financial market internals and weakening order surplus, and last week provided fresh declines in industrial production and retail sales.

However, Myles Udland thinks otherwise.

Citing analysis by Deutsche Bank, Udland wrote that "the US consumer is the heart of the economy, and right now there are few signs that this force is rolling over".

Saturday, 16 January 2016

Markets fall as 2016 turning into year of the bear

Global markets resumed their selloff on Friday.

The S&P 500 fell 2.2 percent, paring an earlier loss of as much as 3.3 percent but still leaving it with a third weekly retreat.

The STOXX Europe 600 fell 2.8 percent. It is down more than 20 percent from its record high in April, confirming a bear market.

The Shanghai Composite Index is also in a bear market, plunging 3.6 percent on Friday to extend its decline from its December high to more than 20 percent.

Oil also plunged. West Texas Intermediate crude lost 5.7 percent while Brent fell 5.9 percent.

The US 10-year Treasury yield fell 10 basis points to 1.99 percent.

A Bloomberg report says that 2016 is looking like the year of the bear, with China and oil the triggers of the upheaval.

“It comes down to one basic fear, which is the global economy,” said Russ Koesterich, global chief investment strategist for BlackRock Inc.

Still, some seem relatively sanguine about market and economic prospects.

“I’m not panicked. I don’t think this is a financial crisis,” said Jack Ablin, chief investment officer for BMO Private Bank.

“A good earnings season could turn things around here,” said Brian Jacobsen, chief portfolio strategist with Wells Fargo Funds Management LLC.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said on a call with analysts on Thursday that the US economy “looks pretty good at this point”.

Friday, 15 January 2016

US and Chinese stocks rebound

Global stocks put up mixed performances on Thursday.

The S&P 500 jumped 1.7 percent while the Shanghai Composite Index rebounded from an early plunge to finish 2.0 percent higher.

However, the STOXX Europe 600 fell 1.5 percent and the Nikkei 225 plunged 2.7 percent.

Indeed, a CNBC report warned that the selling may not be over.

"We are saying this is a low, but not the low, so we would be very selective about what stocks to buy for a tradable rally," said Ari Wald, technical strategist at Oppenheimer Asset Management. "We do expect lower lows over the coming months."

Scott Redler, partner at, said: "I would not say this is the low of the year, but I would hope this is the low of January."

Thursday, 14 January 2016

US and Chinese stocks tumble

US stocks tumbled on Wednesday, with the S&P 500 plunging 2.5 percent.

Elsewhere, stock markets were mixed.

The STOXX Europe 600 rose 0.4 percent for its second consecutive day of gains.

In Asia, the Nikkei 225 jumped 2.9 percent but the Shanghai Composite Index fell 2.4 percent.

Oil also saw mixed fortunes on Wednesday.

Brent oil fell 1.8 percent to its lowest close since April 2004 but West Texas Intermediate crude was little changed.

Wednesday, 13 January 2016

Stocks rally but commodities extend declines

Stocks rose on Tuesday, with the US market enjoying a second day of gains.

The S&P 500 rose 0.8 percent to help pull the MSCI All-Country World Index up 0.3 percent.

The rally in US stocks appears to be turning analysts more optimistic.

“We’re slowly but surely finding a bottom in this selloff,” said Tim Ghriskey, managing director and chief investment officer at Solaris Asset Management.

“This is a market that’s been selling off very hard and is probably short-term oversold,” said Alan Gayle, a senior strategist for Atlanta-based Ridgeworth Investments.

However, other markets remain in a downtrend.

WTI crude oil fell 3.1 percent on Tuesday while Brent fell 2.2 percent.

Other commodities also fell to push the Bloomberg Commodity Index down 0.9 percent to extend its lowest level since March 1999.

Yields on 10-year US Treasury notes dropped seven basis points to 2.11 percent.

Tuesday, 12 January 2016

US blue chips gain amid falls elsewhere

US blue chip stocks avoided another fall on Monday despite sharp falls in China and in oil.

The Dow Jones Industrial Average rose 0.3 percent and the S&P 500 edged up 0.1 percent.

However, the Nasdaq Composite Index fell 0.1 percent while the Russell 2000 declined 0.4 percent.

The STOXX Europe 600 fell 0.3 percent.

Worst hit on Monday was China, where the Shanghai Composite Index plunged 5.3 percent.

Some analysts are downplaying the impact of the turmoil in China's stock market.

“China’s stock market doesn’t have huge ramifications for most international investors,” said David Stubbs, global market strategist at JP Morgan Asset Management.

However, there is also oil. US crude oil also fell 5.3 percent on Monday to hit its lowest level since 2003.

Monday, 11 January 2016

Markets plunge into 2016

Markets fell heavily last week amid anxiety about global growth exacerbated by persistant Chinese renminbi devaluation.

The Standard & Poor’s 500 Index plunged 6 percent last week, the biggest decline since September 2011 and the worst start to a year over five days on record.

Elsewhere, China, the biggest contributor to investors' anxiety last week, saw its Shanghai Composite Index plunge 10 percent, while in Europe, the STOXX 600 Index lost 6.7 percent for its biggest decline in four years.

While financial markets have been sent into turmoil by the negative signals coming out of China, Nobel-prize-winning economist Joseph Stiglitz thinks that China is facing "a slow process of slowing down" but "not a cataclysmic" one.

Indeed, a survey of economists by Bloomberg showed that the country that is expected to do worst in 2016 is Venezuela, where the economy is forecast to contract 3.3 percent.

Saturday, 9 January 2016

US and European stocks fall, renminbi may need to fall further

US and European stocks fell on Friday despite a rebound in Chinese stocks.

The S&P 500 fell 1.1 percent and the STOXX Europe 600 fell 1.5 percent.

Earlier on Friday, though, the Shanghai Composite Index had jumped nearly 2 percent after authorities moved the renminbi higher and suspended the stock market circuit breaker mechanism.

The strengthening of the renminbi could prove temporary though.

According to estimates by Bloomberg, a decline to 7.7 yuan per dollar, from about 6.6, is needed to boost gross domestic product expansion by 0.7 percentage point.

Friday, 8 January 2016

Markets tumble, China's forex reserves see record fall

The renminbi devaluation and Chinese stock market trading halt on Thursday sent global markets tumbling again.

The S&P 500 fell 2.4 percent, the STOXX Europe 600 fell 2.2 percent and the MSCI Asia Pacific Index fell 2.1 percent.

The MSCI All-Country World Index fell for a fourth day, bringing its slide so far this year to 5.2 percent, its worst start to a year in records back to 1998.

Yields on US 10-year Treasury notes fell two basis points to 2.15 percent, crude oil settled at a 12-year low and copper dipped below $2 for the first time since 2009.

However, Chinese stocks managed to rally in early Friday trading after the People’s Bank of China set the renminbi's midpoint rate at 6.5636 yuan per dollar, slightly firmer than the previous fix of 6.5646, the first time in nine trading days that the central bank had strengthened its official rate.

Still, further weakening of the renminbi cannot be ruled out, especially after a report on Thursday showed that China's foreign exchange reserves fell $107.9 billion in December to $3.33 trillion, the biggest monthly drop on record.

Thursday, 7 January 2016

Markets tumble, China trading halted again

Markets fell across the globe on Wednesday as a nuclear test by North Korea added to the growing list of investors' concerns.

The S&P 500 fell 1.3 percent and Brent crude oil prices fell nearly 6 percent to hit new 11-year lows as the Thomson Reuters/CoreCommodity CRB index hit its lowest since August 2002.

Also worrying investors on Wednesday was China's continuing devaluation of the renminbi, with no sign of an end to the trend.

Indeed, on Thursday, the People’s Bank of China cut the yuan’s reference rate by 0.5 percent, the most since August last year.

The move triggerred yet another round of falls in equity markets, with China’s CSI 300 Index in particular plunging 7.2 percent on Thursday, forcing trading to be halted by automatic circuit breakers for the second time this week.

Wednesday, 6 January 2016

Chnese stocks steady but still at risk

After plunging on Monday, China's stock market steadied somewhat on Tuesday, the CSI 300 closing 0.3 percent higher.

However, Bank of America Merrill Lynch's head of China equity strategy David Cui thinks that the Shanghai Composite Index will end the year down roughly 27 percent.

"Historically, any country that grew debt this fast inevitably ran into financial-system problems, including currency devaluation, banking recap, and high inflation, and we do not expect China to be an exception," asserted Cui.

Tuesday, 5 January 2016

China stock plunge sinks global markets

Markets kicked off 2016 with another plunge in Chinese stocks that sent markets worldwide reeling.

China’s CSI 300 Index slid 7 percent, triggerring a trading halt, after a report on Monday showed that the Caixin manufacturing index for China came in at 48.2 in December, missing the median analyst estimate for a reading of 48.9.

The rest of Asia followed China's lead, with the MSCI Asia Pacific Index falling 2.4 percent.

The STOXX Europe 600 Index fell 2.5 percent, capping the worst start of the year ever.

The S&P 500 fell 1.5 percent, its sixth-worst start to a year in data compiled by Bloomberg going back to 1927.

As stocks fell, safe haven government bonds rose. Yields on US 10-year notes fell three basis points to 2.24 percent while Germany’s bund yields fell six basis points to 0.57 percent.

Oil and copper also fell on Monday but gold rose 1.4 percent for its biggest gain in two weeks.

Monday, 4 January 2016

After tumultuous 2015, will 2016 be year of sovereign defaults?

The Wall Street Journal noted that 2015 was a tumultuous year for markets.

"Two major stock indexes posted their first annual decline since the financial crisis, while energy prices fell even further," it wrote. "Emerging markets and junk bonds also struggled."

And towards the end of the year, "a fierce selloff hit junk bonds".

The Wall Street Journal noted that equity strategists still expect US stocks to gain in 2016. However, they also expect higher levels of volatility.

The Wall Street Journal said that a slowdown in economic growth around the world remains a major hurdle for global markets, with emerging economies looking particularly shaky with commodity prices plunging.

Indeed, Carmen Reinhart wrote last week that 2016 could be a year of sovereign defaults.

"As 2016 begins, there are clear signs of serious debt/default squalls on the horizon," she wrote. "We can already see the first white-capped waves."

Ukraine, Greece and Puerto Rico were among those mentioned as at risk, with the biggest risks in the emerging economies after the Federal Reserve’s move to increase interest rates amid slowing growth in China and collapsing oil and commodity prices.