BoJ meets as industrial output and retail sales stall

With markets widely considered to be still reliant on central bank stimulus for support, the Bank of Japan's two-day meeting starting today will be closely-watched.

Japan reported today that industrial production and retail sales in September were unchanged from the previous month.

Compared to a year ago, industrial output rose 0.9 percent in September but retail sales fell 1.9 percent.

Toru Suehiro, senior market economist at Mizuho Securities, said: "Looking at the production report, I think GDP will lack strength and post a small gain, which would increase calls for stimulus measures to boost growth.”

Stocks fall but entering historically bullish period

Stocks mostly fell on Friday.

The S&P 500 fell 0.3 percent after news that the Federal Bureau of Investigation was reviewing new evidence on Democratic presidential candidate Hillary Clinton’s email server. US stocks fell despite a report earlier on Friday showing that the economy grew at an annual rate of 2.9 percent in the third quarter.

The STOXX Europe 600 also fell 0.3 percent but the Nikkei 225 rose 0.6 percent.

Bonds were relatively stable after two days of sharp declines. Nevertheless, the US 10-year Treasury yield edged up to 1.847 percent, its highest since 27 May.

While October closed on a weak note for stocks, next week starts a new trading month, one which has historically kicked off the best six-month period for stocks. According to Adam Shell at USA Today, the Dow Jones industrial average has posted average gains of 7.4 percent in the November-through-April period compared to a 0.4 percent return May-through-October.

“The seasonally bullish pattern has a better-than-average chance of playing out this year,” Doug Ramsey, chief investment officer at Leuthold Group, was quoted as saying.

In contrast, David Santschi, CEO of TrimTabs Investment Research, is positioning his firm’s model stock portfolio “defensively”, saying that there are “plenty of cautionary signs”.

Indeed, recently, Bloomberg posted several charts that supposedly scare Wall Street.

Global bonds fall after UK growth better than expected

Global bond markets fell on Thursday.

The US 10-year Treasury yield rose six basis points to 1.85 percent, pushing the S&P 500 down 0.3 percent.

European bonds also fell, with the UK 10-year gilt yield rising 10 basis points to 1.27 percent, the highest since the Brexit vote in June, after a report showed that the economy grew 0.5 percent in the July-September period, better than the forecast 0.3 percent.

According to Gary Pollack, a head of fixed-income trading at Deutsche Bank, the sell-off in bonds was the result of “a combination of better economic growth and changing expectations for monetary policies going forward”.

Oil rose though. West Texas Intermediate and Brent crude both rose about one percent.

Markets fall as earnings growth seen key

Markets mostly fell on Wednesday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 fell 0.4 percent.

The Nikkei 225 bucked the trend though, rising 0.2 percent.

US crude oil fell 1.6 percent to a three-week low.

Bonds also fell. The US 10-year Treasury yield rose to 1.790 percent from 1.758 percent on Tuesday.

On the US corporate earnings front, Apple fell 2.2 percent but Boeing jumped 4.7 percent after providing contrasting earnings reports.

“Earnings growth is going to be really, really key for continued growth in the market, even though we’ve muddled along without that for a while,” said Karyn Cavanaugh, senior market strategist at Voya Investment Management.

US and European stocks fall but have room to rise

Markets were mixed on Tuesday.

The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.3 percent but the Nikkei 225 rose 0.8 percent.

Despite the weak performance of US and European stocks on Tuesday, some see opportunity in them.

Ed Yardeni of Yardeni Research said in a note on Tuesday that while the overall stock market looks fully valued, "there may be room for stock multiples to expand further, especially for beaten-up sectors like financials and health care".

Richard Barley at The Wall Street Journal wrote that after lagging other markets for most of 2016, European stocks are now looking relatively attractive in value. He said that the STOXX Europe 600 excluding the UK trades on 14.7 times the next 12 months’ earnings compared to 16.6 times for the S&P 500.

Markets mixed but analysts see positive signs for stocks

Markets were mixed on Monday.

The S&P 500 rose 0.5 percent, the Nikkei 225 rose 0.3 percent while the Shanghai Composite Index jumped 1.2 percent.

The STOXX Europe 600 fell less than 0.1 percent, with the IBEX 35 propping the continent's stocks by rising 1.3 percent.

US bonds fell, with the yield on the 10-year Treasury note rising to 1.763 percent from 1.740 percent on Friday.

US stocks were boosted by some better-than-expected earnings.

“Both sales and earnings have been positive so far,” said Michael Arone, chief investment strategist at State Street Global Advisors. “This quarter has the potential to end the earnings recession.”

Indeed, an end to the earnings recession, an active mergers and acquisitions market and the largest initial public offering of the year happening this week “are essentially bullish signs for the market,” said Randy Frederick, director of trading and derivatives at Charles Schwab, according to a CNBC report.

US stocks to get boost from return to earnings growth

Reuters reports that US corporate earnings are turning positive after four consecutive quarters of contraction and that could provide a second wind for stocks.

[S]tronger-than-expected profit reports from companies such as Microsoft and Bank of America have turned the tide and the blended earnings growth estimate for the third quarter sits now at 1.1 percent. This would effectively end the earnings recession...

"With the earnings recession showing signs of ending this quarter, the economy is on firmer footing, which could lead to your typical end of year strength," said LPL's senior market strategist Ryan Detrick.

Stocks flat but earnings may be turning higher

Stocks were flat on Friday.

Both the S&P 500 and STOXX Europe 600 were little changed while in Asia, the Shanghai Composite Index rose 0.2 percent but the Nikkei 225 fell 0.3 percent.

Microsoft broke above its record high hit during the technology boom in 1999 after reporting results on Thursday that beat analyst forecasts.

Indeed, Jack Caffrey of JPMorgan Private Bank told CNBC that after more than a year of back-to-back quarters of earnings declines for stocks, the picture is "finally turning higher" and that stocks will soon reap the benefits of earnings momentum.

Markets fall, may already be in bear market

Markets were mostly down on Thursday.

Stocks fell. The MSCI All-Country World Index fell 0.1 percent, dragged down by a 0.1 percent decline in the S&P 500.

The euro fell 0.4 percent against the US dollar after President Mario Draghi said the European Central Bank has not discussed extending or tapering its bond-buying programme.

Germany's 10-year bund yield fell three basis points to 0.003 percent while the US 10-year Treasury yield rose one basis point to 1.75 percent.

Oil fell. West Texas Intermediate crude declined 2.3 percent.

As the rally in stocks halted, technical analyst Rich Ross of Evercore ISI told CNBC that “we may actually have entered the early stages of a bear market”.

In contrast, Dennis Davitt of Harvest Volatility Management said that “if earnings continue to be good, we're going to see the macro market accelerate to the upside”.

Markets rise as oil hits highest level in over a year

Markets rose on Wednesday.

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

US light sweet crude rose 2.6 percent, reaching its highest level since July 2015.

The rise in oil helped the energy sector in the S&P to lead gains in the US, rising 1.4 percent.

Earlier in Asia, the Nikkei 225 rose 0.2 percent but the Shanghai Composite was flat and the Hang Seng fell 0.4 percent after China reported that its economy grew 6.7 percent in the third quarter.

Markets rise as higher US inflation mitigated by lower core reading

Markets rose on Tuesday.

The MSCI All-Country World Index rose 0.9 percent. The S&P 500 rose 0.6 percent while the STOXX Europe 600 jumped 1.5 percent.

US Treasuries rose. The 10-year note yield fell three basis points to 1.74 percent after a report showed weaker-than-expected US core inflation reading in September.

Charles Comiskey, head of Treasury trading in New York at Bank of Nova Scotia, said: “The lower inflation report pushed the Fed back a little bit.”

However, the inflation report also showed that the headline consumer price index rose 1.5 percent year-on-year, the most since October 2014.

The overall inflation trend appears to be confirming expectations.

The latest monthly survey of fund managers by Bank of America Merrill Lynch showed that inflation expectations are at a 16-month high, while stagflation fears have reached their highest level since April 2013.

And with fund managers also worried about an EU breakup, a bond crash and Republicans winning the White House, it is little wonder then that their cash balances rose to 5.8 percent of their portfolios in October, up from 5.5 percent last month and approaching levels not seen since November 2001.

Markets fall as Fed mulls hot economy

Markets mostly fell on Monday.

The S&P 500 fell 0.3 percent and the STOXX Europe 600 fell 0.7 percent.

In Asia, the Shanghai Composite Index fell 0.7 percent but the Nikkei 225 rose 0.3 percent.

The yield on the US 10-year Treasury note initially rose to 1.814 percent, its highest since early June, before retreating to 1.766 percent.

The Federal Reserve continued to influence markets on Monday, with Vice Chairman Stanley Fischer warning of risk in running a high-pressure economy, something suggested by Chair Janet Yellen last week as plausible.

Stocks at risk from peak in globalisation

The Wall Street Journal reports that slowing world trade growth and moves toward protectionism pose risks for stocks.

U.S. equity prices have been supported for the past three decades by an acceleration of global trade and a freer flow of capital. Those lifted economic growth and allowed companies to take advantage of new markets and economies of scale. The S&P 500 is up nearly ninefold since October 1986, according to FactSet.

But now there is worry that the party is ending. “We believe globalization has probably reached its peak,” said Marino Valensise, head of the multiasset team at Barings, a member of the MassMutual Financial Group with $275 billion in assets under management. “The market won’t like it.”

Earlier this month, a Bloomberg report had highlighted similar views from Bank of America Merrill Lynch.

Some of the hottest trades of the past few years could stage a sharp reversal as global markets face "peaks" in liquidity, free trade, and income inequality.

That's the big-picture call from Bank of America Merrill Lynch, whose analysts argue in a report published Thursday that an apparent fightback against globalization in advanced economies represents a game-changer for global asset-allocation.

Markets rise as bulls remain unshaken

Markets rose on Friday.

The S&P 500 rose less than 0.1 percent but the STOXX Europe 600 jumped 1.3 percent. The Nikkei 225 rose 0.5 percent.

“Earnings season gave us a little boost this morning, but I think there’s a lot of nervousness here,” said Matthew Peron, head of global equity at Northern Trust Asset Management.

Indeed, the S&P 500 fell 1 percent for the week, and Mark DeCambre at MarketWatch said that October is “shaping up to be the ugliest monthly fall since January”.

Still, some bulls remain unshaken. From Bloomberg:

For Thomas Lee of Fundstrat Global Advisors, the latest gyrations are just turbulence on a ride that will leave the market higher by 9 percent come 2017. RBC Capital Markets LLC’s Jonathan Golub and Bank of Montreal’s Brian Belski, with Lee among the bull market’s biggest cheerleaders, say the rocky start to earnings matters little. They’re declaring the longest profit recession since the financial crisis over, clearing the path for equities to rally into the new year.

Markets fall with Chinese exports

Markets fell on Thursday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.9 percent and the US 10-year Treasury yield fell three basis points to 1.74 percent on concerns over possible slower global growth after the release of weak Chinese trade data.

A report from China on Thursday showed that exports fell 5.6 percent in September from a year earlier while imports rose 2.2 percent.

Julian Evans-Pritchard, a China economist at Capital Economics, said in a note on Thursday that this “could be an early sign that the recent recovery in economic activity is losing momentum”.

Mainland Chinese markets shrugged off the trade data though. The Shanghai Composite rose 0.09 percent while the Shenzhen composite rose 0.24 percent. However, the Hang Seng Index fell 1.27 percent.

Markets mixed as Fed remains divided on rate hike timing

Markets were mixed on Wednesday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 1.1 percent.

The yield on the US 10-year Treasury note rose to 1.778 percent from 1.760 percent on Tuesday.

The British pound rose 0.7 percent against the dollar to $1.2207 after four consecutive days of losses.

US crude oil fell 1.2 percent after the Organization of the Petroleum Exporting Countries said its production rose last month.

The release of the Federal Reserve's minutes from the September monetary policy meeting provided little direction for markets. It noted that several members thought a rate hike was needed “relatively soon” but added that “a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labor market and inflation”.

Still, Randall Kroszner, an economics professor at the University of Chicago Booth School of Business, told Bloomberg that “a rate hike is very likely by the end of the year”.

Markets fall as expectation of Fed rate hike rises

Markets mostly fell on Tuesday.

The S&P 500 fell 1.2 percent and the STOXX Europe 600 fell 0.5 percent.

US 10-year Treasury yields rose five basis points to 1.76 percent as odds on a Federal Reserve rate hike before the end of the year rose to 67 percent, up seven percentage points from a month ago.

Earlier on Tuesday, Asian markets were mixed.

The Nikkei 225 rose one percent and the Shanghai Composite rose 0.6 percent.

However, the KOSPI fell 1.2 percent, dragged down by an eight percent plunge in Samsung Electronics after the latter halted sales of its Galaxy Note 7 mobile phone, while the Hang Seng fell 1.3 percent, with developers hit by measures in some Chinese cities to cool property prices.

Markets rise, US earnings may be returning to growth

Markets rose on Monday.

The S&P 500 rose 0.5 percent, the STOXX Europe 600 rose 0.7 percent and the Shanghai Composite rose 1.4 percent as Chinese markets reopened after a week-long holiday.

US crude oil jumped 3.1 percent after Russian President Vladimir Putin said he supported international efforts to limit oil output.

Meanwhile, US stocks could see further gains as a major headwind dissipates.

Bloomberg reports that while analysts predict that net income for S&P 500 Index members fell 1.6 percent in the July-September period to extend the earnings recession to 18 months, US companies have exceeded their forecasts by an average margin of 3.6 percentage points in the past five years.

When the latter is taken into account, the third quarter could yet turn out to be a positive one for US corporate earnings growth.

“Among the nine instances when companies emerged out of prolonged sluggishness, stocks posted gains in all but two,” the report said.

US recession risk down but market vulnerable to one

The Federal Reserve has calculated that the US economy has a 12 percent chance of entering a recession in the next 12 months.

That is down from 16 percent in August and the lowest number since 10 percent in February 2015.

However, Bank of America-Merrill Lynch's head of US equity and quantitative strategy Savita Subramanian warned that “we're going to hit a recession sometime in the second half of next year”.

“We are seven years into a full-fledged, all out, central bankers doing everything they can to stimulate demand,” she said. This has made the market fragile. “There are a lot of itchy trigger fingers. There's lot of violent trades that can really roil a fairly complacent environment.”

Markets fall amid sterling volatility

Markets fell on Friday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.9 percent and the Nikkei 225 fell 0.2 percent.

A highlight of trading on Friday was sterling volatility.

The pound fell to as low as $1.1819 during early Asian trading but recovered to $1.2435 by late New York trading. That still left it down 1.4 percent against the dollar for the day.

The fall in the UK currency, however, helped the FTSE 100 to a 0.6 percent gain, the only positive performance on Friday among the major stock markets.

US jobless claims fall but economy could "slide into recession"

Markets were mixed on Thursday.

Asia kicked off the day positively with the Nikkei 225 rising 0.5 percent and the Hang Seng up 0.7 percent.

However, the STOXX Europe 600 fell 0.4 percent and the S&P 500 finished flat.

A report on Thursday showed that initial claims for unemployment benefits in the US fell by 5,000 to 249,000 last week, pushing the four-week average down 2,500 to 253,500, the lowest since December 1973.

While the report suggests that the US economy remains resilient, Karyn Cavanaugh, senior market strategist at Voya Financial, thinks that “there is trepidation among investors because of the writing on the wall for a December rate increase”.

On the other hand, some economists think that 2016 could be the worst year of growth since the 2009 recession. CNN reports that Oxford Economics expects the US economy to grow 1.5 percent while Fitch Ratings forecasts a growth rate of just 1.4 percent.

Lindsey Piegza, chief economist at Stifel, thinks that the US will “just slowly slide into recession over the next couple of years”.

IMF concerned that debt level could lead to "unprecedented private deleveraging"

Markets were mixed on Wednesday.

The S&P 500 rose 0.4 percent and the Nikkei 225 rose 0.5 percent but the STOXX Europe 600 fell 0.5 percent.

Helping to boost US stocks was a 2.3 percent rise in US crude futures, a welcome relief for energy stocks, which are expected to report an earnings decline of 67 percent in the third quarter from a year earlier.

Niladri Mukherjee, a strategist at Merrill Lynch Wealth Management, recommended that investors stick with stocks for now, despite the risk of mounting political and policy uncertainties and elevated valuations.

“Broadly speaking, we still expect equities to outperform fixed income as global growth is picking up and earnings revision ratios have improved in recent months,” he said.

However, the International Monetary Fund warned in its Fiscal Monitor report released on Wednesday that global growth could be hampered by high debt levels.

“At 225 percent of world GDP, the global debt of the nonfiancial sector...is currently at an all-time high,” it said. “There are concerns that the sheer size of debt could set the stage for an unprecedented private deleveraging process that could thwart the fragile economic recovery.”

Markets mixed as central banks look to wind down stimulus

Markets were mixed on Tuesday.

The S&P 500 fell 0.5 percent but the STOXX Europe 600 and the Nikkei 225 both rose 0.8 percent.

US Treasuries fell, with the yield on the 10-year note rising to 1.683 percent from 1.624 percent on Monday.

“The feeling in the overall market is that the Fed will raise rates sooner rather than later,” said Ted Weisberg, a trader at Seaport Securities.

Adding to concerns of diminishing monetary stimulus is a Bloomberg report that “the European Central Bank will probably gradually wind down bond purchases before the conclusion of quantitative easing, and may do so in steps of 10 billion euros ($11.2 billion) a month, according to euro-zone central-bank officials”.

US stocks fall, vulnerable to rate rise and earnings disappointment

Stocks were mixed on Monday.

The S&P 500 fell 0.3 percent but the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.9 percent.

Despite the weak start to the fourth quarter for US stocks, Paul Eitelman, investment strategist for North America at Russell, said that in the event of a “significant selloff in the United States, we would want to buy that dip because we think the economic fundamentals are OK”, Bloomberg reported.

However, Eitelman also said that a muted outlook for earnings and rate hikes by the Federal Reserve could derail the market. “In our view the risks are asymmetrically skewed toward a more negative outcome,” he said.

Indeed, USA Today reported that Wall Street analysts now see third-quarter earnings shrinking 0.5 percent.

“For stocks to trend to meaningfully higher levels you need to see earnings move appreciably higher,” says Terry Sandven, chief equity strategist at US Bank Wealth Management.

“The market is vulnerable to a surprise rise in rates or a major earnings disappointment,” says Nick Sargen, chief economist at Fort Washington Investment Advisors.

After gain in third quarter, US stocks could go higher still in fourth

US stocks had a good third quarter.

The S&P 500 rose 3.3 percent and now has a gain of 5.5 percent since the start of the year. The technology sector led the gains in the S&P 500 in the third quarter with a rise of 12 percent.

The gain in technology stocks is encouraging to Dan Morgan, portfolio manager at Synovus Trust Co. “It’s people looking for growth,” he said.

David Kelly, chief global strategist at JP Morgan Asset Management noted that cash and bonds are “paying nothing”. He said: “That makes me still an equity bull.”

Dennis Davitt, chief investment officer at Harvest Volatility Management, also expects the stock market to go higher in the fourth quarter, calling it the “pain trade”.

However, weak earnings could prove a drag on stocks.

“We’ve had weak profit growth for a while now, and equity multiples are pretty elevated,” said Ed Campbell, portfolio manager at QMA. “I wouldn’t be surprised to see us pull back a little bit here.”

Max Wolff, chief economist at Manhattan Venture Partners, cited poor earnings growth as a reason the stock market will “run out of steam” before New Year's Eve.

Stocks rebound with Deutsche Bank as risky financials look cheap

Markets were mixed again on Friday.

The S&P 500 rose 0.8 percent but the STOXX Europe 600 was flat and the Nikkei 225 tumbled 1.5 percent.

Markets have been driven by concerns over Deutsche Bank in recent days and it was no different on Friday. The German bank's stock fell 9 percent early in European trading but recovered to end up 6.4 percent after a report suggested that it was near a deal with US officials to reach a settlement related to its dealings in mortgage securities.

“The odds of a large hole in bank balance sheets are pretty minimal at this point,” said David Lefkowitz, senior equity strategist at UBS Wealth Management Americas.

However, Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management, said that “the eurozone banking system is still an overriding question”.

David Lebovitz, global market strategist for JPMorgan Asset Management, told CNBC that there “is a lot of headline risk right now” in financials but added that “the one pocket of value that is left is financials”.