Asian stocks rise but trade war concerns "will linger for a while"

Most major markets were closed on Friday.

In Asia, the Nikkei 225 rose 1.4 percent while the Shanghai Composite rose 0.3 percent.

"The initial market response to President Trump's proposed tariffs on China was an overreaction," Shane Oliver, head of investment strategy and chief economist at AMP Capital, wrote in a recent note. He expected China and the US to reach a negotiated solution such that the trade tariffs and investment restrictions "will ultimately be very modest, if at all".

However, he added that in the meantime, "market nervousness around this issue will linger for a while".

Markets rise but central bank tapering looms

Markets rose on Thursday.

The S&P 500 jumped 1.4 percent, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.6 percent.

Some analysts appear to be regaining confidence in the market.

“We believe the correction has likely run its course and is now working its jagged way back to breakeven,” said CFRA’s Sam Stovall.

“This is still a fundamentally sound economy, and the market is seeing ghosts where there aren’t any,” said CrackedMarket’s Jani Ziedins.

Thomas H. Kee Jr, founder of Stock Traders Daily, is more concerned.

Kee said that demand for global assets had been propped up by central banks. However, with central banks tapering their assets purchases, demand for assets have fallen.

“Looking ahead, when the Fed removes an additional $30 billion in April, it will get even worse,” he concluded.

Markets mixed again, “likely to remain explosively volatile”

Markets were again mixed on Wednesday.

The S&P 500 fell 0.3 percent and the Nikkei 225 plunged 1.3 percent but the STOXX Europe 600 rose 0.5 percent.

Analysts remain wary of possible continued volatility.

“Stock markets are likely to remain explosively volatile and wildly unpredictable amid the ongoing trade drama between the U.S. and China,” said Lukman Otunuga, research analyst at FXTM.

Markets mixed as US stocks erase Monday gains

Markets were mixed on Tuesday.

The Nikkei 225 surged 2.7 percent early in the day and the STOXX Europe 600 followed with a 1.2 percent gain.

However, US stocks plunged. The S&P 500 fell 1.7 percent while the Nasdaq Composite tumbled 2.9 percent.

Mark DeCambre at MarketWatch noted that the US stock market decline on Tuesday erased nearly all its gains on Monday. “That is not a good sign” he said.

Indeed, Michael Batnick, director of research at Ritholtz Wealth Management LLC, noted that big rallies like that on Monday “don’t usually occur in healthy markets”.

Markets mixed as US stocks rebound on news of China-US talks

Markets were mixed on Monday.

The S&P 500 surged 2.7 but the STOXX Europe 600 fell 0.7 percent and the Shanghai Composite fell 0.3 percent.

US stocks rallied amid reports that China and the US have quietly started negotiating to improve US access to Chinese markets.

Still, some traders did not find Monday's rebound convincing.

“Big positive moves in stocks tend to come after biggest down days, and today’s action looks like a technical bounce, just because markets were so weak for days,” said Mike Antonelli, equity sales trader at Robert W. Baird & Co.

However, Raymond James chief investment strategist Jeff Saut said that “the recent correction was overdone” and stocks can now resume their upswing.

Bear market and economic crisis loom

Barry Bannister, Stifel's head of institutional equity strategy who had predicted the S&P 500's drop earlier this year, thinks a bear market is coming, CNBC reported last week.

"Our models for the S&P 500 point to minimal price upside in 2018 and a bear market (-20%) in the coming year. What matters for investors is that any decline is likely to be unusually rapid and occur as a result of P/E compression, resulting from policy risks not weak GDP," Bannister wrote in a note.

"We're concerned the Fed's 2019-20 view grew more hawkish," he wrote. "We now expect deflationary policy errors to develop in 2018 to early 2019."

Indeed, the S&P 500 fell 2.1 percent on Friday to complete a 6 percent loss for the week and leaving it down 3.2 percent for the year to date.

However, while Bannister is wary of the impact of tighter monetary policy, the latest market declines appear to have been driven more by the prospect of a trade war after US President Donald Trump announced moves last week to implement tariffs on Chinese products.

Nobel Prize-winning Yale economist Robert Shiller warned that a trade war could lead to an "economic crisis".

Markets plunge amid trade war uncertainty

Markets fell on Friday.

The S&P 500 tumbled 2.1 percent, the STOXX Europe 600 fell 0.9 percent and the Nikkei 225 plunged 4.5 percent.

A CNBC report suggested that concerns about trade wars or other White House drama will be the market focus in the week ahead.

"It's a cumulative air of uncertainty with the escalation of trade tensions and the personnel turnover [at the White House], along with the signal that lower yields, higher oil prices are sending investors," said Julian Emanuel, chief equity and derivatives strategist at BTIG.

"The S&P 500 hit the 200-day right as the market closed, and it didn't have time to react there. You could either have a Black Monday-type day or not," said Scott Redler, partner with T3Live.com.

While Emanuel thought that "next week is potentially a quiet week", Patrick Kernan, principle with Cardinal Capital, said "the moves are going to be much more violent next week".

Markets plunge as trade war looms

Markets fell on Thursday.

The S&P 500 plunged 2.5 percent to close 8 percent below its all-time high and turning negative for the year.

Elsewhere, the STOXX Europe 600 tumbled 1.6 percent and the Shanghai Composite fell 0.5 percent.

Markets were rocked by an announcement that US President Donald Trump had instructed the office of the US Trade Representative to draw up a list of tariffs on Chinese products totalling up to US$60 billion.

China did not take long to respond. On Friday morning, China announced plans to impose tariffs on up to US$3 billion of US imports.

Investors are bracing for more market turmoil.

“I guess I wouldn't buy here,” said Jack Ablin, CIO at Cresset Wealth Advisors.

Compared to the market in February, Scott Redler, partner with T3Live.com, said: “Now the market feels worse.”

Markets fall as Fed raises rates

Markets fell on Wednesday.

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

Weighing on markets on Wednesday was the Federal Reserve monetary policy meeting, which concluded with a decision to raise the federal funds rate by 25 basis points to between 1.5 percent and 1.75 percent.

In its statement following the meeting, the Fed said “the economic outlook has strengthened in recent months” while noting that household and business fixed investment “have moderated from their strong fourth-quarter readings.”

Fed officials forcast three rate hikes this year, the same forecast as in December, but they increased the expected number of rate hikes over the following two years.

New Fed chairman Jerome Powell said at the press conference after the meeting that he thought some asset prices are high.

“In some areas, asset prices are elevated relative to their long run historical norms,” said Powell. Among these assets are equities and some commercial real estate prices but not housing.

Powell added that he did not see any significant risks in the current financial system.

Markets rebound but bull market may be entering late cycle

Markets mostly rose on Tuesday.

The Nikkei 225 fell 0.5 percent following the sell-off in the US on Monday but the S&P 500 rose 0.2 percent and the STOXX Europe 600 rose 0.5 percent.

The gains in the US were led by energy stocks as oil rose amid tensions between Iran and Saudi Arabia and concerns about Venezuelan crude production.

While stocks showed resilience on Tuesday after Monday's falls, fund managers appear to see the market as now being in the “late cycle” period.

“Cracks in the bull case are starting to emerge, with fund managers citing concerns over trade, stagflation and leverage,” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, following the release of the firm’s monthly global fund managers survey on Tuesday.

Markets fall as Facebook leads tech sell-off

Markets fell on Monday.

The S&P 500 plunged 1.4 percent, the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 0.9 percent.

Facebook plunged 6.8 percent amid an outcry over third-party access to its users' personal data. That led to a sell-off in other tech stocks as the Nasdaq Composite tumbled 1.8 percent.

In the meantime, Richard Perry, an analyst at Hantec Markets, said in a note: “Fears over trade tariffs and protectionism are never far away, whilst the Federal Reserve may be about to signal that an acceleration in its tightening program could be ahead.”

After nine-year bull run, US stock market expected to “push even higher”

CNBC reported that the bull market celebrated its ninth birthday on Friday.

It said that the bull run in the Dow Jones industrial Average is the longest ever and the greatest percentage gain since World War II while it is the S&P 500's second-largest and second-longest bull market ever.

“Assuming the Dow Jones industrial average can exceed its late-January high on March 9th or thereafter, this cyclical bull market will become the first one ever to last nine years,” said Doug Ramsey, chief investment officer at Leuthold Group. “Historically, cycle momentum highs are usually followed by a push to even higher price highs over the next several months.”

While political turmoil surrounding US President Donald Trump's administration is a risk factor, Lori Calvasina, head of equity strategy at RBC Capital Markets, told CNBC last week that it is “not enough to derail the bull case at this point”.

Markets rise as trade war uncertainty “lifted for now”

Markets were mostly higher on Friday.

The S&P 500 rose 0.2 percent and the STOXX Europe 600 rose 0.2 percent but the Nikkei 225 fell 0.6 percent.

“Upward momentum has started to further improve,” said Ivan Ip, an analyst at UOB Kay Hian.

“The fear that the U.S. and China would engage in a trade war weighed on stocks during the week, but that uncertainty has lifted for now,” said David Madden, market analyst at CMC Markets UK.

However, Lukman Otunuga, a research analyst at brokerage FXTM, cautioned that “stock markets still remain exposed to downside risks, as concerns heighten over escalating trade tensions”.

Markets mixed as positive economic trends seen raising interest rate and financial risks

Markets were mixed on Thursday.

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

A report on Thursday showed that initial US jobless claims declined by 4,000 to 226,000 in the seven days ended 10 March, near a 50-year low, but this and other recent positive economic data failed to excite some analysts.

“We continue to see positive trends in economic fundamentals but valuations that suggest a lot of good news has already been priced in,” wrote Bruce Bittles, chief investment strategist at Baird, in a note to investors.

“Economic releases, especially leading indicators, still point to an expanding economy, not only in the U.S., but also in Europe and China. But we are closer to the end of the cycle,” said Maris Ogg, president at Tower Bridge Advisors.

Indeed, there are concerns that the world economy is turning too hot.

“When lots of countries are growing strongly, the global economy is at its most vulnerable, thanks to heightened interest rate and financial risks,” said Stephen King, senior economic adviser at HSBC.

Markets fall on renewed fears of trade war

Markets fell on Wednesday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 fell 0.2 percent and the Nikkei 225 fell 0.9 percent.

Stocks in Europe initially traded higher after European Central Bank President Mario Draghi said its bond-buying program will likely continue if underlying inflation in the region remains subdued.

However, stocks turned down as fears of a potential trade war resurfaced after President Donald Trump announced that his administration will impose tariffs to trim the US trade deficit with China.

With upcoming personnel changes in the Trump administration, Art Hogan, chief market strategist at Wunderlich Securities, suggested that policy mistakes and trade protectionism are concerns.

“Will the new people be more protectionist?” he asked. “Right now the economy and earnings are solid, but are we going to make a trade or policy mistake that could slow earnings or lead into a recession that will turn this market over?”

Markets fall after Tillerson exit but no major sell-off expected

Markets mostly fell on Tuesday.

The S&P 500 fell 0.6 percent and the STOXX Europe 600 fell 1.0 percent. However, the Nikkei 225 rose 0.7 percent earlier in the day.

A report on Tuesday showed that the US consumer price index rose 0.2 percent in February, down from 0.5 percent in January.

Karyn Cavanaugh, senior market strategist at Voya Financial, said that the report showed that “inflation is not too hot and not too cold”. She added: “Combined with the fact that there is still slack in the labor market we don’t worry too much about inflation.”

The announcement that US President Donald Trump has decided to replace Secretary of State Rex Tillerson had little lasting impact on the market.

“Investors got used to the game of musical chairs in the White House and realize that it’s not a true economic risk,” said Cavanaugh.

Indeed, most analysts think that the personnel shake-ups in the Trump administration will not result in a major market sell-off unless a full-blown trade war breaks out.

“If you look historically, political headlines tend to bother people for about 15 minutes, and the market tends to move on. Even concerning political headlines tend to not roil the markets for sustained periods in general,” said Jonathan Golub, Credit Suisse chief US market strategist.

Markets mixed but “worst of pullback may be behind us”

Markets were mixed on Monday.

In the US the S&P 500 dipped 0.1 percent but the Nasdaq Composite rose 0.4 percent to a record high.

Elsewhere, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 surged 1.7 percent.

“Global markets continue to advance after Friday’s U.S. employment numbers effectively gave the green light to investors to buy equities,” said Rebecca O’Keeffe, head of investment at Interactive Investor, in a note. “Goldilocks appears to be alive and well.”

“The underlying macroeconomic backdrop is still pretty intact, and stocks continue to be supported by good earnings,” said Michael Mullaney, director of global markets research at Boston Partners. However, he added: “I can’t think of an asset class that’s inexpensive, so any values out there are relative.”

Indeed, Ryan Vlastelica at MarketWatch reported that Morgan Stanley thinks that “it will prove difficult for the S&P 500 to trade outside of the 16-18x forward 12 month [price-to-earnings] range for the remainder of 2018” and that the high hit in January and the low reached in February “about established the high and low end of valuations for U.S. equity markets” for the rest of the year.

Still, Vlastelica noted “improvements in market breadth and other technical factors” for the S&P 500. He quoted Sameer Samana, global equity and technical strategist at Wells Fargo Investment Institute, as suggesting that “the worst of the pullback may now be behind us”.

BIS: Despite market turbulence, minimal signs of stress

The Bank for International Settlements released its latest quarterly report on Sunday.

In the report, the BIS noted: “Stock markets across the globe underwent a sharp correction in late January and early February.”

“A sharp increase in long-term US bond yields heralded the stock market stress,” the BIS added. “A firming inflationary outlook was at the root of the increase in US long-term yields during the period under review.”

However, the BIS did not appear too concerned, at least for the United States.

“Despite equity market turbulence and higher yields, financial conditions remained very accommodative in the United States, with minimal signs of overall stress,” it concluded.

Still, in a special feature, the BIS said that its latest set of early warning indicators of banking crises showed that “Canada, China and Hong Kong stand out, with both the credit-to-GDP gap and the DSR flashing red”.

Markets rise after US employment report

Markets rose on Friday.

The S&P 500 surged 1.7 percent, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.5 percent.

Investor sentiment was boosted by a report showing that US employment rose 313,000 in February.

“If you had tried to concoct an event that would be good news for the economy and good for the markets, you would come up with the kind of jobs report that we got today: solid headline number with only moderate wage growth,” said Kristina Hooper, chief global market strategist at Invesco.

Markets rise but JPMorgan says 40 percent fall possible

Markets rose on Thursday.

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

Investors were somewhat relieved after President Donald Trump signed a proclamation to impose tariffs on imported steel and aluminum but exempted Canada and Mexico while allowing other countries to negotiate exclusions.

“We think the likelihood of a full trade war is low, and that any market dips are a buying opportunity,” said Abe Sheikh, co-chief investment officer of Cougar Global.

Still, JPMorgan Chase & Co. executive Daniel Pinto warned that equity markets could fall as much as 40 percent in the next two to three years.

Markets mixed, high yield bond market flashes warning

Markets were mixed on Wednesday.

The S&P 500 fell less than 0.1 percent and the Nikkei 225 fell 0.8 percent but the STOXX Europe 600 rose 0.4 percent.

News late Tuesday of the resignation of top White House economic adviser Gary Cohn renewed concerns of a trade war.

Brad McMillan, chief investment officer for Commonwealth Financial Network, wrote in a note that Cohn's resignation “introduces more uncertainty into economic policy and raises the chance of policy actions such as tariffs”.

BlackRock Investment Institute's multi-asset investment strategist Terry Simpson said that tariffs would be a “game changer”. Speaking on CNBC, he said: “Let's make no mistake about it, tariffs are bad economic policy.”

However, Matt Maley, equity strategist at Miller Tabak, thinks that the game may already have changed.

In an article for CNBC, Maley noted that the high-yield corporate bond exchange-traded fund, the HYG, peaked five to six months before the stock market topped out in January, and since then, “the high-yield market has not behaved well at all”.

“This is quite reminiscent of what took place in 2015, when the high-yield market topped out and began rolling over five months before the stock market began its 14 percent decline into early 2016,” he wrote.

Maley concluded that if the HYG breaks beneath its February lows and puts in yet another “lower low”, it would be a “big negative for this asset class” and for the stock market.

Market danger “bigger than ever before”

Markets rose on Tuesday, with the S&P 500 rising 0.3 percent as concerns over a potential trade war receded somewhat.

George Schultze, a hedge-fund manager and founder of Schultze Asset Management, said that “it seems like investors are starting to suspect that Trump’s tariff announcement could just be an opening gambit in his renegotiations over Nafta, so the threat may not be as bad as some are fearing”.

Still, former US presidential candidate Ron Paul thinks that the market is at risk even if Trump backs away from his tariff threat.

“If the Fed continues on the things that they are sort of planning on doing, it's going to be a calamity,” he said on CNBC on Monday. “I think we have a greater distortion and a financial danger sitting out there bigger than ever before.”

Markets rise in “technical bounce”

Markets were mostly higher on Monday.

The S&P 500 jumped 1.1 percent and the STOXX Europe 600 rose 1.0 percent. Earlier, though, Asian markets fell, with the Nikkei 225 declining 0.7 percent.

While Italy's FTSE MIB fell 0.4 percent, investors in Europe mostly shrugged off the country's Sunday election result, where no one party won an outright majority, setting the stage for political instability.

In contrast to Italy, in Germany, the Social Democrats voted to support a coalition government with Chancellor Angela Merkel's conservatives after five months of uncertainty.

“I see today’s rebound as more of a technical bounce,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

“We still think strong growth and robust earnings will deliver good equity returns, but the recent volatility is a sign of things to come,” said James Barty, head of global cross asset and European equity strategy at Bank of America Merrill Lynch.

Stock market bounce falters

The S&P 500 fell 2 percent last week. Worries over a potential trade war after President Donald Trump said that he would impose tariffs on steel and aluminum imports added to ongoing concerns over inflation and higher interest rates.

The decline in US stocks came after two weeks of rebound over which the S&P 500 rose 4.9 percent.

Indeed, the S&P 500 had started last week positively, jumping 1.2 percent on Monday to come within 3.25 percent of its 52-week intraday high.

That rebound, however, had not been enough to convince some analysts that the pullback in stocks is over.

Matt Maley, equity strategist at Miller Tabak, wrote on CNBC early last week that the “bounce has been nothing more than what we typically see on the heels of a miniature 'crash'”.

John Hussman, president of Hussman Investment Trust, said in his monthly commentary later in the week that in the initial break from a speculative bubble, “the first leg down tends to be extremely steep, and a subsequent bounce encourages investors to believe that the worst is over”.

However, Hussman said that market internals are unfavourable and with market conditions “overvalued, overbought, overbullish”, expects the S&P 500 “to lose about two-thirds of its value over the completion of the current market cycle”.

Markets mixed as US stocks rebound

Markets were mixed on Friday.

The Nikkei 225 dived 2.5 percent and the STOXX Europe 600 plunged 2.1 percent.

However, the S&P 500 rose 0.5 percent, erasing an early decline.

“While trade and inflation are big concerns, there are also a lot of good things on the market’s mind,” said Matt Forester, chief investment officer of BNY Mellon’s Lockwood Advisors. “We’ve been seeing a lot of good data and we’re also getting very attractive earnings growth.”

Markets tumble as Trump announces tariffs

Markets fell sharply on Thursday.

The S&P 500 plunged 1.3 percent, the STOXX Europe 600 tumbled 1.3 percent and the Nikkei 225 dived 1.6 percent.

The sharp fall in the US stock market was widely attributed to President Donald Trump's announcement that he would impose tariffs on steel and aluminum imports, raising concerns of protectionism and trade wars.

However, sharp falls earlier in Europe and Asia indicate that market sentiment was still reeling from interest rate fears.

“There has been a real negative shift in market sentiment since the Jerome Powell testimony a couple of days ago. Suddenly not only three, but perhaps even four hikes need to be priced in by the market, and this is impacting across global markets,” said Hantec Markets analyst Richard Perry in a note.

Markets fall, S&P 500 ends winning streak

Markets fell on Wednesday.

The S&P 500 fell 1.1 percent, the STOXX Europe 600 fell 0.7 percent and the Nikkei 225 tumbled 1.4 percent.

“Valuations are high for all financial assets, and the trick for the Fed will be to get to a normalized rate environment on a slow enough bypass that we don’t hit any speed bumps along the way,” said James Meyer, chief investment officer at Tower Bridge Advisors.

With the fall on Wednesday, the S&P 500 ended the month down 2.6 percent on a total-return basis, its first such decline since October 2016, and 3.7 percent on a price basis, its first negative month of the past 11.