Saturday, 30 June 2018

Markets rise, “reasonable prospect” of more gains in second half of year

Markets rose on Friday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 rose 0.2 percent.

“As we look into the second half of 2018, I believe that the economy will continue to grow, with healthy employment conditions, rising interest rates, and the reasonable prospect of rising markets,” said Brad McMillan, chief investment officer at Commonwealth Financial Network, in a note.

“The consequences of U.S. monetary policy normalization, moderately higher inflation and U.S.-China trade tensions top our list of worries, but do not change our broadly optimistic view on world growth. We are mindful, however, that the combination of worsening trade outcomes, higher oil prices and a hawkish Fed may dent confidence further in 2018 and beyond,” Standard Chartered Global Chief Economist David Mann said in a note.

Friday, 29 June 2018

Markets mixed, Dow also sending mixed signals

Markets were mixed on Thursday.

The S&P 500 rose 0.6 percent but the STOXX Europe 600 fell 0.8 percent.

Earlier in Asia, the Shanghai Composite fell 0.9 percent but the Hang Seng rose 0.5 percent while the Nikkei 225 was little changed.

The Shanghai Composite closed 20 percent below its peak on Tuesday, confirming a bear market, but US stocks have been more resilient, staying within correction territory.

Still, Schaeffer's senior quantitative analyst Rocky White noted that the Dow Jones Industrial Average broke below its 200-day moving average on Monday.

“If history is a guide, based on this signal, stocks could struggle going forward,” he said.

However, Mark Hulbert at MarketWatch has an opposing view.

Hulbert noted that while selling stocks after the Dow breaks below its 200-day moving average may have been a good strategy previously, this has not been true recently.

“You would have made more money over the last 25 years by treating the breaking of the 200-day moving average as a reason to increase stock exposure rather than reduce it,” he said.

Thursday, 28 June 2018

Stock outflows rise as trade war risks “full-blown recession”

Markets were mixed on Wednesday.

The S&P 500 fell 0.9 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 fell 0.3 percent.

The S&P 500 opened higher but subsequently reversed to close below its 50-day moving average amid continued concerns over trade tensions.

Dan Wantrobski, director of research at Janney Montgomery Scott, said that “we could see another correction cycle” and that while he did not expect a structural downturn, “tariffs and trade wars could exacerbate the weakness”.

Indeed, analysis by economists at Bank of America Merrill Lynch showed that “a major trade war would push the economy towards a full-blown recession”.

Meanwhile, some investors are already heading for the exit. According to the Investment Company Institute, stock outflows hit a three-month high last week.

Wednesday, 27 June 2018

Markets stable as buying opportunity seen amid trade tension

Markets were mostly little-changed on Tuesday.

The S&P 500 rose 0.2 percent while the STOXX Europe 600 and the Nikkei 225 were flat.

Trade tension remained a concern on Tuesday but some analysts are optimistic.

“Skittish buying interest returns to risky assets during a pause in the barrage of new U.S. trade restrictions,” said Ken Odeluga, market analyst at City Index, in a note.

“This is the beginning of an opportunity to buy equities at a discount,” said Chris Zaccarelli, chief investment officer at the Independent Investor Alliance.

Liz Young, senior investment strategist at BNY Mellon Investment Management, noted that “the economy is still strong, data is moving in the right direction, and we don’t see this as the issue that will turn things around”.

Byron Wien told CNBC on Tuesday that while the S&P 500 could test the February lows, he sees the index rallying thereafter “because earnings are coming through very powerfully”.

Tuesday, 26 June 2018

Markets fall as Trump threatens escalation of trade war

Markets fell on Monday.

The S&P 500 tumbled 1.4 percent, the STOXX Europe 600 plunged 2.0 percent and the Nikkei 225 fell 0.7 percent.

Markets fell after US President Donald Trump wrote on Twitter insisting that trade partners remove their trade barriers “or be met with more reciprocity by the U.S.”.

“You can now make the case that we’re in a trade war. The language has gotten bad enough, companies are saying the issue is impacting them, and there’s a sense that the numbers and scope of the issue are ratcheting up,” said Willie Delwiche, investment strategist at Robert W. Baird.

Gina Sanchez, CEO of Chantico Global, told CNBC last Friday that a trade war could reduce US GDP by 0.3 to 0.4 percent.

Monday, 25 June 2018

Despite last week's fall, underlying trend for stocks appears bullish

Markets fell last week. The S&P 500 fell 0.9 percent and the STOXX Europe 600 fell 1.1 percent.

Paul Hickey, co-founder of Bespoke Investment Group, told CNBC last week that the underlying trend for the stock market remains bullish.

Pointing to the technical indicator called the advance/decline line, he noted that the cumulative A/D line has been making a series of new highs. “That tells us that there's an underlying trend in the market where investors are acquiring stocks,” he said.

He added that this holds true for the S&P 500, the Nasdaq and the Russell 2000.

He said that “what all three are telling us is that the rally isn't just being driven by a few stocks”.

In a Forbes article, technical analyst Tom Aspray also looked at an advance/decline indicator, calling it “the most important warning of a bear market”. Aspray focused on the monthly NYSE A/D line and found that it too has been making new highs.

According to Aspray, other things to watch out for as indicators of a coming bear market are peaks in consumer sentiment and leading indices of economic indicators.

In the meantime, Aspray suggested that while trade threats could trigger some more profit taking this week, “this should be a buying opportunity for those without long positions in equities”.

Saturday, 23 June 2018

Markets rise, equity share of household assets nears all-time high

Markets were mostly higher on Friday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 jumped 1.1 percent but the Nikkei 225 fell 0.8 percent.

Oil rose after OPEC members came to an agreement on production. West Texas Intermediate crude surged 4.6 percent and Brent rose 3.4 percent.

Meanwhile, Mark Hulbert at MarketWatch said that the stock market is showing signs of a long-term top.

“The share of household financial assets currently invested in equities is already close to an all-time high,” he said. “It is far more likely to fall in coming years than it is to stay at its lofty level, much less go higher.”

Hulbert added that the S&P 500's average annualised 10-year return was 16.4 percent following the 20 percent of times the equity share of household assets was lowest and only 3.9 percent following the 20 percent of readings in which the equity share was highest.

Friday, 22 June 2018

Markets fall as trade concerns drag on

Markets mostly fell on Thursday.

The S&P 500 fell 0.6 percent and the STOXX Europe 600 fell 0.9 percent.

Earlier in the day, Asian stocks were mixed. The Nikkei 225 rose 0.6 percent but the Shanghai Composite fell 1.4 percent.

Trade issues remained a concern for investors.

“We think the trade issue is going to continue to escalate,” said Jeff Donlon, managing director of the global strategies group at Manning & Napier, “and the longer this drags on, the more risk will grow and the more the issue should be factored into expectations.”

However, Shane Oliver, chief economist at AMP Capital, thinks that negotiations will lead to a resolution before the tariffs are implemented. “Share markets would rebound in response to this,” he said.

Thursday, 21 June 2018

Markets bounce, may hit “air pocket” over summer, “day of reckoning” next year

Markets rose on Wednesday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 jumped 1.2 percent.

“This looks like a relief rally,” said Lance Humphrey, executive director of global multi-assets at USAA.

Humphrey said trade issues are still a concern. “If tariffs continue to rise, that is a negative, and it could derail some of the confidence,” he said.

Jasper Lawler, head of research at London Capital Group, said: “Any fresh news of retaliation could see traders snatch risk back off the table quickly.”

However, David Spika, president of GuideStone Capital Management, does not think a trade war is the biggest threat to the stock market. “The bigger concern should be the impact of central bank tightening,” he told CNBC on Tuesday.

Spika said that “central bank tightening will have a negative impact” for the market and sees a “day of reckoning” next year.

In the meantime, though, Federated Investors' Phil Orlando told CNBC that he expects the market to hit an “air pocket” over the summer months.

However, he added that he expects a “very strong fourth quarter rally into year-end”.

Wednesday, 20 June 2018

Markets tumble on trade war fears, “time for a major correction”

Markets fell on Tuesday.

The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.7 percent

The biggest losses were in Asia. The Shanghai Composite plunged 3.8 percent and the Nikkei 225 tumbled 1.8 percent as investors became increasingly concerned about a trade war between the US and China after US President Donald Trump indicated his administration was looking to impose further tariffs on China.

“This latest escalation, if it materialized, would mean significant economic impact in China, the U.S. and elsewhere at a sensitive time for the global economy,” said Louis Kuijs, head of Asia economics at Oxford Economics, in a note.

Billionaire investor Jim Mellon thinks that the trade tension is coming at a bad time for the stock market.

He said that the trade tension is “certainly having an effect on the market, but the market is reacting because it's already far too expensive.”

“The U.S. is selling at 32 times cyclically adjusted price-to-earnings (PE) ratio, which is an all-time high,” he noted. “Surely it's time for a major correction anyway.”

Tuesday, 19 June 2018

Markets fall on trade concerns but breadth suggests strength ahead

Markets fell on Monday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.8 percent.

Markets were weighed down by concerns of a trade war between the US and China.

“If the current trade skirmish with China were to escalate into a full-blown trade war, it could potentially have a materially negative impact on corporate earnings growth,” said Alec Young, managing director of global markets research at FTSE Russell.

The Russell 2000 did rise 0.5 percent to a record high on Monday. Small-cap stocks are perceived as being more insulated from trade issues.

Indeed, Ryan Vlastelica at MarketWatch noted that market breadth has held up in the US stock market, and that could indicate stock market strength ahead.

Monday, 18 June 2018

Paulsen: Economic growth “too good”

Last week, the Federal Reserve raised interest rates and the European Central Bank announced a tapering of its asset-purchase programme.

Markets were largely indifferent to the announcements. The S&P 500 was flat last week and the STOXX Europe 600 rose 1 percent.

However, Jim Paulsen, chief investment strategist at The Leuthold Group, suggested that interest rate increases could weigh on the stock market.

“A big part of this stock market, when it did the best was when Main Street was not doing the best. We had a lot of excess slack, and you could grow the economy and not create any cost pressures, any interest rate pressures, any inflation pressures,” Paulsen told CNBC last week.

Now, economic growth is “too good”, he said, and is bringing pressure on interest rates, costs and profit margins. “It forces the Fed to restrict the money supply and liquidity conditions,” he added.

Saturday, 16 June 2018

US-China trade tension shakes markets

Markets mostly fell on Friday.

The S&P 500 fell 0.1 percent, the STOXX Europe 600 fell 1.0 percent but the Nikkei 225 rose 0.5 percent.

Oil prices fell 3 percent on Friday after Russia and Saudi Arabia indicated they might increase output at next week’s OPEC meeting.

Markets were hit by news that the US would impose tariffs on Chinese imports, a move which sparked immediate retaliation from Beijing.

Elsa Lignos, global head of FX strategy at RBC Capital Markets, said that the US move “shouldn’t come as a surprise, given how well-flagged these tariffs have been” but added that they “could still cause some risk aversion”.

However, US stocks on Friday mostly recovered from early falls related to the trade tension. Robert Pavlik, chief investment strategist at SlateStone Wealth, said: “The market could be in a position to give something back if this persists, but unless things really escalate, I don’t think that will last.”

Friday, 15 June 2018

Markets rise on ECB taper plans but liquidity drain a risk

Markets mostly rose on Thursday.

The Nikkei 225 fell 0.9 percent early on Thursday but the STOXX Europe 600 jumped 1.2 percent and the S&P 500 rose 0.3 percent.

Markets mostly reacted positively to the outcome of the European Central Bank meeting on Thursday.

The ECB announced after the meeting that it will halve its bond buys to 15 billion euros a month from October through the end of December before ceasing. It will reinvest principal payments from maturing securities “for an extended period after the end of the net asset purchases” while keeping interest rates at their present all-time lows “at least through the summer of 2019”.

However, Thomas H. Kee Jr, founder of Stock Traders Daily, warned that the unwinding of stimulus from central banks presents risks to the stock market.

Kee said that the Fed and ECB will, in total, “begin to drain more liquidity from the financial system in July on a monthly basis than it was infusing on a monthly basis all of last year”.

“If stimulus policies served to bolster asset prices, the opposite will happen as they continue to remove liquidity,” he said. “A 40% correction in the S&P 500 is possible, and we expect it to be worse in the higher-beta markets.”

Thursday, 14 June 2018

Markets mixed as Fed raises rates, US economy getting “temporary” boost from fiscal policy

Markets were mixed on Wednesday.

The S&P 500 fell 0.4 percent but the STOXX Europe 600 rose 0.2 percent. Earlier in Asia, the Nikkei 225 rose 0.4 percent but the Shanghai Composite fell 1.0 percent.

At its monetary policy meeting, the Federal Reserve decided to raise its benchmark federal funds rate by a quarter percentage point to a range of 1.75 to 2 percent.

“Today’s announcement, including updates to the post-meeting statement and to policymakers’ forecasts for growth, labor markets, inflation, and interest rates, reinforce our expectation that the FOMC will raise the funds rate a total of 4 times in 2018, and additional times in subsequent years,” wrote Ken Matheny, executive director US Economics at IHS Markit.

Alec Young, FTSE Russell managing director, said that “the economy has gotten better” and that the Fed decision was “a validation of the recovery”.

However, JP Morgan strategist David Kelly told CNBC that the economy will slow in the second half of 2019 and 2020.

“Fiscal policy is sort of at its maximum accelerated right now,” he said, suggesting that the rising economic activity being seen is just a “sugar rush” and is “probably temporary”.

Wednesday, 13 June 2018

Markets mixed, bull party “still going”

Markets were mixed on Tuesday.

The S&P 500 rose 0.2 percent and the Nikkei 225 rose 0.3 percent but the STOXX Europe 600 slipped 0.1 percent.

Investors were mostly unmoved by the signing of an agreement between US President Donald Trump and North Korean leader Kim Jong Un to work towards complete denuclearisation of the Korean Peninsula after their talks in Singapore.

Craig Erlam, senior market analyst at Oanda, noted that “the agreement still lacks some detail and given the unpredictable and volatile nature of the two leaders, there’s no guarantee that it won’t run into significant difficulties”.

Investors' attention is likely to be focused on central banks for the rest of the week. The Federal Reserve meets on Tuesday and Wednesday, with markets expecting an interest-rate hike as an outcome. On Thursday, the European Central Bank is expected to announce the timing for unwinding its bond buying. The Bank of Japan will release a policy update on Friday.

Meanwhile, investors appear to be showing renewed love for US stocks. A Bank of America Merrill Lynch survey for June showed that investors are overweight US stocks for the first time in 15 months.

Maneesh Deshpande, Barclays' new US stock strategist, appears to endorse the bullish view of US stocks.

“It's late, but the party's still going,” he said in a note.

Tuesday, 12 June 2018

Markets shrug off G-7 outcome, hopeful over Trump-Kim talks

Markets rose on Monday.

The S&P 500 edged up 0.1 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 rose 0.5 percent.

Investors mostly shrugged off the disappointing outcome of the G-7 meeting over the weekend, where US President Donald Trump withdrew his support for the group’s communiqué after Canadian Prime Minister Justin Trudeau criticised US tariffs on Canadian metals.

Accendo markets analysts Mike van Dulken and Artjom Hatsaturjants noted that “there is more optimism about the U.S. president’s meeting with North Korean leader Kim Jong Un in Singapore”, suggesting that “meaningful discussions” about denuclearisation on the Korean peninsula could improve the global mood.

The FTSE MIB surged 3.4 percent after Italian Economy Minister Giovanni Tria said the country’s new government is committed to the euro.

Monday, 11 June 2018

US stocks could “progress” even as G7 talks fail

US stocks rose last week. The Dow Jones Industrial Average rose 2.8 percent, its biggest weekly gain since March. The S&P 500 rose 1.6 percent and the Nasdaq rose 1.2 percent, both posting their third consecutive weekly gain.

Markets may start this week in sombre mood though after the Group of Seven meeting in Canada over the weekend failed to resolve a trade dispute between the US and the rest of the group.

US President Donald Trump left the meeting early, warning Canada, Japan and Europe that “the gig is up”.

However, MarketWatch reported that Guild Investment Management thinks that US stocks could see more gains.

“U.S. trade policy will produce results; over the summer there will be volatility, and eventually, progress,” said Monty Guild and his team of strategists in a note.

“The pessimist case for slow growth in the U.S. has been substantially wrong so far, and we believe it will continue to be wrong,” they added.

Saturday, 9 June 2018

Markets mixed as G-7 leaders meet

Markets were mixed on Friday.

The S&P 500 rose 0.3 percent but the STOXX Europe 600 fell 0.2 percent and the Nikkei 225 fell 0.6 percent.

With the Group of Seven leaders headed for a meeting in Canada over the weekend, Jasper Lawler, head of research at London Capital Group, said that “no one wants to play ball with Trump”, with many “promising tit-for-tat retaliation”. He warned that “the collective group of leaders could use this as an opportunity to make their point clearer, turning the event into a reason to take risk off the table”.

In contrast, Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, was encouraged by the advance in stocks in the US on Friday and said that “we’re in a war of words, but not a trade war”.

Friday, 8 June 2018

Markets mixed as Brazilian stocks plunge

Markets were mixed on Thursday.

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

The MSCI Emerging Market Index fell 0.3 percent. Brazil's Bovespa fell some 6.5 percent at its low point before recovering a bit while the real plummeted to its weakest in more than two years.

The yield on US 10-year Treasuries fell five basis points to 2.92 percent as investors fled to safer assets.

Chad Morganlander of Washington Crossing Advisors thinks that the selloff in emerging markets will only get worse.

Thursday, 7 June 2018

Markets rise as ECB seen moving towards QE exit

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.9 percent and the Nikkei 225 rose 0.4 percent. However, the STOXX Europe 600 was flat.

Comments by two ECB officials on Wednesday indicating that the central bank will start intense discussions about winding down its massive bond-buying program when policy makers meet next week was a focus of attention.

Neil Wilson, chief market analyst at, suggested that “volatile Italian bond yields and softer economic data is not going to dissuade the ECB from walking the fine line towards the exit”.

However, some analysts remain optimistic.

“We’re still in the stage of the economy where rising rates reflect stronger economic growth, as opposed to central banks trying to combat inflation,” said Kate Warne, investment strategist at Edward Jones.

Wednesday, 6 June 2018

Markets mixed but tech stocks rally on “strong fundamentals”

Markets were mixed on Tuesday.

In the US, the S&P 500 rose 0.1 percent while the Nasdaq Composite rose 0.4 percent to a second consecutive record close. However, the Dow Jones Industrial Average fell 0.1 percent.

Elsewhere, the Nikkei 225 rose 0.3 percent but the STOXX Europe 600 fell 0.3 percent.

European stocks were dragged down by a 1.2 percent tumble in the FTSE MIB as Giuseppe Conte, Italy’s new prime minister, outlined “radical change” from the country’s new coalition government.

However, in line with the pattern in the US, the STOXX Europe 600 Technology Index jumped 1.5 percent to hit its highest since 2001.

“The fact of the matter is that investors are realizing that the tech sector is the sector they can count on for solid earnings growth,” said Lindsey Bell, investment strategist at CFRA.

Indeed, Goldman Sachs says that there is no bubble in tech stocks as this time is different from previous bubbles.

“Unlike the technology mania of the 1990s, most of this success can be explained by strong fundamentals, revenues and earnings rather than speculation about the future,” strategists Peter Oppenheimer and Guillaume Jaisson wrote in a note. “Given that valuations in aggregate are not very stretched, we do not expect the dominant size and contribution of returns in stock markets to end any time soon.”

Tuesday, 5 June 2018

Markets rise, investors especially bullish on US

Markets rose on Monday.

In the US, the S&P 500 rose 0.5 percent and the Nasdaq Composite rose 0.7 percent to a record high.

Elsewhere, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 jumped 1.4 percent.

“Despite threats and recriminations from China and other global leaders, investors are actively choosing to ignore the trade tariff tensions, with global equity markets rising,” said Rebecca O’Keeffe, head of investment at Interactive Investors.

Investors appear particularly bullish on US stocks. According to estimates compiled by FactSet, analysts are predicting earnings growth of 18.9 percent in the second quarter and a continuation of double-digit growth for the rest of the year.

“Investors are looking at the broader data from the US and saying, 'We're still doing okay,' -- especially compared to the rest of the world,” said Paul Nolte, portfolio manager with Kingsview Asset Management.

In the meantime, though, Europe is appearing less attractive after the political turmoil last week.

In a report on Monday, Europe-based global equity strategist Mislav Matejka and his team said that “global investor flows are likely to stay on the sidelines as Italy will remain an issue in the background, with the new populist government being potentially quite confrontational”.

The team reduced their rating on euro zone stocks to neutral from overweight while raising their US allocation to overweight from neutral.

Monday, 4 June 2018

Hussman: Economy a Ponzi scheme, market faces open trap door

John Hussman, president of Hussman Investment Trust, thinks that the current economic system is a Ponzi scheme.

In his latest monthly commentary, he wrote that a Ponzi economy involves “the constant creation of low-grade debt in order to finance consumption and income shortfalls among some members of the economy, using the massive surpluses earned by other members of the economy”.

“This is where we find ourselves, once again,” he said.

Hussman said that his measures of stock market internals are “unfavorable” and his most reliable measures of valuation are at “offensive extremes”.

As a result, there is “an open trap door” in the market and he expects the S&P 500 to reach 1,100 or lower over the completion of this cycle and to post negative total returns over the coming 12-year horizon.

He concluded: “The debt burdens, speculation, and skewed valuations most responsible for today’s lopsided prosperity are exactly the seeds from which the next crisis will spring.”

Saturday, 2 June 2018

Markets rise on “goldilocks jobs report”, end of Italian political deadlock

Markets were mostly higher on Friday.

The S&P 500 jumped 1.1 percent while the STOXX Europe 600 rose 1.0 percent. Asian markets were mixed.

US stocks were boosted by a strong employment report. A report on Friday showed that the US economy added 223,000 new jobs in May and the unemployment rate fell to an 18-year low of 3.8 percent.

Lisa Erickson, head of traditional investments for US Bank Wealth Management, called the report a “goldilocks jobs report” while Wouter Sturkenboom, senior investment strategist at Russell Investments, said the jobs data “reaffirm the Fed’s plan to raise interest rates twice more this year — one in June and one in September, with a 50/50 chance of third hike in December”.

In Europe, politics were again in focus.

Late on Thursday, populist parties the 5 Star Movement and the League agreed to form a coalition government led by Giuseppe Conte, a lawyer and academic, as prime minister, and the latter was sworn in on Friday, ending the political deadlock.

Meanwhile, Spanish lawmakers ousted Mariano Rajoy as prime minister in a vote of no confidence after corruption convictions for senior members of the latter’s party. Pedro Sánchez, leader of the Socialist Party, will replace Rajoy.

In Asia, MSCI's addition of 230 Chinese stocks to some of its global benchmark indices on Friday met with a muted reaction, with the Shanghai Composite Index falling 0.7 percent.

Friday, 1 June 2018

Markets fall as US tariffs reignite trade war fears

Markets mostly fell on Thursday.

The S&P 500 fell 0.7 percent and the STOXX Europe 600 fell 0.6 percent. Earlier in the day, though, the Nikkei 225 rose 0.8 percent.

US and European stocks fell after the US decided to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico, reigniting fears of a global trade war.

Art Hogan, chief market strategist at B Riley FBR, suggested that investors had initially thought the tariff threats by the US and threats of retaliation by trade partners earlier this year would likely be followed by negotiated agreements.

But “now it feels like we’re moving backwards not forwards,” Hogan said.