Tuesday, 23 April 2019

Markets “in a happy place” amid “cheap and plentiful money”

Markets were mixed on Monday.

The S&P 500 rose 0.1 percent and the Nikkei 225 rose 0.1 percent but the Shanghai Composite tumbled 1.7 percent. Major European stock markets were closed for a holiday.

Oil prices surged after the US declared it would end waivers for countries to import Iranian oil. West Texas Intermediate crude surged 2.7 percent and Brent jumped 2.9 percent.

“With the S&P 500 forward PE (price-to-earnings) ratio sitting near highs of 16.8 and the index 1.2% below its historic record, investors need convincing results to keep buying equities at their current levels,” said Hussein Sayed, chief market strategist at FXTM.

Chinese stocks fell after the Politburo said on Friday that the government would continue to implement a proactive fiscal policy and a prudent monetary policy that is neither too tight nor too loose. Shen Zhengyang, an analyst at Northeast Securities, said that investors interpreted that to mean that “the government will suspend the easing of monetary policy”.

However, Stephen Innes, head of trading at SPI Asset Management, said that a “positive confluence of events continues to support risk sentiment” and that the markets “should remain in a happy place provided the Federal Reserve stays on the dovish course as indeed cheap and plentiful money has a most soothing effect on equity investors”.

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