Markets mixed, US first quarter GDP revised down

Markets were mixed on Thursday.

The S&P 500 rose 0.2 percent while the STOXX Europe 600 rose 0.4 percent but the Nikkei 225 fell 0.3 percent.

The US Commerce Department revised down its estimate of first quarter GDP growth to a 3.1 percent annualised rate from 3.2 percent.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said that the downward revision was “widely expected, but core personal consumption was revised down to 1.0%, below the 1.3% street estimates.”

Cieszynski said that “there’s no pressure on the Fed to raise rates any time soon, perhaps not at all this year”.

US-China trade tensions remain palpable, with Chinese Vice Foreign Minister Zhang Hanhui saying that provoking trade disputes is “naked economic terrorism”.

“We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!” the People’s Daily said in a commentary piece.

US on “recession watch”, stocks “may be subject to further adjustment”

Markets fell on Wednesday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 tumbled 1.4 percent and the Nikkei 225 fell 1.2 percent.

Market sentiment was weighed down by comments in Chinese newspapers that it could squeeze its supply of rare earth elements to hit the US.

Meanwhile, the global economy may already be headed for a downturn.

George Saravelos, global head of FX research at Deutsche Bank, wrote in a note: “Stock prices of the semiconductor sector tend to lead the global manufacturing PMI by one to two months and yesterday made a new low.”

Indeed, the US 10-year Treasury yield has fallen about 30 basis points since 30 April and now trades at its lowest since September 2017.

The movement in US Treasuries contributed to Morgan Stanley announcing on Tuesday that it is now “‘in the zone’ for a recession watch”.

While the US stock market has been relatively resilient in the face of the US-China trade tension, Brett Arends at MarketWatch noted that the S&P 500 is now “just a few points away” from its 200-day moving average. Arends suggested that the index falling to that level “would trigger a closely watched sell signal, potentially setting off a broader alarm, selling pressure and further falls”.

And the European Central Bank said in its latest Financial Stability Review released on Wednesday that “US equity prices look stretched and may be subject to further adjustment”.

Markets mixed, US “not ready” for deal with China, Italy at risk of “doom loop”

Markets were mixed on Tuesday.

The S&P 500 fell 0.8 percent and the STOXX Europe 600 fell 0.2 percent but the Nikkei 225 rose 0.4 percent.

The US-China trade tension continued to be a concern after President Donald Trump said at a news conference in Tokyo on Monday that the US is “not ready to make a deal”, adding that, instead, tariffs on Chinese products could go up “very substantially”.

In Europe, sentiment was affected by a statement by Italian Deputy Prime Minister Matteo Salvini that the European Commission could slap a 3 billion euro fine on the country for breaking EU rules due to its rising debt and structural deficit levels.

“For Italy, the potential for a doom loop is still looming in the background where you have an undesirable connection between the debt possession of the state and the banks,” said Teeuwe Mevissen, senior eurozone market economist at Rabobank.

Markets rise, Trump sees trade deal with Japan “getting close”

Most markets rose on Monday while the US stock market was closed.

The STOXX Europe 600 rose 0.2 percent after results of European parliamentary elections showed strong support for pro-European Union parties.

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

While on a state visit to Japan, US President Donald Trump said Tokyo and Washington were “getting close” to a deal that would address the US trade deficit.

However, Ray Attrill, head of foreign exchange strategy at National Australia Bank, said “there is no expectation a comprehensive trade deal will be struck anytime soon”.

The trade deal that most investors are focused on, though, is that between the US and China, and one analyst thinks that the market is still not accurately pricing in the probability that the trade talks will ultimately fail.

“The market got the wake-up call on May 5, and it hit the snooze button — expecting this to go away with a tweet,” Alicia Levine, chief strategist at BNY Mellon, said on CNBC last week.

“The trade war is turning into a tech war, and this could go on longer. It could be deeper, and it could be harder to come up with a resolution,” she added.

Escalation of US-China trade war could be “buying opportunity” for stocks

The S&P 500 fell 1.2 percent last week, its third consecutive weekly decline as concerns over the US-China trade war continued to plague markets.

“The odds of a deal are rapidly receding,” Yale University senior fellow Stephen Roach told CNBC last week as tit-for-tat tariffs escalated.

Still, some analysts remain sanguine.

Analysts at Goldman Sachs led by chief US economist Jan Hatzius wrote that if the US imposes tariffs on another US$300 billion worth of Chinese imports, stocks could pull back by 4 percent.

However, Goldman's base case is that a trade deal is reached, along with a “staggered reduction” in the current tranche of tariffs, which could be followed by a 4 percent rise in stocks.

Chinese stocks could also gain, according to some analysts.

Dai Ming, a Shanghai-based fund manager at Hengsheng Asset, said that he is “cautiously optimistic that an agreement on trade will eventually be reached between the two nations” and this would create “a buying opportunity both in the short and medium term”.

Markets higher but “could be years” for US and China to reach trade deal

Markets were mostly higher on Friday.

The S&P 500 rose 0.1 percent while the STOXX Europe 600 rose 0.6 percent. However, the Nikkei 225 fell 0.2 percent.

Markets largely shrugged off UK Prime Minister Theresa May’s resignation as Conservative party leader after she had failed in a final attempt to win parliamentary support for her deal on the UK's exit from the European Union.

Markets may have reacted favourably to US President Donald Trump's comment on Thursday that the US could ease its ban on Huawei as “some part” of a wider trade deal with China, with Deutsche Bank Research analysts saying that it showed that “he remains amenable to a broad deal”.

Still, analysts at ANZ Research said that since both sides “will only negotiate on their own terms, it could be years before the two powers can find sufficient common ground”.

Markets fall as trade tension “likely to linger”

Markets fell on Thursday.

The S&P 500 fell 1.2 percent, the STOXX Europe 600 fell 1.4 percent and the Nikkei 225 fell 0.6 percent.

“Markets are pricing in the harsh reality that trade tension is more likely to linger than quickly be resolved as had been the consensus expectation anchoring sentiment until late April,” said Alec Young, managing director of global markets research at FTSE Russell.

However, Brian Belski, chief investment strategist at BMO Capital Markets, thinks that the market has overreacted to the US-China trade dispute.

Belski said in a recorded presentation to clients on Wednesday that even as stock prices have fallen, revenue and earnings estimates “have not changed at all” and advised clients to “stay invested”.

Markets lower, may be “extremely oversold”

Markets were mostly lower on Wednesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.1 percent and the Shanghai Composite fell 0.5 percent.

“Sentiment remains fragile as investors digest the changing face of the trade dispute from broad sweeping tariffs to direct action against single Chinese companies,” Jasper Lawler, head of research at futures brokerage London Capital Group, wrote in a note.

One analyst sees hopeful signs for stocks though.

“A couple of the indicators that I look at got extremely oversold early last week and continue in that direction,” said former Goldman Sachs and Cowen market technician Helene Meisler on CNBC.

Meisler said that “in the first half of last year we had four such instances where we had extreme readings, and each time the market rallied”.

Stocks make a comeback but bonds point to trouble ahead

Markets rose on Tuesday, with the S&P 500 rising 0.9 percent.

“The market is responding to the Trump administration backpedaling a bit on Huawei, which suggests that we are moving toward rather than away from a trade agreement, and that’s what the market wants to hear,” said Crit Thomas, global market strategist with Touchstone Investments.

Deutsche Bank's head of asset allocation and chief equity strategist Binky Chadha sees more gains ahead for the stock market, telling CNBC on Tuesday that he is keeping the S&P 500 target at 3,250.

However, while the stock market is making a comeback, a CNBC report noted that the bond market is pointing to more trouble ahead, with the US 10-year Treasury yield trading about 40 basis points below its 2019 high and within 10 basis points of its year-to-date low.

Dave Haviland, managing partner at Beaumont Capital Management, pointed out that transports, small caps and mid-cap stocks have not hit record highs this year while “outflows from stocks and inflows to bonds is another sign that bonds have been sending the right message, not stocks”.

Markets fall as Huawei ban raises US-China tension

Markets were mostly lower on Monday.

The S&P 500 fell 0.7 percent while the STOXX Europe 600 tumbled 1.1 percent.

In Asia, the Shanghai Composite fell 0.4 percent but the Nikkei 225 rose 0.2 percent.

Market sentiment was shaken by another escalation in US-China trade tension after US tech companies were reported to have begun to comply with the government’s ban on the supply of software and hardware to China’s Huawei Technologies.

Also, CNBC reported that scheduling for the next round of trade negotiations is “in flux” because it is unclear what the two sides would negotiate.

“The rally at the back end of last week is starting to look like a relief rally, and this move could be the beginning of the next major move lower,” David Madden, market analyst at CMC Markets UK, wrote in a note.

Yardeni: Stocks to move higher

The S&P 500 fell 0.8 percent last week, its second consecutive weekly decline.

The decline in stocks over the past two weeks has mostly been attributed to the escalation of the trade war between the US and China as the former threatened and subsequently implemented increased tariffs on imports from the latter.

However, Edward Yardeni, president of Yardeni Research, sees the stock market resuming its rally before long.

“I think it moves higher partly because there’s a recognition that even companies that do business with China are going to find ways to deal with this escalating trade tension like moving some of their supply chains to other countries,” said Yardeni on CNBC.

Yardeni thinks that the “trade escalation is probably going to be more of a negative for China than it is for the United States”, so the former “desperately need a deal much more so than we do”.

“I think a deal will be struck and probably by the end of this summer, if not before then,” he added.

Markets fall as US-China trade suffers “severe negotiating setbacks”

Markets mostly fell on Friday.

The S&P 500 fell 0.6 percent and the STOXX Europe 600 fell 0.4 percent.

In Asia, the Nikkei 225 rose 0.9 percent but the Shanghai Composite plunged 2.5 percent.

Tension between the US and China was raised after an executive order by the Trump administration, aimed at banning Huawei equipment from US networks, took effect on Thursday.

A spokesman for China’s Ministry of Commerce called the Trump administration’s recent moves to raise tariffs on Chinese imports “bullying behavior” that has resulted in “severe negotiating setbacks”.

Charalambos Pissouros, senior market analyst with JFD Group, said that “we are still reluctant to trust a long-lasting reversal in risk appetite” and “cannot assume that the worst is behind us”.

Markets rise after reprieve on car tariffs

Markets were mostly higher on Thursday.

The S&P 500 rose 0.9 percent and the STOXX Europe 600 jumped 1.3 percent.

However, Asian markets were mixed, with the Nikkei 225 falling 0.6 percent but the Shanghai Composite rising 0.6 percent.

Asian markets were rattled by US President Donald Trump's order to ban telecom equipment from countries considered “foreign adversaries”, in a move apparently targeted at China’s Huawei Technologies, but other markets largely shrugged it off.

“After the damaging trade war escalation that dominated either side of the weekend, the markets were granted a reprieve on Wednesday as reports came out suggesting the U.S. was prepared to delay tariffs on cars from Europe and Japan,” wrote Connor Campbell, financial analyst at SpreadEx, in a note.

Markets rise amid US-China “squabble” and disappointing economic data

Markets rose on Wednesday.

The S&P 500 rose 0.6 percent and the STOXX Europe 600 rose 0.5 percent.

Earlier in Asia, the Nikkei 225 rose 0.6 percent while the Shanghai Composite jumped 1.9 percent.

Markets apparently took consolation after US President Donald Trump on Tuesday described the trade dispute with China as a “squabble” and repeated expectations for a positive meeting with Chinese leader Xi Jinping next month in Japan.

However, investors would also have noted some disappointing economic data on Wednesday.

US retail sales fell 0.2 percent last month compared with expectations for a 0.1 percent increase.

Andrew Hunter, senior US economist with Capital Economics, said that this decline “supports our view that GDP growth is set to slow in the second quarter”.

And in China, industrial production in April increased 5.4 percent year-on-year compared to expectations for a 6.5 percent year-on-year increase while retail sales grew at the slowest pace since May 2003.

Heng Koon How, head of markets strategy at UOB, described these reports as “depressing and disappointing”.

Markets rise as trade deal expected but “prolonged conflict could put a serious dent on economy”

Markets were mostly higher on Tuesday.

The S&P 500 rose 0.8 percent while the STOXX Europe 600 rose 1.0 percent.

Earlier in Asia though, the Nikkei 225 fell 0.6 percent and the Shanghai Composite fell 0.7 percent.

While the US-China trade dispute continues, Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management, said that the market still believes that “a trade deal gets done” and that “the Fed is there to put a bottom in the market”.

However, analysts at Danske Bank wrote in a note that “our concern is that it will require financial stress to create the necessary pressure to get the deal done”.

Indeed, Steve Goldstein at MarketWatch suggested that at the moment, China seems happy to walk away from trade talks.

“That’s the upshot after China first rolled back some concessions — prompting a new escalation in tariffs — and then showed up to Washington without any other compromises,” wrote Goldstein

The escalation of the trade war could turn nasty, wrote Jeff Cox at CNBC.

Cox noted that the “New York Fed’s gauge of recession probability over the next 12 months is now at 27.5%, easily the highest since the financial crisis” and suggested that “a prolonged conflict could put a serious dent into the economy of both nations, and reverberate through a global picture that at best looks tenuous”.

In contrast, Brett Arends at MarketWatch remains sanguine, saying that the tariff “amounts involved are trivial”.

Michael Brush at MarketWatch wrote that a trade deal is still “very likely to get wrapped up over the next few weeks” and that “it is time to get more aggressive about re-deploying any cash you may have raised in early May”.

Markets tumble as China announces retaliatory tariffs

Markets fell on Monday.

The S&P 500 plunged 2.4 percent, the STOXX Europe 600 tumbled 1.2 percent and the Shanghai Composite sank 1.2 percent.

Markets fell as China announced that it would impose retaliatory tariffs on US$60 billion in imports from the US with new or expanded duties that could reach 25 percent.

“On the heels of 2019’s historic rally, valuations are no longer depressed, making it harder for equities to shrug off looming macro risks,” wrote Alec Young, managing director of global markets research at FTSE Russell. “With the ultimate trade outcome inherently uncertain and difficult to model or predict, investors are selling first and asking questions later.”

Markets at risk of correction as US-China trade war escalates

Markets fell last week as tensions rose after US President Donald Trump threatend to raise tariffs on US$200 billion worth of Chinese goods from 10 percent to 25 percent, a threat that was subsequently carried out on Friday.

The S&P 500 fell 2.2 percent last week while the STOXX Europe 600 fell 3.4 percent.

Talks to resolve the trade dispute between the US and China ended without agreement.

Calculations by Oxford Economics indicated that the latest tariff hike by the US on Chinese goods, together with a likely retaliatory move by China, would reduce US gross domestic product by 0.3 percent in 2020 and Chinese output by 0.8 percent. The global economy would see a 0.3 percent hit.

Markets could sink if the US-China trade war gets worse.

"If the deal totally falls apart, we think there's a pretty big chance of a market correction," said Ryan Detrick, senior market strategist at LPL Financial. He suggested that US stocks could fall as much as 5 percent over the next month and even more elsewhere.

Markets shrug off tariff increase

Markets mostly rose on Friday.

The S&P 500 rose 0.4 percent and the STOXX Europe 600 rose 0.3 percent.

Earlier in Asia, the Nikkei 225 fell 0.3 percent but the Shanghai Composite surged 3.1 percent.

Markets appear to have mostly shrugged off the actual initiation of increased US tariffs on China imports.

“Given how much markets have corrected over the past few days, you would expect some short covering,” said Ken Wong, Asia equity portfolio strategist at Eastspring Investments.

“Despite the tariff increase, the outlook for a trade deal in the relatively near future remains cautiously optimistic,” wrote Tom Essaye, president of the Sevens Report, in a note.

Still, Nick Marro, analyst at the Economist Intelligence Unit, said that the potential for a deal “has gone down significantly”.

Allan von Mehren, chief analyst and China economist at Danske Bank, wrote: “A trade deal getting less likely in Q2 after Trump’s moves today...hopefully we can get a short break from Trump’s tweets and enjoy spring time instead.”

“If things do escalate then this will have an impact of around 0.5 percentage points of global GDP and that would not be inconsiderable,” said Julian Mayo, chief investment strategist at investment management firm Fiera Capital.

Markets fall amid concerns of “disastrous outcome” of US-China trade talks

Markets fell on Thursday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 plunged 1.7 percent, the Nikkei 225 fell 0.9 percent and the Shanghai Composite tumbled 1.5 percent.

The trade tension between the US and China continued to weigh on markets after US President Donald Trump claimed on Wednesday that China “broke the deal”.

Chris Rupkey, managing director and chief financial economist at global financial group MUFG, warned that an increase in US tariffs on China imports “spells disaster for the U.S. economy”.

Edward Moya, senior market analyst at Oanda, said that “a disastrous outcome this week...could see a 10% correction with U.S. equities” while a “framework agreement is likely to see stocks attempt another run at making fresh record highs”.

Moya said that “the base case remains for a deal to be reached”.

Still, David de Garis, a director and senior economist at National Australia Bank, wrote in a note that the negotiation “could easily go pear-shaped again”.

Markets mixed, Chinese exports fall as all-out trade war looms

Markets were mixed on Wednesday.

The S&P 500 fell 0.2 percent and the Nikkei 225 tumbled 1.5 percent but the STOXX Europe 600 rose 0.2 percent. The Shanghai Composite resumed its slide, falling 1.1 percent after a slight rebound on Tuesday.

Worries over the US-China trade dispute lingered, especially after China reported that its exports fell 2.7 percent in April from a year earlier.

“The outlook for Chinese exports is challenging. If Trump follows through on his latest tariff threats, we think this would drag down export growth by two to three percentage points,” Capital Economics said in a research note.

And things could get worse for China and possibly, the rest of the world, as a CNBC report suggested that an all-out trade war is about to begin.

“Fasten your seatbelt and don't hold your breath,” Bank of America strategists wrote.

Markets fall, increased US tariffs on China could be “final nail in coffin” for bull run

Markets mostly fell on Tuesday.

The S&P 500 plunged 1.7 percent, the STOXX Europe 600 tumbled 1.4 percent and the Nikkei 225 fell 1.5 percent.

The Shanghai Composite rebounded 0.7 percent after having fallen 5.6 percent on Monday.

The trade tension between the US and China remained the main concern after US officials confirmed that tariffs on goods from China could be raised by the end of the week.

“Implementation of the increased tariff levels on Friday could be a final nail in the coffin for these trade talks as well as the equity bull run which we’ve seen since the beginning of the year,” analysts at Rakuten Securities Australia wrote.

Some analysts remain hopeful of a successful outcome to the trade talks.

“I think it’s too early to get so pessimistic, but a lot of investors are,” said Craig Callahan, president of Icon Investments.

“The likelihood the Fed cuts rates if the trade talks collapse is probably the reason the market will hang in better than it should given that the Chinese just upped the ante this morning,” said Ian Winer, advisory board member of Drexel Hamilton.

Markets fall on Trump threat to raise China tariffs

Markets fell on Monday.

Early in the day, Asian markets fell sharply after US President Donald Trump tweeted on Sunday that he would raise tariffs on US$200 billion worth of Chinese goods from 10 percent to 25 percent this week. The Shanghai Composite plunged 5.6 percent.

European markets followed Asian markets lower, the STOXX Europe 600 declining 0.9 percent.

However, the S&P 500 managed to recover from early sharp losses to finish 0.5 percent lower.

Many analysts see Trump's threat as merely part of negotiation tactics and think that a deal will still be reached.

“I don’t think it’s a setback at all. It’s all sort of a posturing position,” said Patrick Palfrey, senior US equities strategist at Credit Suisse.

“The President’s negotiating tactics may be unconventional but the likelihood of some kind of deal is still higher than nothing getting done,” writes Tobias Levkovich, chief US equity strategist at Citigroup.

US recession fears have faded but “the business cycle’s not dead”

The Economist noted last week that fears of a recession in the US have faded.

It noted that the probability of a recession within 12 months based on a model from economists at JPMorgan Chase had fallen from 65 percent at the end of last year to 15 percent on 29 April.

“It’s eye-popping how quickly the narrative has changed,” the article quoted Torsten Slok of Deutsche Bank as saying.

One analyst whose narrative has not changed, though, is Gluskin Sheff chief economist and strategist David Rosenberg.

In an interview with CNBC last week, Rosenberg said that “what investors have to know is that the business cycle’s not dead and that a recession is out there probably sooner rather than later”.

Markets jump with US employment, “buy stocks even at new highs”

Markets rose on Friday. The S&P 500 rose 1.0 percent while the STOXX Europe 600 rose 0.4 percent.

Markets were boosted by a report showing that the US economy added 263,000 new jobs in April. The unemployment rate fell to 3.6 percent, a 49-year low.

“This is another loud and clear signal that the economy is in really good shape,” wrote Mike Loewengart, vice president of investment strategy at E*Trade Financial Corp.

Fed Vice Chairman Richard Clarida said in a speech that the US economy “is in a very good place” with low unemployment and “muted” inflation.

“Solid jobs gains shows U.S. resilience and further strengthens case to buy stocks even at new highs,” said Thomas Lee, co-founder of Fundstrat.

Still, Bob Pisani at CNBC had suggested earlier on Friday that stocks are getting pricey, with the forward earnings multiple for the S&P 500 over 17 when the historic norm is 15 to 16, and could be hitting resistance.

“A lot of things have to go right for the market to keep going up,” UBS’ Art Cashin was quoted as saying.

Markets fall, “time to turn cautious on stocks”

Markets were mostly lower on Thursday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 fell 0.6 percent but in Asia, the Hang Seng rose 0.8 percent.

Tom Essaye, president of the Sevens Report, said that after the Federal Reserve meeting on Wednesday, investors were “left with a market lacking a material, positive catalyst at the moment and one at the top of reasonable valuations”, and added that “this market could at best churn sideways, or even see a mild pullback”.

Indeed, Morgan Stanley analysts think that a melt-up in the stock market is unlikely at this point. “Large moves from a high starting point (a melt-up) are rare and unlike today usually follow a period of subdued returns and good earnings growth,” the analysts wrote.

However, the analysts also wrote that “hitting our equity strategists’ S&P 500 bull case of 3,000 is likely”.

In contrast, Michael Brush wrote on MarketWatch that it is “time to turn cautious on stocks”.

“Sentiment is getting rich,” he wrote, while “fewer stocks are participating”.

“This combination — investor complacency plus narrowing market breadth — often shows up ahead of a nice pullback. Plus we are moving into the seasonally more volatile time of the year,” he wrote.

US stocks fall as Powell sees “no strong case” for rate cut

The S&P 500 fell 0.8 percent on Wednesday. Most other major markets were closed for holiday.

The Federal Reserve left its benchmark interest rate unchanged after its monetary policy meeting on Wednesday, noting a recent decline in inflation even as the economy continues to grow “at a solid rate”.

However, Powell said the slackening in price pressures appears to be “transient” and said he saw “no strong case” for expecting the central bank’s next move to be a rate cut.

US economic data on Wednesday were mixed.

ADP's employment report showed that the economy added 275,000 new jobs in April while Markit's manufacturing PMI rose to 52.6 in April from 52.4 in March.

However, the Institute for Supply Management's manufacturing index fell to 52.8 in April from 55.3 in March while another report showed that construction spending fell 0.9 percent in March.

US stocks could be headed for “minor correction” but “buy the dip”

Markets were mostly little-changed on Tuesday.

The S&P 500 rose 0.1 percent to eke out another record high but the STOXX Europe 600 was flat. The Shanghai Composite rose 0.5 percent.

“We’re near all-time highs, and investors are waiting for a catalyst to drive the market in the second half,” said Patrick Healey president of Caliber Financial Partners.

Tony Dwyer, equity strategist at Canaccord Genuity, thinks that the market could take a dip first before heading higher.

Dwyer wrote in a Tuesday research note that “the tactical backdrop continues to suggest a minor correction in the near term, with any drawdown limited to 5%”. He added that such a pullback would be “an opportunity to add exposure in the Info Tech, Financial and Industrial sectors”.

Similarly, Citigroup investment strategist Robert Buckland suggested that there are few signs of a bear market and that investors should “buy the next dip”.