Markets fall but melt-up possible

Markets fell on Tuesday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.4 percent.

Wilmington Trust’s chief economist Luke Tilley said that investors may have become excessively optimistic on US-China trade talks and Federal Reserve policy.

However, other analysts still see the potential for a stock market melt-up.

Maneesh Deshpande, head of equity derivatives strategy at Barclays, said that a melt-up could occur if trade tensions decrease substantially, the Federal Reserve eases aggressively and the current industrial slowdown remains a soft patch and does not turn into a full recession.

Masanari Takada, quantitative analyst at Nomura, said that “the appetite for risk is alive and well” and that an improvement in sentiment could push the market “into a ‘melt-up’ risk rally”.