Saturday, 31 August 2019

Markets rise as tumbling sentiment triggers “buy signal”

Markets rose on Friday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 jumped 1.2 percent.

US economic data on Friday were mixed.

Personal income in July rose by a less-than-expected 0.1 percent but the 0.6 percent rise in personal spending was in line with the consensus.

The core PCE price index rose 0.2 percent in July while the year-on-year increase was 1.4 percent.

The Chicago Federal Reserve’s purchasing managers index for August came in at 50.4, up from 44.4 in July.

The University of Michigan’s revised index of consumer sentiment for August was 89.8, down from an initial reading of 92.1 and below the 98.4 reading in July.

Vasu Menon, executive director of investment strategy at Singapore’s OCBC Bank, said that while the bank has been “telling our clients to somewhat de-risk portfolios a month ago”, it also noted that “fundamentals are not that bad right now”.

“What’s dragging the market down is sentiment,” Menon said.

Indeed, Bank of America Merrill Lynch said in a research note on Friday that its flagship sentiment indicator had tumbled from 2.4 to 1.3. That has triggered a contrarian “buy signal” for risk assets.

Friday, 30 August 2019

Stocks may decline further, signs indicate “excessive optimism”

Markets were mostly higher on Thursday.

The S&P 500 rose 1.3 percent and the STOXX Europe 600 rose 1.0 percent. However, the Nikkei 225 fell 0.1 percent.

Some analysts think that stocks may see further declines.

“I don’t think stocks are out of the woods yet,” Sven Henrich, founder and lead market strategist of NorthmanTrader, told CNBC on Tuesday.

Heinrich said that if “the central banks lose control and we actually do go into a global can head all the way down to 2,100 on the S&P”.

Scott Wren, Wells Fargo Investment Institute’s senior global equity strategist, told CNBC on Wednesday that the S&P 500 may decline another 5 percent and fall through the 200-day moving average.

However, that could represent a “buying opportunity”.

“Our year-end target is 3,030 on the S&P. So, clearly we’re constructive here,” he said.

And Wren is apparently not the only one who is optimistic over the longer term.

Ned Davis, founder of Ned Davis Research, said that a longer-term view of equity valuations and allocations indicates “excessive optimism”.

Davis wrote in a note that the S&P 500 is trading at about 16.3 times forward earnings, below the average valuation during the past five years but higher than they have been 80 percent of the time going back to 1928.

Thursday, 29 August 2019

US yield curve inverts further but stocks have time to soar

Markets were mixed on Wednesday.

The S&P 500 rose 0.7 percent and the Nikkei 225 rose 0.1 percent but the STOXX Europe 600 fell 0.2 percent.

US Treasury yields fell. The 30-year yield hit an all-time low of 1.907 percent while the spread between the 10-year and 2-year yields inverted further.

“We’re in a fragile equilibrium: rallying bond markets are propping up equity valuations, but the balance holds only if global growth does not break out to the downside,” said UBS economist Arend Kapteyn in a note.

However, Stephen McBride, chief analyst at RiskHedge, wrote in a Forbes article that there is time for stocks to soar.

“From the time the yield curve first inverts, a recession hits 20 months later, on average,” he wrote. “Twenty months is a long time. And in those 20 months after the yield curve inverts, stocks usually perform well.”

Wednesday, 28 August 2019

Markets mixed, "downside risks are increasing"

Markets were mixed on Tuesday, with the S&P 500 falling 0.3 percent but most other markets gaining.

Germany's economy contracted 0.1 percent in the second quarter from the previous quarter.

"Downside risks are increasing for both the global economy and markets," UBS Wealth Management Chief Investment Officer Mark Haefele said in a note as he announced a shift to an "underweight" recommendation on equities.

Nevertheless, Haefele said UBS still thinks the US can avoid a recession in 2020.

A slowdown in the US is becoming evident though.

US economic data on Tuesday showed that the Case-Shiller home price index rose 2.1 percent in June over the past 12 months, down from a 2.4 percent increase the previous month, while the Conference Board’s consumer confidence index fell to 135.1 in August from 135.8 in July.

Tuesday, 27 August 2019

Markets mixed amid signs of waning confidence

Markets were mixed on Monday.

The S&P 500 rose 1.1 percent, the STOXX Europe 600 was flat and the Nikkei 225 plunged 2.2 percent.

US President Donald Trump said on Monday that negotiations with China would begin again after the US received two “very good calls” from Beijing.

Economic data on Monday pointed to further slowing of economic growth.

US durable goods orders rose 2.1 percent in July but fell 0.4 percent when transport items are excluded.

The Chicago Fed National Activity Index fell to -0.36 in July from 0.03 in June.

In Germany, the Ifo business confidence index fell to 94.3 in August, its weakest level since November 2012, from 95.7 in July.

Confidence in corporate America may also be declining.

According to TrimTabs Investment Research, corporate insiders have sold an average of US$600 million of stock per day in August. This puts August on track to be the fifth month of the year in which insider selling tops US$10 billion. TrimTabs said that the only other times that has happened was 2006 and 2007, the period before the last bear market in stocks.

"It signals a lack of confidence," said Winston Chua, an analyst at TrimTabs. "When insiders sell, it's a sign they believe valuations are high and it's a good time to be outside the market."

Monday, 26 August 2019

US faces stagflation risk, “problem is in the president”

The S&P 500 fell 1.4 percent last week, its fourth consecutive weekly decline.

The S&P 500 ended the week with a 2.6 percent plunge on Friday after China announced new tariffs on US$75 billion worth of US goods in retaliation for US plans to institute tariffs on US$300 billion worth of Chinese imports.

The Chinese announcement was immediately followed by US President Donald Trump announcing that he was ordering US companies “to immediately start looking for an alternative to China”.

This was followed by another anouncement on Friday that the US will raise existing duties on US$250 billion in Chinese products to 30 percent from 25 percent on 1 October and the tariffs on another US$300 billion in Chinese goods, which are scheduled to take effect on 1 September, will now be 15 percent instead of 10 percent.

With the continuing escalation in the US-China trade war, investors will be increasingly looking at the Federal Reserve to cut interest rates to support the economy and asset markets.

However, Alan Blinder, former vice chair of the Federal Reserve board, warned that the trade war is likely to generate a supply shock for the US economy and thus be stagflationary, resulting in both slower economic growth and higher inflation.

In such an environment, central bankers attending the Federal Reserve’s central banking conference in Jackson Hole acknowledged that there is little they can do.

“We are experiencing a series of major political shocks,” said Reserve Bank of Australia Governor Philip Lowe.

“There’s only so much a monetary policy action can do,” said Cleveland Fed President Loretta Mester.

“The problem is in the president of the United States,” former Fed Vice Chair Stanley Fischer said bluntly. “How the system is going to get around some of the sorts of things that have been done lately, including trying to destroy the global trading system, is very unclear. I have no idea how to deal with this.”

Saturday, 24 August 2019

US stocks plunge after US-China trade war escalates

US stocks fell sharply on Friday, the S&P 500 plunging 2.6 percent.

Elsewhere, the STOXX Europe 600 fell 0.8 percent while the Nikkei 225 rose 0.4 percent.

Markets fell after China announced new tariffs on US imports and US President Donald Trump responded by ordering US companies “to immediately start looking for an alternative to China”.

Federal Reserve Chairman Jerome Powell did provide some support for the market in his speech at the meeting of central bankers at Jackson Hole.

“We have seen further evidence of a global slowdown,” he noted.

US economic data on Friday added to the evidence: new home sales in July fell 12.8 percent.

Friday, 23 August 2019

Markets mixed, US manufacturing PMI falls below 50

Markets were mixed on Thursday.

In the US the S&P 500 slipped 0.1 percent but the Dow Jones Industrial Average rose 0.2 percent.

Elsewhere, the STOXX Europe 600 fell 0.4 percent but in Asia, the Shanghai Composite rose 0.1 percent while the Nikkei 225 rose less than 0.1 percent.

US stocks were held down by reports from IHS Markit showing that its purchasing managers index for US manufacturing fell to 49.9 in August from 50.4 in July while its services index fell to 50.9 from 53.0.

Thursday, 22 August 2019

Markets rise, “don't need” another rate cut

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.8 percent and the STOXX Europe 600 rose 1.2 percent but the Nikkei 225 fell 0.3 percent.

The minutes of the Federal Reserve 30-31 July monetary policy meeting released on Wednesday showed that most Fed members who supported the rate cut agreed with Fed Chairman Jerome Powell’s assessment that it was a “mid-cycle adjustment” and thus not the start of an aggressive monetary easing campaign.

While traders are pricing in a near-certain interest rate cut during the Fed's September meeting, the curve between the 2-year Treasury yield and 10-year yield inverted briefly after the release of the minutes.

“Looks like the Fed is going to be stubborn, and the yield curve is starting to price that in,” noted Andy Brenner of National Alliance.

However, Jon Hill, rate strategist at BMO, said: “Cutting this early in the cycle before economic data turns could lead to excessive risk taking.”

Indeed, Bank of America Corp.’s CEO Brian Moynihan told CNBC that the US economy will keep growing.

“The U.S. consumer continues to spend and that will keep the U.S. economy in good shape,” he said.

Byron Wien, vice chairman of private wealth solutions at Blackstone, thinks similarly.

“This is a 70% consumer economy — and the consumer is spending; unemployment is low; wages are rising,” he told CNBC on Wednesday.

Wien added that the stock market also does not need another Fed rate cut.

“If you look at the market over the past week, stocks don’t need any help. They are roaring ahead, without the Fed doing anything,” Wien said.

Wednesday, 21 August 2019

Markets fall with Treasury yields

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.7 percent and the Shanghai Composite fell 0.1 percent.

US 10-year Treasury yields fell about 5 basis points, which Art Cashin, director of NYSE floor operations at UBS, said may have contributed to the fall in stocks.

“For the past two weeks whenever yields move down, stocks move down,” said Cashin.

Bianco Research president James Bianco told CNBC last Friday that the market needs to see the Federal Reserve respond with aggressive rate cuts.

“We’re the only place on the planet now you can get more than a 2% yield among developed countries,” Bianco said. “Powell should probably open the door for the possibility of a 50 basis point cut at the September meeting.”

Kyle Bass, founder and chief investment officer of Hayman Capital Management, does think that the Federal Reserve will keep cutting rates and eventually bring US interest rates all the way down to zero.

Tuesday, 20 August 2019

Markets rise but US recession widely expected by 2021

Markets rose on Monday.

The S&P 500 rose 1.2 percent, its second consecutive gain of more than 1 percent. Elsewhere, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 rose 0.7 percent.

However, the rally may not last.

“The market is preparing for a bad outcome,” Mike Wilson, chief US equity strategist at Morgan Stanley, told MarketWatch in an interview.

“The hope of Fed cuts has been propping up the markets all year, but rate cuts aren’t good for the market if you’re going into recession,” said Wilson.

While some economists think that the US consumer could prop up the economy, Wilson noted that the University of Michigan’s consumer sentiment index fell 6.3 points in August and weekly hours worked has fallen to near two-year lows.

Also, the trade war between the US and China is likely to weigh down the economy as “the likelihood of a deal has gone down dramatically”.

Indeed, many other economists think that the US economy may be entering recession within the next few years.

According to a survey by the National Association for Business Economics, 2 percent of economists surveyed expect a recession to begin this year, 38 percent expect a recession next year and 34 percent expect one in 2021.

Monday, 19 August 2019

Stocks seen falling further

The S&P 500 fell 1.0 percent last week. It was its third consecutive weekly decline.

Bank of America-Merrill Lynch chief equity technical strategist Stephen Suttmeier told CNBC last week that the S&P 500 needs to fall another 5 percent and panic needs to get more extreme before it bottoms.

“The correction is going to continue,” he said, suggesting that it could take weeks for stocks to find a floor.

Cresset Capital chief investment officer Jack Ablin told CNBC last week that the stock market could stay weak even longer.

Ablin said that trade tensions will create more danger and volatility deep into 2020. “I’m not too hopeful about a trade deal,” he said.

Saturday, 17 August 2019

Markets rise but “US stock market hasn’t hit correction low”

Markets rose on Friday.

The S&P 500 jumped 1.4 percent, the STOXX Europe 600 rose 1.2 percent and the Shanghai Composite rose 0.3 percent.

US economic data on Friday were mostly weak. The University of Michigan’s consumer sentiment survey fell to 92.1 in August from 98.4 in July. US housing starts fell 4 percent but building permits rose 8.4 percent.

European stocks were lifted by indications that the German government would allow deficit spending if necessary to combat a recession.

Meanwhile, Mark Hulbert at MarketWatch said that US stocks could fall further.

Hulbert noted that sentiment did not deteriorate enough during the recent market decline to build enough “wall of worry” among investors to support a tradable rally.

“The U.S. stock market hasn’t yet hit a correction low,” he wrote. “The bulls have begun to retreat, which is a step in the right direction. But contrarians are betting that more bulls will have to throw in the towel before a tradable bottom is at hand.”

Friday, 16 August 2019

Risk of recession “greater than ever” but rate cuts could save markets

Markets were mixed on Thursday.

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

Earlier in Asia, the Shanghai Composite rose 0.2 percent but the Nikkei 225 fell 1.2 percent.

The US 10-year Treasury yield fell 6.2 basis points to 1.534 percent, its lowest since August 2016.

US economic data on Thursday were mixed. Retail sales rose 0.7 percent in July but industrial production fell 0.2 percent.

China on Thursday threatened to take “necessary countermeasures” against planned additional US tariffs against its imports.

“Tariff escalation risks continue to aggravate the current weakness in global manufacturing, with risk now threatening to infiltrate the resilient service sector and labor market,” wrote Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo.

Kathy Lien, managing director of FX strategy at BK Asset Management, said that “the risk of recession this cycle is greater than its ever been”.

Still, Mark Mobius thinks that central banks will save markets by cutting interest rates.

“Everyone seems to be racing to the bottom. Which is actually going to result in the market doing very well,” he told MarketWatch on Thursday.

Thursday, 15 August 2019

US stocks plunge, yield curve inverts amid weak economic data

Markets were mostly lower on Wednesday.

The S&P 500 plunged 2.9 percent and the STOXX Europe 600 tumbled 1.7 percent.

Earlier in the day, the Nikkei 225 rose 1.0 percent.

The yield on the 10-year US Treasury note fell below that of the 2-year US Treasury note for the first time in more than a decade.

Oil fell as a US government report showed that domestic crude inventories rose for a second week in row. West Texas Intermediate crude declined 4.2 percent.

Concerns over the economy weighed on markets after data showed that Chinese industrial production growth slowed to 4.8 percent year-over-year in July, its lowest rate since 2002, and Germany's economy contracted 0.1 percent in the second quarter.

“The global economy would likely see a recession if the US escalates tariffs on China to 25% for an extended period,” Morgan Stanley equity analyst, Michael Wilson wrote in a note.

Wednesday, 14 August 2019

US and European stocks rise but buying the dip likely to be “a losing proposition”

Markets were mixed on Tuesday.

The S&P 500 jumped 1.5 percent and the STOXX Europe 600 rose 0.5 percent.

However, Asian stocks fell. The Hang Seng plunged 2.1 percent amid escalating anti-government protests while the Nikkei 225 fell 1.1 percent.

US and European stocks rose after the US government backed off on imposing tariffs on some Chinese imports from 1 September.

However, some analysts remain cautious.

Andrew Hunter, senior US economist at Capital Economics, said that the US decision to delay some of the China tariffs was “obviously designed to avoid a politically-damaging rise in consumer prices ahead of the holiday season” and “should not be misinterpreted as a sign that trade tensions are easing”.

Meanwhile, Fiona Cincotta, senior market analyst at City Index, said that the protests in Hong Kong “are adding to an already tense geopolitical picture amid ongoing U.S.-Sino trade tensions”.

In Europe, the ZEW indicator of German economic sentiment fell to -44.1 in August, down from -24.5 in July and marking the lowest reading since December 2011.

And with purchasing managers indices already having fallen to the low 50s, UBS strategists Francois Trahan and Samuel Blackman said that buying the dip in stocks is likely to be “a losing proposition”.

Tuesday, 13 August 2019

US stocks fall as recession risk raised

Markets were mixed on Monday.

The S&P 500 fell 1.2 percent, the STOXX Europe 600 fell 0.3 percent but the Shanghai Composite rose 1.5 percent.

The US 10-year Treasury yield fell 9.1 basis points to 1.64 percent, its lowest level since October 2016.

“We think the failed breakout last week for the S&P 500 confirms we are still mired in a cyclical bear market,” said Mike Wilson, Morgan Stanley’s chief US equity strategist, in a note on Monday.

Bank of America raised its estimated chance of a US recession to 1-in-3 in the next 12 months as some of its economic indicators are “flashing yellow”.

However, JP Morgan’s head of global equity strategy Mislav Matejka said that it is too early to expect the next US recession and investors should be optimistic on equities.

“The current macro setup has more similarities to the ’15-’16 mid-cycle correction episode rather than the end of the cycle, in our view,” he said.

Monday, 12 August 2019

Investors' sentiment at extreme but stock market decline may not be over

The S&P 500 fell 0.5 percent last week in volatile trading.

It opened the week with a 3 percent plunge on Monday as a weakening renminbi prompted the US to label China a currency manipulator, rebounded on the following three days, then dipped at the end of the week.

Tom Aspray at Forbes wrote that sentiment fell to extreme levels last week. According to the American Association of Individual Investors survey, the percentage of investors who were bullish fell to 21.66 while the percentage who were bearish rose to 48.20, levels last seen before the December lows.

While Aspray acknowledged that the extreme sentiment could be an indicator of a market bottom, he noted that “technical not yet suggest that a bottom is in place”.

Aspray also noted the plunge in interest rates, with “no signs from the charts that the decline is over yet”.

Christopher Harvey, Wells Fargo Securities’ head of equity strategy, told CNBC that fear over ultra-low US rates and negative rates abroad could spark another deep sell-off.

“If you have a loss of confidence with the rate market, that’s going to spill over into equities,” he said last week.

Nevertheless, Harvey still sees the S&P 500 gaining 6 percent from Friday's close by the end of the year.

Saturday, 10 August 2019

Markets mostly lower but Japan rises on better-than-expected growth

Markets were mostly lower on Friday.

The S&P 500 fell 0.7 percent despite an afternoon rally which saw it recovering from sharp morning declines.

The STOXX Europe 600 fell 0.8 percent, with the FTSE MIB in particular plunging 2.5 percent after the leader of the ruling League party, Matteo Salvini, pulled his support for the country's governing coalition on Thursday and called for fresh elections.

Elwin de Groot, Rabobank’s head of macro strategy, said that the latest political development “leads to uncertainty because obviously we don’t know when it will be possible for Italy to improve their budget because they’ve only just come to an agreement with Brussels, which could very easily be upended”.

In Asia, the Shanghai Composite fell 0.7 percent but the Nikkei 225 rose 0.4 percent after Japan reported a better-than-expected economic growth of 0.4 percent in the three months ending June.

Commenting on the Japanese GDP report, Kathy Matsui, vice chair and chief Japan strategist at Goldman Sachs Japan, said that “the domestic demand part of the economy was particularly robust” and suggested “that both consumption and private (capital expenditure) remain kind of the engines of Japan’s economy at least for the foreseeable future”.

Friday, 9 August 2019

Stocks jump as China exports rise but “trends remain sharply lower”

Markets rose on Thursday.

The S&P 500 surged 1.9 percent, the STOXX Europe 600 jumped 1.7 percent and the Nikkei 225 rose 0.4 percent.

Markets were boosted by data from China, which showed that exports for July unexpectedly rose 3.3 percent from the previous year.

Also, fears on the currency front were at least temporarily quelled after the People’s Bank of China set the onshore renminbi reference rate at 7.0039 against one US dollar.

However, Mark Newton, technical analyst at Newton Advisors, said in a Thursday research note that “while the near-term trends in both equities and Treasury yields have begun to stabilize slightly, trends remain sharply lower and it wouldn’t take much to turn both trends back to the downside for a retest of recent lows”.

Thursday, 8 August 2019

Stocks turn around from sharp fall, oil plunges

Markets were mixed on Wednesday.

The S&P 500 rose 0.1 percent after recovering from a sharp fall earlier in the session while the STOXX Europe 600 rose 0.2 percent. However, the Nikkei 225 fell 0.3 percent.

JJ Kinahan, chief market strategist at TD Ameritrade, said: “A thinly-traded market can sometimes exacerbate moves, and August trading tends to be light – its typically a sleepy month.”

Oil prices fell on Wednesday after US inventory data showed an unexpected increase in supplies for last week. West Texas Intermediate crude fell 4.7 percent and Brent fell 4.6 percent.

“Selling pressure has started to build, and as a result, crude oil has entered in bear market territory,” said Naeem Aslam, chief market analyst with TF Global Markets.

Wednesday, 7 August 2019

US stocks rebound but more weakness and volatility expected

Markets were mixed on Tuesday.

The S&P 500 rebounded 1.3 percent after the previous day's tumble. However, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.7 percent.

Despite the rebound in US stocks on Tuesday, some analysts think that there is room for markets to fall again.

JP Morgan head of global and European equity Mislav Matejka wrote in a note on Monday that given the escalating trade war between the US and China as well as the time of the year, “markets could experience a few weeks worth of a pullback”.

However, he suggested that “one should use the prospective weakness as an opportunity to add” as “global equities will advance further before the next U.S. recession strikes”.

In contrast, Nomura macro and quant strategist Masanari Takada said in a note on Tuesday that “any near-term rally...would be best treated as an opportunity to sell in preparation for the second wave of volatility that we expect will arrive in late August or early September”.

Takada added that “the second wave may well hit harder than the first” and that “it would be a mistake to dismiss the possibility of a Lehman-like shock as a mere tail risk”.

Tuesday, 6 August 2019

Markets tumble as US-China trade war escalates further

Markets fell sharply on Monday.

The S&P 500 plunged 3.0 percent, the STOXX Europe 600 tumbled 2.3 percent and the Nikkei 225 fell 1.7 percent.

Market losses accelerated over the course of the day as China allowed its currency to fall to a more-than-10-year low versus the US dollar.

That provoked the US to label China a currency manipulator.

“Secretary Mnuchin, under the auspices of President Trump, has today determined that China is a Currency Manipulator,” the Treasury Department said in a release.

This despite the fact that “it’s not intervening consistently or persistently to weaken the currency” said Marc Chandler, chief market strategist at Bannockburn, who suggested that “many people in the private sector may not conclude it is a currency manipulator”.

Indeed, Hedge fund manager and Hayman Capital Management founder Kyle Bass suggested that China is actually supporting its currency by selling US dollars and buying its own currency.

“If they were to ever free float their currency, I think it would drop 30% or 40%,” said Bass.

In any case, Chandler said that this is “another step in the currency war” and “makes trade more difficult”.

As a result, John Higgins, chief markets economist at Capital Economics, said that “investors are right to mark down the prices of global equities in the expectation of a further escalation of the trade war”.

Monday, 5 August 2019

US stocks could see continued volatility

The S&P 500 fell 3.1 percent last week, its biggest weekly loss since December last year.

The decline in US stocks was accompanied by increased volatility, the CBOE Volatility Index spiking on Wednesday and Thursday.

Nomura strategist Masanari Takada said in a note to clients Friday that “a jittery global equity market is on its way to seeing two volatility spikes in August, one early in the month and one towards the end of the month”, and suggested that investors “refrain from bargain-hunting in global equities” until after that.

Phil Orlando, chief equity market strategist at Federated Investors, said he expected “some increased choppy volatility over the course of the next couple of months before we turn up and get back to record highs at the end of the year”.

Saturday, 3 August 2019

Markets fall amid escalating trade tensions

Markets fell on Friday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 plunged 2.5 percent and the Nikkei 225 plunged 2.1 percent.

The US 10-year Treasury yield fell 2.9 basis points to 1.864 percent, its lowest since 7 November 2016.

After US President Donald Trump announced additional tariffs on Chinese imports on Thursday, the US-China trade war looks likely to escalate even further as China’s spokesperson at the foreign ministry, Hua Chunying, said at a daily press briefing that Beijing may have to take countermeasures.

And the US-China trade war is not the only trade tension ongoing. On Friday, Japan’s cabinet approved a plan to remove South Korea from a so-called “white list” of countries that enjoy trade privileges with Tokyo following a dispute over compensation for wartime forced labour. In response, South Korea’s finance minister said the country will take steps to drop Japan from its list of countries with fast-track export status.

Friday, 2 August 2019

US stocks fall, oil plunges after Trump announces new tariffs on China

Markets were mixed on Thursday.

The S&P 500 fell 0.9 percent and the Shanghai Composite fell 0.8 percent but the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 rose 0.1 percent.

US stocks fell after President Donald Trump announced plans to impose additional tariffs on Chinese imports.

In addition, US manufacturing indices from the Institute for Supply Management and IHS Market showed declines to 51.2 and 50.4 in July, the lowest since August 2016 and September 2009 respectively.

Oil prices fell. West Texas Intermediate crude plunged 7.9 percent while Brent tumbled 7 percent.

“Perceptions of slowing economic growth that could likely bode ill for oil demand growth as well, especially with new tariffs about to be imposed on Chinese imports into the U.S., undermined sentiment in crude oil,” said Marshall Steeves, energy markets analyst at IHS Markit.

Thursday, 1 August 2019

Fed disappoints investors despite cutting interest rates

The Federal Reserve cut the fed funds rate by 25 basis points on Wednesday as widely expected.

Nevertheless, the S&P 500 tumbled 1.1 percent anyway after the Fed failed to signal that further cuts were on the way.

“There is nothing in the statement about growth cooling here at home, and there is not a whole lot to suggest another rate cut is coming down the pike,” said Mike Loewengart, vice president of investment strategy at E*Trade.

Indeed, Chris Rupkey, chief financial economist at MUFG Union Bank, said that the rate cut on Wednesday may already have been too much.

Calling the rate cut an “unwise decision”, Rupkey noted that it was made “despite a strong economy with no recession signs apparent anywhere out on the horizon”.

Former Philadelphia Fed President Charles Plosser told FOX Business that the Fed may have felt compelled to cut, having given an indication earlier that a potential rate cut was in the foreseeable future after a tumultuous December 2018.

“I think the Fed has talked themselves into a corner here where I think they had to deliver on a 25 basis point cut today because they will be afraid of the market reaction,” he said.