Saturday, 4 July 2020

Markets mixed, global COVID-19 tally passes 11 million

Markets were mixed on Friday.

Asian markets rose. The Nikkei 225 rose 0.7 percent and the Shanghai Composite jumped 2.0 percent.

However, the STOXX Europe 600 fell 0.8 percent.

US markets were closed for a holiday.

Asian markets were boosted by a report showing that the China Caixin/Markit services PMI rose from 55.0 in May to 58.4 in June, the highest reading since April 2010.

However, the continuing rise in COVID-19 cases kept gains in check, with European stocks in particular losing ground as the session wore on.

Reuters reported that global COVID-19 cases exceeded 11 million on Friday, with 520,000 deaths linked to the disease.

The daily US tally of cases stood at 53,483 late on Friday, below the previous day’s record 55,405, but Alabama and six other states reported record increases in coronavirus cases.

Friday, 3 July 2020

US jobs jump but so do COVID-19 cases

Markets rose on Thursday.

The S&P 500 rose 0.5 percent, the STOXX Europe 600 surged 2.0 percent and the Shanghai Composite jumped 2.1 percent.

Markets were buoyed by a report showing that the US economy added back 4.8 million jobs in June.

However, the continuing rise in COVID-19 cases tempered gains.

“Of course, we now know that reopening plans have been changed, with many states and cities reversing course,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management.

A Reuters tally put the number of new US COVID-19 cases on Thursday at 55,000, the largest daily increase any country has ever reported.

Thursday, 2 July 2020

Markets rise on economic rebound

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.5 percent and the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, the Nikkei 225 fell 0.8 percent but the Shanghai Composite rose 1.4 percent.

The Institute of Supply Management said its US manufacturing index rose to 52.6 in June from 43.1 in May.

Manufacturing purchasing managers indices elsewhere also showed improvements.

However, dampening sentiment is the continuing rise in COVID-19 infections.

Reuters reported that the number of infections in the US rose by over 48,000 on Wednesday, the biggest daily increase since the pandemic started. California rolled back the reopening of its economy on Wednesday, banning indoor restaurant dining in much of the state, closing bars and stepping up enforcement of social distancing and other measures.

Jim Baird, chief investment officer for Plante Moran Financial Advisors, said that while the “rebound clearly underway creates reason for hope; the ongoing health risk provides reason for caution”.

Wednesday, 1 July 2020

Markets rise as economic data surpass expectations

Markets rose on Tuesday.

The S&P 500 rose 1.5 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 1.3 percent.

Better-than-expected economic data helped boost markets on Tuesday.

In the US, the Conference Board’s consumer confidence index rose to 98.1 in June from 85.9 in May.

In China, the official manufacturing PMI rose to 50.9 in June from 50.6 in May.

“We’ve seen a good sweep of data, macro data in particular, over the past few weeks coming out of the US, the euro zone and China and I think this Chinese data just reiterates the fact that we’re seeing a faster than expected improvement from a macro perspective,” said Cedric Chehab, head of country risk and global strategy at Fitch Solutions.

Markets rose even as Dr Anthony Fauci, the top US epidemiologist, told a Senate committee on Tuesday that the daily COVID-19 case-load could reach 100,000 from the current 40,000 unless Americans wear masks and recommit to social distancing.

Chehab warned that the continuing rise in infections and further lockdowns could lead to “a much larger correction in equity markets”.

Tuesday, 30 June 2020

US stocks jump, “worst yet to come” for COVID-19

Markets were mixed on Monday.

Early in the day, Asian markets fell, with the Nikkei 225 tumbling 2.3 percent.

However, markets turned up later in the day. The STOXX Europe 600 rose 0.4 percent and the S&P 500 jumped 1.5 percent.

Stocks rose in the US and Europe despite COVID-19 cases worldwide passing 10 million on Sunday.

“If things get really bad, the Fed will step in with additional monetary easing and basically reach into their bag of tricks to do whatever they need to support the market,” said Sam Stovall, chief investment strategist at CFRA Research.

Still, Federal Reserve chairman Jerome Powell said on Monday that “the path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus”.

And at the moment, success in containing the virus appears to be not at hand.

“This is really the beginning,” said Dr Anne Schuchat, principal deputy director of the Centers for Disease Control and Prevention, on Monday of the recent surge in cases in the US.

“Although many countries have made some progress, globally, the pandemic is actually speeding up,” said Tedros Adhanom Ghebreyesus, director-general of the World Health Organization, on Monday. “The worst is yet to come.”

Monday, 29 June 2020

As COVID-19 cases rise, markets look for government support

Stocks fell last week, with the S&P 500 declining 2.9 percent.

Investors became concerned as the number of COVID-19 cases continued to climb in the US and many other countries.

By Sunday, the global number of infections had exceeded 10 million while the death toll had reached half a million.

In the US, California on Sunday ordered some bars to close, the first major rollback of efforts to reopen the economy in the most populous US state. This followed similar moves in Texas and Florida on Friday.

David Russell, vice president of market intelligence with TradeStation, said that things look "worrisome".

"There will be a lot of difficulty predicting what earnings are going to be like with a disruption of this magnitude," said Russell.

However, some remain optimistic.

"Markets are clearly responding to the significant stimulus in the US and throughout the world," said Kent Insley, chief investment officer with Tiedemann Advisors. "Stocks still look more attractive over the long term compared to bonds."

"The government is providing so much support, so I'd be surprised if the market touches the March lows again," said Ted Swimmer, head of capital markets with Citizens Bank.

Sam Hendel, president of Levin Easterly Partners, said that while he is worried about heavily indebted energy firms and struggling travel and leisure companies, others like tech, consumer staples and health care have the "ballast to withstand an economic contraction".

Saturday, 27 June 2020

US stocks plunge amid setback in economic reopening

Markets were mixed on Friday.

Early in the day, the Nikkei 225 rose 1.1 percent.

However, later, the STOXX Europe 600 fell 0.4 percent and the S&P 500 plunged 2.4 percent.

US stocks fell after the country reported a single-day record rise of 37,000 in infections on Thursday. Governors in Texas and Florida re-imposed restrictions on bars on Friday, marking a setback to hopes of reopening the economy.

Outside the US, localised restrictions have also been re-imposed in parts of the Portuguese capital Lisbon, western Germany, Beijing and Victoria state in Australia.

Friday, 26 June 2020

Central banks boost markets, economy in “depression-like crisis”

Markets were mostly higher on Thursday.

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

Earlier in Asia, though, markets fell, with the Nikkei 225 falling 1.2 percent.

US stocks got a boost after the Federal Deposit Insurance Commission and Office of the Comptroller of the Currency said they are planning to loosen the restrictions imposed by the Volcker rule.

The Federal Reserve did subsequently put new restrictions on bank share buybacks and dividend payments after its annual stress test found that several banks could get uncomfortably close to minimum capital levels in scenarios tied to the COVID-19 pandemic.

European stocks were boosted by a European Central Bank announcement that it would offer euro loans against collateral to central banks outside the euro area to backstop funding markets amid the COVID-19 pandemic.

Meanwhile, the third and final reading of first-quarter US gross domestic product confirmed that the economy contracted at an annualised pace of 5 percent.

However, the US economy is already showing signs of recovery, with durable goods orders rising 15.8 percent in May and new jobless claims falling in the week ended 20 June from the previous week.

Still, a Reuters poll of over 250 economists taken this month showed that most think the ongoing recessions in most major developed economies would be deeper than predicted last month.

“We expect global GDP to surpass pre-COVID levels only in late 2021, and later still for advanced economies,” said Ajay Rajadhyaksha, head of macro research at Barclays. “And much could still go wrong, especially if the virus has a second wave.”

“To call this crisis a recession is a misnomer,” said David Shulman, senior economist at UCLA Anderson School of Management. “Make no mistake, the public health crisis of the pandemic morphed into a depression-like crisis in the economy.”

Thursday, 25 June 2020

Markets fall sharply amid surge in COVID-19 cases

Markets in the US and Europe fell sharply on Wednesday.

The S&P 500 tumbled 2.6 percent and the STOXX Europe 600 plunged 2.8 percent. Asian markets were mixed, with the Shanghai Composite rising 0.3 percent but the Nikkei 225 falling 0.1 percent.

Oil prices plunged more than 5 percent.

A surge in COVID-19 cases intensified fears of another round of government lockdowns and worsening economic damage.

In the US, the three most populous states, California, Texas and Florida, all set records for the number of new cases in one day. The governors of New York, New Jersey and Connecticut announced that visitors from states with high coronavirus infection rates must self-quarantine for 14 days on arrival.

“Today was finally the day markets came to terms with the fact that increasing COVID-19 cases could mean a slower recovery in the economy,” said Art Hogan, chief market strategist at National Securities.

News that the US may modify duties on a range of EU products and was weighing tariffs on other products from Britain, France, Spain and Germany also hurt market sentiment.

Meanwhile, the International Monetary Fund said it now expects global output to shrink by 4.9 percent, compared with a 3.0 percent contraction predicted in April.

“People who are looking for a magical V [recovery] are delusional,” said Julian Emanuel, head of equities and derivatives strategy at BTIG.

“Investors are positioned very optimistically,” said Liz Ann Sonders, Charles Schwab chief investment strategist. “When you get to extremes of sentiment in either direction it often takes less of a catalyst to ignite the naturally contrarian move in the market.”

Wednesday, 24 June 2020

Markets rise as COVID-19 seen “tolerable”

Markets rose on Tuesday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 jumped 1.3 percent and the Nikkei 225 rose 0.5 percent.

IHS Markit’s preliminary composite PMI for the US rose to 46.8 in June from 37 in May while the composite PMI for the eurozone rose to 47.5 from 31.9.

Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said in testimony before Congress on Tuesday that parts of the US are beginning to see a “disturbing surge” in COVID-19 infections.

However, Tony Roth, Wilmington Trust’s chief investment officer, said that recent gains in the market show “guarded optimism around the COVID situation becoming more tolerable, or livable”.

Tuesday, 23 June 2020

Nasdaq hits record high as V-shaped recovery seen

Markets were mixed on Monday.

In the US, the S&P 500 rose 0.7 percent while the Nasdaq Composite rose 1.1 percent to a record high.

Elsewhere, however, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.2 percent.

“There remains a degree of concern that a rise in infection rates ... could well derail the prospects for a recovery as economies continue to try and re-open,” said Michael Hewson, chief market analyst at CMC Markets.

Indeed, while hopes for a sustained re-opening of economies and recovery have been boosted by anticipation for a vaccine for COVID-19, recent research from China showed that levels of an antibody found in recovered patients fell sharply in 2-3 months after infection for both symptomatic and asymptomatic patients, raising questions about the length of any immunity.

Still, many analysts are optimistic.

“Virus numbers are picking up,” said Bruce Bittles, chief investment strategist at Robert W Baird & Co. “But it’s not to the extent that we’re looking at a shutdown again.”

“History is not on the side of investors expecting anything less than a V-shape,” wrote analysts at Jefferies.

Monday, 22 June 2020

Daily increase in COVID-19 cases at record high

The S&P 500 rose 1.9 percent last week even as the number of COVID-19 cases continued to rise in the US following the re-opening of the economy.

The US reported more than 30,000 new coronavirus cases on Friday and Saturday, the highest daily totals since 1 May, according to data compiled by Johns Hopkins University.

The Centers for Disease Control and Prevention now forecasts between 129,000 and 145,000 total reported COVID-19 deaths by 11 July.

Globally, the World Health Organization reported a record increase in COVID-19 cases on Sunday, with the total rising by 183,020 in a 24-hour period.

Brazil, the world’s No. 2 COVID-19 hot spot after the US, hit a total of 1,085,038 confirmed cases and 50,617 deaths on Sunday, with experts saying that the true numbers are much higher because of a lack of testing.

Even countries that had previously brought the disease under control are seeing a resurgence in cases.

China reported on Sunday 26 new confirmed coronavirus cases for 20 Jun, with 22 cases in Beijing. A fresh cluster in the capital has resulted in parts of the city being sealed off.

In Germany, health authorities reported that the coronavirus reproduction rate jumped to 2.88 on Sunday, up from 1.79 a day earlier, indicating a rising infection rate.

Saturday, 20 June 2020

WHO says COVID-19 in “new and dangerous phase” amid market optimism

Markets were mixed on Friday.

The Nikkei 225 rose 0.6 percent and the STOXX Europe 600 rose 0.6 percent but the S&P 500 gave up early gains to fall 0.6 percent.

An announcement by Apple that it would re-close 11 stores in Florida, the Carolinas and Arizona starting on Saturday triggered a reversal in US stocks as it re-ignited fears of the COVID-19 pandemic.

Also on Friday, the World Health Organization reported that there had been 150,000 new COVID-19 cases on Thursday, the highest in a single day.

“The world is in a new and dangerous phase,” said Director General Tedros Adhanom Ghebreyesus. “The virus is still spreading fast, it is still deadly, and most people are still susceptible.”

Joe Saluzzi, co-manager of trading at Themis Trading, said that the market has been reacting to the news on the pandemic and that “we are going to be stuck here for a while until there’s clarity on the virus, and that could take months”.

Still, Mike Loewengart, managing director at E-Trade Financial Corp, said that “optimism around reopenings could fuel a comeback” in sectors like energy and consumer discretionary.

Vishnu Varathan, head of economics and strategy at Mizuho Bank, was also optimistic in a note. “Simply put, markets view pandemic risks as passé, relegating them to the backseat (and rear-view mirror) as they look for an upturn ahead.”

Friday, 19 June 2020

Markets mixed, “recovery likely to be less V-shaped”

Markets were mixed on Thursday.

The S&P 500 edged up 0.1 percent but the STOXX Europe 600 fell 0.7 percent and the Nikkei 225 fell 0.4 percent.

Concerns over the COVID-19 pandemic continued to be the dominating theme.

In the US, Arizona reported a record-high number of new confirmed cases while Texas saw an 11 percent daily spike in hospitalisations for COVID-19 on Wednesday. California, meanwhile, reported its largest-ever daily increase of COVID-19 cases.

In China, Beijing has reportedly closed schools and cancelled flights to contain the new wave of COVID-19 cases.

“For all the optimism that central bank and government stimulus will help alleviate more permanent economic scarring, there is rising concern that any recovery is likely to be less V-shaped and more a long U-shaped type of rebound,” said Michael Hewson, chief market analyst at CMC Markets UK.

The Asian Development Bank said in a report on Thursday that developing Asia will “barely grow” in 2020 as “this will not be a V-shaped recovery”.

Thursday, 18 June 2020

Economy seeing “pent up demand” but stock rally is “crazy stuff”

Markets were mixed on Wednesday.

The S&P 500 fell 0.4 percent and the Nikkei 225 fell 0.5 percent but the STOXX Europe 600 rose 0.7 percent.

A resurgence in COVID-19 cases in the US and China kept investor sentiment down but James Meyer, chief investment officer at Tower Bridge Advisors, said that “the general consensus is that the economy won’t completely shut down again”.

John Cunnison, chief investment officer at Baker Boyer, said that fresh economic data points to “an economy that’s creating all sorts of pent up demand”.

“If we get on the other side of this virus, there are reasons for being fairly bullish,” he said.

In contrast, Jeremy Grantham, co-founder and chief investment strategist at GMO, called the current rally a bubble.

“This is really the real McCoy, this is crazy stuff,” said Grantham.

He suggested that the level of exposure investors should have to US equities now “is zero and less than zero might not be a bad idea if you can stand that”.

Wednesday, 17 June 2020

No break from COVID-19 likely, Fed needs to “pull out a bazooka”

Markets rose sharply on Tuesday.

The S&P 500 jumped 1.9 percent, the STOXX Europe 600 surged 2.9 percent and the Nikkei 225 soared 4.9 percent.

Positive US economic data helped boost stocks. Retail sales jumped 17.7 percent in May while industrial production rose 1.4 percent.

Still, investors are likely to remain on edge as the global case tally for COVID-19 climbed above 8 million on Tuesday and the US showed increases in infections even as officials continued their push to reopen economies and end lockdowns.

“We have 21 states where cases are going up and quite dramatically, and it’s not just testing, but more people are testing positive and in some places hospitals are overflowing,” said Michael Osterholm, head of the Center for Infectious Disease Research and Policy at the University of Minnesota.

One US city has gone against the flow. Miami mayor Francis Suarez announced on Monday that the city will not move into the next phase of reopening because of concern over rising COVID-19 cases.

And while many think that the resurgence in cases is part of a second wave of infection, experts say it is not.

Raymond James analysts wrote: “We expected this uptick and anticipate other states will also see upticks as reopenings continue. This isn’t a second wave, this is another swell that is part of the ‘first wave’ of this virus.”

“We’re now recognizing that we’re not going to see the summer break that we had hoped for,” said Dr Leana Wen, an emergency physician and public health professor at George Washington University.

This could be bad news for the economy.

Already, Goldman Sachs economists led by Jan Hatzius are expecting a 2.3 percent fall in disposal income for Americans in 2021, which could “pose a significant risk to the budding recovery in the quarters following the election”.

And Scott Minerd, global chief investment officer at Guggenheim Partners, said that the S&P 500 is likely to retest its 23 March low of 2,237.40 over the next month, potentially falling to as low as 1,600.

“There's a point where the Federal Reserve is going to have to pull out a bazooka,” said Minerd. “And I think the option of buying stocks on the part of the Fed is on the table.”

Indeed, many fund managers seem to agree that another decline is likely.

The latest Bank of America Global Fund Manager Survey showed that 78 percent of them say the market is overpriced, the highest percentage since the survey began in 1998.

Some 53 percent say the comeback from the March lows is a “bear market rally”. Just 37 percent believe it is a new bull market.

Tuesday, 16 June 2020

Markets mixed as Fed expands credit support

Markets were mixed on Monday.

Early in the day, the Nikkei 225 plunged 3.5 percent while later the STOXX Europe 600 slipped 0.3 percent.

However, the S&P 500 rose 1.3 percent after the Federal Reserve said it is expanding the scope of its $750 billion emergency corporate debt loan facility to include individual corporate bonds, while also scrapping some earlier restrictions for potential borrowers.

“This change underscores the Federal Reserve’s commitment to supporting the flow of credit to large corporations,” said Steve Friedman, senior macroeconomist at MacKay Shields.

Some analysts brushed off reports of rising COVID-19 cases in the US.

“Cases are up, but that’s a result of more testing,” said Kent Engelke, chief economic strategist at Capitol Securities Management. ”You just can’t just close down the economy again,” he added.

Monday, 15 June 2020

Stocks fall as COVID-19 may persist for months

The S&P 500 fell 4.8 percent last week after the Federal Reserve projected that the economic recovery will be weak.

Also probably holding back the market is the concern that the COVID-19 pandemic is far from over.

Indeed, new coronavirus cases and hospitalisations in record numbers swept through more US states over the weekend. Alabama reported a record number of new cases for the fourth day in a row on Sunday while Arkansas, North Carolina, Texas and Utah all had a record number of patients enter the hospital on Saturday.

Former Goldman Sachs executive Gary Cohn had told CNBC last week that the US is not even through the first wave of the COVID-19 outbreak and it could persist for months.

Meanwhile, in China, after weeks with almost no new COVID-19 infections, Beijing has in recent days recorded dozens of new cases linked to a major wholesale food market, resulting in the re-imposition of restrictions.

Saturday, 13 June 2020

Markets bounce but global economy faces “significant scarring”

Markets were mixed on Friday.

The S&P 500 jumped 1.3 percent and the STOXX Europe 600 rose 0.3 percent but the Nikkei 225 fell 0.8 percent.

Analysts' views on the direction of the market have been mixed.

“I suspect the bounce is a dead cat bounce,” said Naeem Aslam, AvaTrade’s chief market analyst.

However, Esty Dwek, head of global market strategy at Natixis Investment Managers, said that “the downside had become more limited given a still-bearish consensus, high cash levels, and a broadening rally”.

Meanwhile, a report on Friday showed that the UK economy contracted by a record 20.4 percent in April.

The International Monetary Fund’s Gita Gopinath said that the global economy is recovering more slowly than expected and faces “significant scarring”.

Friday, 12 June 2020

Stocks plunge on weak Fed projection and rising COVID-19 cases

Markets fell sharply on Thursday.

The S&P 500 plunged 5.9 percent, the STOXX Europe 600 tumbled 4.1 percent and the Nikkei 225 fell 2.8 percent.

The falls were mostly attributed to the Federal Reserve's weak economic projections made on Wednesday. It had forecast a 6.5 percent contraction by the end of the year on a year-over-year basis, with the unemployment rate ending at 9.3 percent.

A continuing rise in COVID-19 cases also affected sentiment. The global case tally for the disease rose to 7.39 million on Thursday. In the US, the seven-day average of new cases over the past two weeks is still rising in more than 20 states.

“The stock market has almost had blinders on,” said Kristina Hooper, Invesco chief global market strategist.

Still, Hooper noted: “Typically the initial reaction to the Fed press conference is not the subsequent reaction. There needs to be some digestion by investors.”

Thursday, 11 June 2020

Markets mixed, Fed “not thinking about raising rates”

Markets were mixed on Wednesday.

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

Elsewhere, the STOXX Europe 600 fell 0.4 percent but the Nikkei 225 rose 0.2 percent.

US stocks fell even though Federal Reserve showed no inclination to raise interest rates after its monetary policy meeting on Wednesday.

“We’re not thinking about raising rates, we’re not even thinking about thinking about raising rates,” said Fed chairman Jerome Powell. He said that there remains “a lot of work” to do with millions still out of jobs.

Wednesday, 10 June 2020

Nasdaq hits new high along with COVID-19 cases

Markets were mixed on Tuesday.

In the US, the Nasdaq Composite rose 0.3 percent to close at a record high but the S&P 500 fell 0.8 percent while in Europe, the STOXX Europe 600 fell 1.2 percent.

Earlier in Asia, the Shanghai Composite rose 0.6 percent but the Nikkei 225 fell 0.4 percent.

“It does seem, at least right now, that even lower quality stocks seem to be finding interest,” said Noah Hamman, Founder & CEO of AdvisorShares.

There was caution elsewhere in the markets though amid signs that COVID-19 cases and hospitalisations are spiking in parts of California and the US Southwest.

On Tuesday, 21 US states reported weekly increases in new cases of COVID-19. Arizona, Utah and New Mexico all posted rises of 40 percent or higher for the week ended Sunday and were among the states that recorded their highest seven-day average of new coronavirus cases since the pandemic began.

Tuesday, 9 June 2020

US recession declared, may already be over

Markets were mixed on Monday.

US stocks rose, with the Nasdaq Composite rising 1.1 percent to an all-time high and the S&P 500 rising 1.2 percent to close just 4.5 percent from its high.

Asian stocks were also higher, with the Nikkei 225 jumping 1.4 percent.

However, the STOXX Europe 600 slipped 0.3 percent.

Ironically, US stocks performed well on a day the National Bureau of Economic Research declared that the US economy entered recession in February.

The recession is not expected to last though. Jan Hatzius, chief economist at Goldman Sachs, said that while this is “almost certainly the deepest recession since” the war, “it is almost certainly also the shortest recession”.

“From the market’s perspective, the economic impact of COVID is basically over. We still may see spikes in cases, but it will be difficult politically to shut down economies again,” said Bill Callahan, an investment strategist at Schroders.

Monday, 8 June 2020

S&P 500 in “broad bull market” as US employment surges

The S&P 500 rose 4.9 percent last week as it maintained a rally from its March low.

The advance last week was boosted on Friday by a report that US employment rose by 2.5 million in May.

That surge in employment has raised hopes for a V-shaped economic recovery.

Jan Hatzius, chief economist at Goldman Sachs, said that Friday’s “report marks the beginning of the labor market recovery in our view, and we expect the unemployment rate to fall further in June”.

Tom Porcelli, chief US economist at RBC Capital Markets, said that “a June payroll print at north of 10 million is a reasonable starting point for the conversation”.

Indeed, Edward Yardeni, president of Yardeni Research, told CNBC on Friday that the May employment report is a game changer for Wall Street.

“The economy may very well be catching up with the stock market rather than the stock market going off on its own,” he said. “It’s going to be a pretty broad bull market here.”

Saturday, 6 June 2020

Markets surge with US jobs

Markets rose on Friday.

The S&P 500 surged 2.6 percent, the STOXX Europe 600 jumped 2.5 percent and the Nikkei 225 rose 0.7 percent.

US and European stocks were boosted by a report that showed that US employment rose by 2.5 million in May.

“Ultimately, this report provides additional confirmation for risk asset investors who are betting on a faster recovery of the economy.,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

“One month does not make a trend, but the sharp turn in May justifies a bit more optimism about the near-term outlook,” said Jim Baird, chief investment officer at Plante Moran.

“These rallies can become self-sustaining as more investors rush in through fear of missing out,” said Lewis Grant, a senior portfolio manager at Federated Hermes.

Oil prices also surged, with news that major oil producers will convene Saturday to discuss plans for extended productions cuts adding to the boost from the US employment report.

West Texas Intermediate crude jumped 5.7 percent while Brent surged 5.8 percent.

Friday, 5 June 2020

Markets mixed, US job losses continue

Markets were mixed on Thursday.

In the US, the S&P 500 fell 0.3 percent while the Dow Jones Industrial Average closed marginally higher.

Elsewhere, the STOXX Europe 600 fell 0.7 percent while the Nikkei 225 rose 0.4 percent.

While the S&P 500 snapped a streak of four consecutive gains, the recent rally suggested to Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research, that “things are going to get better”.

Indeed, US investors on Thursday largely shrugged off a report from ADP showing that a total of 2.76 million jobs were lost in May.

However, Mark Tepper, president and CEO of Strategic Wealth Partners, noted that the latest data on continuing claims for unemployment benefits indicate that “people remained unemployed and didn’t return to work”.

Indeed, CNBC's Jim Cramer suggested that while big businesses may be rebounding, small businesses are still suffering.

“I think we’re looking at a V-shaped recovery in the stock market, and that has almost nothing to do with a V-shaped recovery in the economy,” he said.

Meanwhile, in Europe, the ECB said it would expand its pandemic emergency purchase programme by €600 billion and extend it to June 2021.

Thursday, 4 June 2020

Markets rise as economic reopening plans “remain on track”

Markets rose on Wednesday.

The S&P 500 jumped 1.4 percent, the STOXX Europe 600 surged 2.5 percent and the Nikkei 225 rose 1.3 percent.

Analysts at National Australia Bank wrote in a note that investors remain “squarely focused on the prospect of economies reopening supported by COVID-19 stats that broadly speaking continue to suggest reopening plans remain on track”.

However, Nikko Asset Management’s John Vail suggested that “enthusiasm should be dialed down quite a bit for the market”, adding that the upcoming second quarter “earnings warning season” is likely to feature “more negative ones than positive ones”.

Wednesday, 3 June 2020

Markets rise as COVID-19 crisis “now appear largely under control”

Markets rose on Tuesday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 jumped 1.6 percent and the Nikkei 225 rose 1.2 percent.

Markets shrugged off civil unrest in the US as investors focused on the prospect of fuller business activity as restrictions imposed to curb the spread of the COVID-19 pandemic are lifted.

“This has largely been about the pace of the economic restart, which appears to be coming online somewhat more quickly than believed to be the case even a month or six weeks ago,” said Bill Northey, senior investment director at US Bank Wealth Management.

“The global health and financial crises now appear to be largely under control,” wrote Joseph Capurso, head of international economics at Commonwealth Bank of Australia, in a note.

Tuesday, 2 June 2020

Markets rise with better manufacturing PMIs

Markets rose on Monday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 rose 0.8 percent.

Recent economic data provide hopeful signs that the global economy has bottomed.

In the US, the Institute for Supply Management said its manufacturing index climbed to 43.1 last month from an 11-year low of 41.5 in April.

IHS Markit’s manufacturing PMI for the euro zone rose to 39.4 in May from 33.4 in April.

The Caixin/Markit manufacturing PMI for China rose to 50.7 in May from 49.4 in April.

The improved economic data come as economies around the world begin re-opening but protests across the US at the death of an unarmed black man at the hands of a white police officer in Minneapolis raised concerns of a resurgence in COVID-19.

Monday, 1 June 2020

Stock market rally at risk from rising US-China tension

Stocks continued to rally last week, with the S&P 500 rising 3 percent to finish the month of May with a 4.5 percent gain.

However, while the re-opening of economies from COVID-19 lockdowns has been boosting markets, a new risk is rising: US-China geopolitical tension.

After repeatedly accusing China of being responsible for the spread of COVID-19, US President Donald Trump raised the ante on Friday by ordering an end to Washington’s special treatment of Hong Kong in response to China's passing of a national security law on the city.

From Reuters:

Some investors said Trump’s move firmly brings back to the fore an issue that had receded earlier this year when Washington and Beijing struck a Phase 1 deal in their months-long battle over trade terms...

“What Hong Kong represents is longer than a one-day or one-year issue,” said Jim Paulsen, chief investment strategist at the Leuthold Group. Paulsen said he believes that geopolitical tensions are likely to hang over markets over the longer term...

[Erin Browne, a portfolio manager at Pimco,] said the tensions may weigh on the Phase 1 trade deal. “While a repeal of the Phase 1 trade deal between the U.S.-China would hurt market sentiment into an important election year for President Trump, the risks of that happening are escalating,” she said.

Saturday, 30 May 2020

Markets mixed as Trump shows restrained response to China

Markets were mixed on Friday.

The STOXX Europe 600 fell 1.4 percent but the S&P 500 reversed an early decline to close up 0.5 percent.

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

Early concerns over US-China tension eased somewhat as US President Donald Trump ordered an end to Washington’s special treatment of Hong Kong in response to China's passing of a national security law on the city but did not mention any further trade restrictions.

Economic data on Friday continued to be negative though. Japan's retail sales fell 13.7 percent year-on-year in April while US consumer spending plunged 13.6 percent last month, the biggest drop on record.

However, analysts are looking past these data.

Chris Low, chief economist at FHN, said that if the economy re-opens quickly “without consequence”, consumers’ accumulating savings “represent considerable spending power in the second half”.

Friday, 29 May 2020

Market rally stalls after China moves ahead on HK security law

Markets were mixed on Thursday.

The Nikkei 225 surged 2.3 percent and the STOXX Europe 600 jumped 1.6 percent. However, the rally lost steam by the end of the day and the S&P 500 fell 0.2 percent.

US-China tension kept equities in check after China’s parliament on Thursday approved a decision to go forward with national security legislation for Hong Kong.

“There’s going to be some push back. No one was anticipating that in the immediate future,” said Ed Moya, senior market analyst at OANDA. “It could derail some of the reopening momentum we’ve had.”

Thursday, 28 May 2020

Markets rise despite US-China tensions amid “huge amount of liquidity”

Markets were mostly higher on Wednesday. The S&P 500 jumped 1.5 percent and the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, though, markets were mixed. The Nikkei 225 rose 0.7 percent but the Shanghai Composite fell 0.3 percent.

“Mounting US-China tensions bodes ominous for the global economy amid pandemic fragilities,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note after the US said it was considering sanctions on Chinese firms and officials over China’s plans to impose new security legislation on Hong Kong.

Elsewhere, though, investors shrugged off the rising geopolitical tension.

In Europe, market sentiment was boosted by a stimulus plan from the European Commission while US stocks were buoyed by hopes for an economic recovery as restrictions are relaxed.

However, David Kelly, chief global strategist at JPMorgan Asset Management, said that the recovery will take some time and that the rally is being driven mainly by large flows of money.

“You got a huge amount of liquidity with nowhere to go,” said Kelly.

“We will see a start of a recovery, but it shouldn’t be misinterpreted,” Kelly said. “We’re not going to get back to full employment or even an unemployment rate below 10% any time this year, and maybe it will take most of next year.”

Wednesday, 27 May 2020

Markets rise, new market highs “a real possibility”

Markets rose on Tuesday.

The S&P 500 rose 1.2 percent, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 surged 2.6 percent.

The S&P 500 briefly moved above its 200-day moving average on Tuesday but failed to hold that level.

“In the first attempt to get above the 200-day, the bears made a stand,” said Scott Redler, partner with T3Live.com.

Still, some analysts see a good chance of a more sustained move over the 200-day moving average.

“Maybe you spend a couple months not making much progress, but as long as investors are as defensive as they are, I wouldn’t get too negative,” said Chris Verrone, Strategas head of technical strategy.

“Week by week, the active bulls are proving more powerful than the active bears,” suggested Redler.

“The underlying trend is still pretty healthy,” said Robert Sluymer, Fundstrat technical analyst.

Wharton School professor Jeremy Siegel told CNBC on Tuesday that new stock market highs this year is “a real possibility”.

Even Mohamed El-Erian, the chief economic advisor at Allianz who had warned of dire economic and market consequences from the coronavirus in early February, has become more optimistic.

“It’s not just stocks. It’s other risk assets. It’s fixed income. It’s currencies, and it’s commodities,” he said. “So it’s really good to see an across the board risk-on tone, which we haven’t had really for quite a while.”

Saturday, 23 May 2020

Markets mixed amid concerns over increased US-China tension

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 was flat while the Shanghai Composite fell 1.9 percent.

Markets were initially weighed down by China's announcement of a plan to impose a new security law in Hong Kong, raising concerns of fresh tension between China and the US.

“Justifiably, the Hong Kong Security bill on the agenda for the NPC in Beijing today evokes insecurity in the markets; as risks of US China conflict and renewed Hong Kong protests grow,” analysts at Mizuho Bank said in a note.

However, investors turned more optimistic over the course of the day.

Vasu Menon, executive director of investment strategy, wealth management at OCBC Bank, said that “we’ve seen this happen before and while it might impact the Hong Kong market, I’m not sure whether it will spillover into the rest of Asia, rest of the world unless it’s results in a significant economic impact as Covid-19 has”.

Meanwhile, on the COVID-19 front, Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases in the US, said on Friday that Moderna’s vaccine data looked “promising”.

Fauci also acknowledged that the US “can’t stay locked down for such a considerable period of time that you might do irreparable damage and have unintended consequences, including consequences for health”.

Tom Lee, founder and head of research at Fundstrat Global Advisors, claimed that “there has yet to be a second wave in re-opened economies” and thinks that “stocks offer pretty good risk/reward”.

Friday, 22 May 2020

Markets fall, economic recovery could be “slow and bumpy”

Markets fell on Thursday.

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

A report from IHS Markit on Thursday showed that its flash manufacturing PMI for the US rose to 39.8 in May from 36.1 in April while the flash services PMI rose to 36.9 from 26.7.

IHS Markit's flash composite PMI for the euro zone rose to 30.5 in May from 13.6 in April.

While the PMI data indicated some improvement in the economy, strategists at Cantor Fitzgerald wrote in a note that “markets are priced to perfection on the expectation that there is only smooth sailing” and warned that should COVID-19 cases re-emerge, “the path back to growth will be slow and bumpy”.

Still, Savita Subramanian, Bank of America's head of US equity and quantitative strategy, suggested that low equity allocation among investors and bond yields near zero “can be the catalyst for the rotation into stocks, driving the market higher”.

Thursday, 21 May 2020

Markets rise as COVID-19 cases hit record

Markets were mostly higher on Wednesday.

The S&P 500 jumped 1.7 percent, the STOXX Europe 600 rose 1.0 percent and the Nikkei 225 rose 0.8 percent.

The World Health Organization reported on Wednesday that the number of newly reported COVID-19 cases worldwide hit a daily record with more than 100,000 new cases over the last 24 hours.

Still, investors remain hopeful that economies will recover as movement restrictions imposed to curb the spread of the diseasex` are relaxed.

“With re-openings now the vogue,” said Jim Paulsen, chief investment strategist at the Leuthold Group, “it seems almost assured that fundamental economic and earnings reports are headed for a period of improvement.”

Other analysts are less optimistic.

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, said in a note that stocks have already “priced in some degree of reopening success” but “consumer spending may be slower to come back than the market appears to currently expect”.

Peter Toogood, CIO of financial services business The Embark Group, told CNBC on Wednesday that the US stock market “has been expensive and remains expensive”.

Wednesday, 20 May 2020

Markets mixed amid doubts about rally

Markets were mixed on Tuesday.

The S&P 500 fell 1.1 percent and the STOXX Europe 600 fell 0.6 percent but the Nikkei 225 rose 1.5 percent.

Stocks were weighed down late in the day by doubts over Moderna's COVID-19 vaccine candidate, hopes for which had driven Monday's gains.

But many fund managers have had doubts about the stock market rally anyway.

A global fund manager survey by Bank of America found that two-thirds called the rally from the March low a “bear-market rally” rather than a new bull market.

Tuesday, 19 May 2020

Markets rise as end of COVID 19 downturn seen

Markets rose on Monday.

The S&P 500 jumped 3.2 percent, the STOXX Europe 600 surged 4.1 percent and the Nikkei 225 rose 0.5 percent.

Kristina Hooper, Invesco’s chief global market strategist, wrote that “the stock market has largely shrugged off the damage created by the pandemic-related cessation of economic activity” while Joe Saluzzi, co-head of equity trading at Themis trading, said that “the bets are coming in that we seen an end coming in sooner rather than later”.

A report by Moderna that it is seeing “compelling” early data from a phase-one clinical trial for its experimental COVID-19 vaccine helped boost markets, with Oanda’s senior market analyst Edward Moya saying that a vaccine “is a gamechanger” for an economic recovery but also warning that it “is still months away from being finalized”.

In the meantime, though, Morgan Stanley’s European equity strategist Graham Secker said that “this economic upturn is already largely priced in” by investors.

“We think valuations look full as we see further earnings downgrades as necessary for 2H20 and into 2021,” he said.

In contrast, Morgan Stanley's head of US equity strategy, is bullish “based on the equity-risk premium reaching the same levels observed in March 2009” when the US stock market began its post-financial crisis bull run.

Monday, 18 May 2020

Japan, Germany in recession

The Japanese economy has fallen into recession.

A report on Monday showed that the Japanese economy contracted by 0.9 percent in the first quarter. This followed a 1.9 percent decline in the fourth quarter of 2019.

After two consecutive quarterly declines in GDP, the Japanese economy is now tehnically in recession.

"We expect the worst is yet to come, with the state of emergency in Japan and the severity of the pandemic among Western nations continuing to derail the Japanese economy," said Naoya Oshikubo, senior economist at SuMi TRUST.

Last week, Germany reported that its economy shrank 2.2 percent in the first quarter. This followed a 0.1 percent contraction in the fourth quarter of last year, which means that Germany is also in a technical recession.

Elsewhere in the euro area, France and Italy, which have suffered more from the COVID-19 pandemic, had reported economic contractions of 5.8 percent and 4.7 percent in the first quarter respectively.

Saturday, 16 May 2020

Markets rise amid grim economic data

Markets rose on Friday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 rose 0.6 percent.

Economic data released on Friday were mostly grim.

In the US, retail sales fell 16.4 percent in April and industrial production fell 11.2 percent.

Eurozone GDP fell 3.8 percent in the first quarter.

However, China's industrial output rose 3.9 percent in April from the previous year. Retail sales, though, fell 7.5 percent.

Also encouraging was a rise in the University of Michigan's consumer sentiment index for the US to 73.7 in May based on a preliminary reading from 71.8 in April.

Jim Baird, chief investment officer at Plante Moran Financial Advisors, said that “the gradual lifting of restrictions across the country should signal a bottoming in the economy and the first steps toward recovery”.

Friday, 15 May 2020

Economy may have bottomed but COVID-19 virus “may never go away”

Markets were mixed on Thursday.

The S&P 500 rebounded from an early decline to finish 1.2 percent higher.

Earlier in the day, the STOXX Europe 600 plunged 2.2 percent and the Nikkei 225 tumbled 1.7 percent.

US stocks rose even as a report showed that weekly jobless claims rose by 2.98 million last week.

Diane Jaffee, senior portfolio manager at TCW, suggested that the economy has hit bottom but Minneapolis Federal Reserve President Neel Kashkari said that a “V-shaped recovery is off the table”.

“Stock pickers are just wildly guessing. At this point, I want to listen more to health experts than investors,” said Kashkari.

Unfortunately, some health experts are warning that the COVID-19 pandemic is not going away anytime soon.

“This virus just may become another endemic virus in our communities and this virus may never go away,” said Dr. Mike Ryan, executive director of the WHO's health emergencies program, at a media briefing in Geneva on Wednesday.

Thursday, 14 May 2020

Markets fall as Powell describes downturn as “without modern precedent”

Markets fell on Wednesday.

The S&P 500 fell 1.8 percent, the STOXX Europe 600 fell 1.9 percent and the Nikkei 225 fell 0.5 percent.

Federal Reserve Chairman Jerome Powell said on Wednesday that the “scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II”.

This leaves stocks vulnerable to another significant pullback, especially with the market, especially in the US, already seen as expensive.

“The market is pretty high and the Fed has put a lot of money in here,” David Tepper, founder of Appaloosa Management, told CNBC on Wednesday. Before Wednesday’s sell-off, it was “maybe the second-most overvalued stock market I’ve ever seen,” he said.

On Tuesday, hedge fund manager Stanley Druckenmiller told the Economic Club of New York: “The risk-reward for equity is maybe as bad as I’ve seen it in my career.”

Wednesday, 13 May 2020

S&P 500 tumbles as US at risk of more “suffering and death”

Markets were mixed on Tuesday.

The S&P 500 tumbled 2.1 percent and the Nikkei 225 fell 0.1 percent but the STOXX Europe 600 rose 0.3 percent.

“The economic worries are still front and center here. Even though there are reopenings, they’re going to go slowly,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Indeed, Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases in the US, warned the Senate Health Committee that the US could face more “suffering and death” if states start to reopen too quickly.

“It’s hard to see equities powering further higher,” Rob Carnell, chief economist and head of research for Asia-Pacific at ING. “Any further dollops of stimulus are gonna be fairly marginal.”

Meanwhile, the US stock market's rebound from its March low has brought it back into expensive territory. According to Refinitiv, the S&P 500 now trades at 22.5 times projected earnings, the most expensive valuation since October 2000 during the bursting of the dotcom bubble.

Tuesday, 12 May 2020

Markets mixed amid renewed COVID-19 fears

Markets were mixed on Monday.

The S&P 500 was flat, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 rose 1.0 percent.

After a rally driven by hopes of economies reopening with the relaxation of restrictions imposed to curb the spread of COVID-19, investors turned cautious amid reports that some countries like Germany and South Korea are seeing an acceleration of new infections after easing restrictions.

Russ Mould, investment director at AJ Bell, said markets were realising that “the V-shaped recovery will not be as fast as expected”.

“I think it’s pretty clear that if you open too fast, it’s going to have significant consequences,” said Michael Yoshikami, founder and CEO of Destination Wealth Management.

While many are calling the resurgence in cases a second wave, Jung Eun-Kyeong, director-general of South Korea's Centers for Disease Control and Prevention, said that this is not correct as the “first wave has not ended”.

Jung said that the second wave will come in autumn or winter.

Monday, 11 May 2020

COVID-19 pandemic: “It’s not over until it’s over”

Stocks rose last week, with the S&P 500 rising 3.5 percent.

Stocks rose despite grim economic data released last week, including a report on Friday that showed that the US economy lost 20.5 million jobs in April.

Instead, investors appear to be focused on the expected economic recovery as countries begin or plan to remove restrictions on activities that had been put in place to contain the spread of COVID-19.

However, the experiences of some countries that have so far been among the more successful in containing the disease suggest caution is warranted.

South Korea reported 34 new COVID-19 cases on Sunday, the highest daily number in a month. 26 were domestically transmitted infections while eight were imported cases.

The resurgence came as South Korea eased some social distancing restrictions and is seeking to fully reopen schools and businesses after the daily tally of cases had hovered around 10 or less in recent weeks.

“It’s not over until it’s over,” said South Korean President Moon Jae-in. “While keeping enhanced alertness till the end, we must never lower our guard regarding epidemic prevention.”

New COVID-19 infections also appear to be rising in Germany just days after the country eased social restrictions.

Over the weekend, the Robert Koch Institute reported that its estimate of the reproduction number of the disease, that is, the number of people infected by each case, is 1.1. It had been below 1 for most of the last three weeks.

Saturday, 9 May 2020

US stocks jump as employment dives

Markets rose on Friday.

The S&P 500 jumped 1.7 percent, the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 surged 2.6 percent.

Investors shrugged off a report on Friday showing that the US economy lost 20.5 million jobs in April and the unemployment rate shot up to 14.7 percent.

“While this pandemic has the potential to create economic conditions that are as bad or worse than the Great Depression, the steps that the Federal Reserve Bank has already taken, coupled with the stimulus that Washington is also providing, are the main reasons why we are unlikely to re-experience that terrible time in world history”, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

Indeed, the US economy may already be recovering some jobs. Data from scheduling software company Homebase showed that while employment on 5 May was down 51 percent from before the COVID-19 shutdown, this is actually better than the 74 percent decline registered on 12 April, the worst day.

However, Sat Duhra, portfolio manager of Asia dividend income strategy at Janus Henderson Investors, told CNBC not to expect a V-shaped recovery in the economy.

“We’ve seen a bit of a V-shaped recovery in markets but that’s not how the real economy will behave,” he said.

Friday, 8 May 2020

China exports rise, US unemployment surges, UK faces biggest slump in 300 years

Markets were mostly higher on Thursday.

The S&P 500 rose 1.2 percent, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 rose 0.3 percent.

However, the Shanghai Composite fell 0.2 percent despite a report on Thursday showing that Chinese exports rose 3.5 percent in April from a year ago.

“We think the pick-up in exports is temporary and export momentum will fall in the coming months,” wrote economists at Oxford Economics.

In the US, investors shrugged off a report showing that almost 3.2 million people applied for unemployment benefits last week, bringing the total job losses amid the COVID-19 pandemic to over 33 million.

In Europe, the Bank of England left interest rates at 0.1 percent after its monetary policy meeting on Thursday but said it stands ready to take further action if deemed necessary.

The BoE mentioned that the UK economy is at risk of seeing output shrink by 14 percent in 2020, its biggest slump in over 300 years.

Earlier in the week, data had shown that the UK's COVID-19 death toll has overtaken Italy to become the highest in Europe.

Thursday, 7 May 2020

Economic news at “bottom” but “market valuations no longer as attractive”

Markets fell on Wednesday.

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

A report from ADP on Wednesday showed that US private-sector employers shed more than 20 million jobs in April.

However, market reaction was relatively muted as many appear to be looking beyond April data.

“As investors, we see this Friday’s employment report, which will show a job loss of 21 million people, as marking the bottom for terrible economic news,” wrote Bryce Doty, a senior portfolio manager at Sit Fixed Income Advisors. “So, ironically, we are becoming more optimistic about the future.”

“The stock market is certainly pricing in the beginning of a downtrend in new virus cases for the U.S. as a whole,” wrote Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

Still, some analysts note that the US stock market has become expensive.

“While we are encouraged by the stabilization of new COVID-19 cases and the massive stimulus put in place, stock market valuations are no longer as attractive,” wrote Jeff Buchbinder, equity strategist at LPL Financial, in a Wednesday research note.

Also, an economic recovery may not allow corporate earnings to recover as much as some think.

“While it’s possible that 2020 forecasts have been cut enough, we are concerned that 2021 numbers now need to be cut more aggressively,” wrote Lori Calvanasi, head of US equity strategy at RBC Capital Markets, in a Wednesday note. “We have serious doubts about whether S&P 500 profitability will be able to surpass pre-coronavirus crisis levels in 2021.”

Wednesday, 6 May 2020

Markets rise, “demand bottom behind us”

Markets rose on Tuesday.

The S&P 500 rose 0.9 percent and the STOXX Europe 600 jumped 2.2 percent.

Oil prices surged. West Texas Intermediate crude jumped 20.5 percent and Brent rose 13.9 percent.

“The market is still vulnerable but now one thing is clear, the demand bottom is behind us, and this is manifesting in oil prices which are on the rise,” wrote Magnus Nysveen, head of analysis at Rystad Energy.

Chicago Fed President Charles Evans said on Tuesday that the US economy may return to growth in the second half of the year as businesses open up again after the lockdowns to combat the COVID-19 pandemic.

Evans added that “I can’t imagine that anybody is expecting the Fed to raise the interest rates over any relevant time horizon”.

Indeed, St Louis Fed President James Bullard said that he thought the Fed’s benchmark interest rate would stay near zero for “years”, not “months”.

Bullard said that the US unemployment rate could exceed 20 percent in the second quarter, the third quarter will be a “transition” period and “by the time we get to the fourth quarter I would hope that you could have an end to the crisis and put this behind us”.

Tuesday, 5 May 2020

US stocks rebound amid easing of curbs

Markets were mixed on Monday.

The STOXX Europe 600 plunged 2.7 percent after the US criticised China on Sunday for allowing the coronavirus causing COVID-19 to emerge from a Chinese laboratory.

However, the S&P 500 rebounded from an early decline to close 0.4 percent higher.

“Some regional openings in California helped financial markets end the day on a positive note,” said Edward Moya, senior market analyst at OANDA.

Ohio and other states were also easing more curbs on businesses while outside the US, Italy, among the world’s hardest-hit countries, allowed about 4.5 million people to return to work.

Meanwhile, though, economic data remained grim, with IHS Markit reporting that its final manufacturing PMI for the euro zone sank to 33.4, its lowest since the survey began in mid-1997.

Monday, 4 May 2020

Peak in US COVID-19 cases also means “peak infectivity”

The S&P 500 fell 0.2 percent last week, its second consecutive weekly decline.

Stocks enjoyed gains early in the week on hopes of the relaxation of restrictions imposed on economies to curb the spread of COVID-19.

However, those gains were reversed in the latter part of the week, with the S&P 500 falling particularly hard on Friday by 2.8 percent.

Indeed, even as Americans began to take advantage of the relaxation of restrictions, some are worried that the pandemic could yet worsen.

“We expected that we would start seeing more significant declines in new cases and deaths around the nation at this point. And we’re just not seeing that,” said Scott Gottlieb, a former Food and Drug Administration commissioner. “If we don’t snuff this out more and you have this slow burn of infection, it can ignite at any time.”

Indeed, John Hussman, president of Hussman Invesment Trust, pointed out in his latest article that while the US rate of new infections of COVID-19 may have hit a peak, “relaxing containment at the point of ‘peak’ daily new cases also means relaxing containment at the point of peak infectivity”.

He added that while he had considered the possibility of fewer than 60,000 US fatalities a few weeks ago, “we’re now looking at the likelihood of about 90,000 by mid-year, with the potential for far greater numbers if containment is eased without offsetting practices”.

With regards to market conditions, Hussman views the recent advance as a “clearing rally” to relieve an oversold compression.

However, extreme valuations, divergent market internals and overextended conditions have created a “trap door” situation that, when seen over the past two decades, have had “unfortunate consequences”.

Saturday, 2 May 2020

Markets fall as US manufacturing shrinks further

Markets fell on Friday, with both the S&P 500 and Nikkei 225 tumbling 2.8 percent.

Most European markets were closed for a holiday.

“After one of the best months in history, it’s not overly surprising to see some profit taking here,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management.

News that the US government is considering proposals for punishing China for its handling of the COVID-19 pandemic added to downward pressure on stocks.

Miskin said that “even more strains to supply chains in the form of tariffs is rightfully being priced into the market negatively”.

Indeed, the strain on the US economy is already showing in the Institute for Supply Management's manufacturing index, which fell to 41.5 in April from 49.1 in March. The index for new orders dropped 15.1 to 27.1, the biggest monthly drop since 1951.

The IHS Markit US manufacturing PMI fell to 36.1 in April from 48.5 in March.

Friday, 1 May 2020

Markets lower, euro area faces “unprecedented” contraction

Markets were mostly lower on Thursday.

The S&P 500 fell 0.9 percent and the STOXX Europe 600 tumbled 2.0 percent.

Earlier in Asia, though, the Shanghai Composite rose 1.3 percent and the Nikkei 225 jumped 2.1 percent.

The European Central Bank left interest rates unchanged at its monetary policy meeting on Thursday but said it would make long-term loans to banks even cheaper and would set up a new shorter-term liquidity operation.

Eurozone GDP fell 3.8 percent in the first quarter and ECB President Christine Lagarde said it could shrink by 5 to 12 percent this year.

“The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime,” said Lagarde.

Thursday, 30 April 2020

Stocks jump on hopes for COVID-19 treatment and Fed support

The S&P 500 jumped 2.7 percent on Wednesday on hopes for a treatment for COVID-19.

Market sentiment was buoyed by a report from Gilead Sciences on Wednesday that its drug, remdesivir, met the primary endpoint of a clinical trial evaluating the drug as a treatment for the disease.

Also on Wednesday, the Federal Reserve announced that it would maintain its current interest rate target between 0 and 0.25 percent.

“The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the Federal Open Market Committee said in a statement after its monetary policy meeting.

The report on remdesivir and the Fed's supportive stance helped the market shrug off news that US GDP shrank at a 4.8 percent annualised rate in the first quarter.

Wednesday, 29 April 2020

Markets mixed, economic downturn may be “very protracted”

Markets were mixed on Tuesday.

The S&P 500 fell 0.5 percent and the Shanghai Composite fell 0.2 percent but the STOXX Europe 600 jumped 1.7 percent.

While markets have been cheered by recent suggestions of economies reopening, some analysts are advising caution.

Chris Gaffney, president of world markets at TIAA Bank, said that there are “a lot of folks out there saying the downturn is going to be much deeper and probably last longer than many had originally predicted”.

“We’re not gonna see, suddenly, a sudden stop in the economy become a sudden start,” Kerry Craig, a global market strategist at JPMorgan Asset Management, told CNBC on Tuesday. “It’s gonna be very protracted, it’s gonna come through very slowly and I don’t think that’s very much appreciated by what we’re seeing in the markets.”

Meanwhile, the news on the COVID-19 pandemic remained grim, with the US death toll hitting 58,233 on Tuesday, more than the toll from the Vietnam War.

While the US has the highest death toll from the virus in the world, Italy has the second highest death toll, with another 382 deaths on Tuesday, the highest since Saturday, to bring the total to 27,359.

Tuesday, 28 April 2020

Stocks shrug off oil plunge, retest of low still plausible

Stocks rose on Monday.

The S&P 500 rose 1.5 percent, the STOXX Europe 600 rose 1.8 percent and the Nikkei 225 surged 2.7 percent.

However, oil prices plunged. West Texas Intermediate crude fell 24.6 percent and Brent fell 6.8 percent.

Stock markets were able to shrug off the oil price declines as investors focused on plans to reopen economies.

“Country reopenings could anchor short-term sentiment provided the COVID-19 curve remains on a flattening tangent,” said Stephen Innes Chief Global Markets Strategist at AxiCorp.

However, some analysts think the markets may be getting ahead of themselves.

“We've got this epic battle between monetary and fiscal policy on one side, and weak economic earnings, earnings data on the other,” Tony Dwyer, managing director and chief market strategist at Canaccord Genuity.

“Having a very, very flat yield curve is telling you that the economy is going to be very slow coming out of the recession and that you want to maybe just kind of wait for some of the overbought condition that was created on this relief rally to work itself out,” he said

Indeed, Jeffrey Gundlach, CEO of DoubleLine, told CNBC on Monday that a retest of the March low is “very plausible”.

“I think we’d take out the low,” he added.

Monday, 27 April 2020

Stocks fall as global economy faces steepest contraction on record

The S&P 500 fell 1.3 percent last week, ending a two-week winning streak.

Stocks saw big declines early last week amid plunging oil prices but recovered partially in the second half of the week on hopes that the US and other economies will be reopening in the near future as tests for COVID-19 become more widely available and drugs are developed to treat the disease.

“Any sentiment around a therapy is really moving markets because it shapes expectations for a return to normalcy which would be needed to get an economic recovery started,” said Shawn Cruz, manager of trader strategy at TD Ameritrade.

However, that sentiment suffered a setback on Thursday after Gilead Science’s remdesivir reportedly failed a trial.

Meanwhile, others are warning that a vaccine could take some time to become available.

“We haven’t got a hugely good track record with vaccines for this particular virus, coronavirus, the family of viruses,” said Professor Gina Radford, former deputy chief medical officer for England. “I think those who are very used to the process of developing vaccines are saying they are not anticipating it being available until well into next year.”

That would be problematic for a global economy that is widely expected to suffer its steepest contraction on record this year.

“We are likely to see a deeper contraction in 2020 than during the global financial crisis,” said Janet Henry, global chief economist at HSBC.

“The global economy is collapsing at a pace not seen since World War Two,” said Michael Hanson, senior global economist at JPMorgan. “Staggered re-openings of economies until a vaccine is widely available imply more of a U- rather than a V-shaped recovery for the global economy.”

Still, others think that the positive response of policy-makers to the COVID-19 pandemic may be enough to turn markets around.

“On March 23, we made a low exactly on the same day that the Federal Reserve introduced what I call ‘QE4ever.’ The Fed announced that they were going to purchase bonds for the foreseeable future,” Yardeni Research president Edward Yardeni told CNBC on Friday.

Having lowered his year-end target for the S&P 500 to 2,900 early last month, Yardeni is now looking forward to a rebound.

“Sometime next year, maybe by the end of next year, we’ll be moving toward 3,500,” he said.

Saturday, 25 April 2020

US stocks rise even as economy faces large pullback in capital spending

Markets were mixed on Friday.

The S&P 500 rose 1.4 percent but the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 0.9 percent.

US stocks rose despite a report on Friday showing that US orders for durable goods tumbled 14.4 percent in March.

Lydia Boussour, senior US economist at Oxford Economics, wrote that the impact of the COVID-19 pandemic “will translate into some of the largest pullbacks in capital spending of all time”.

In Europe, BofA said that it expected stocks to gain a further 20 percent as “the root cause of the economic slump - the spread of Covid-19 - is fading”.

However, Hannah Anderson, global market strategist at JPMorgan Asset Management, warned that progress in combating the virus is “not the same as returning the economy to the place it was last fall” and said “investors should expect more volatility across all asset classes”.

Similarly, Hugh Young, managing director for the Asia Pacific region at Aberdeen Standard Investments, warned that markets “have not accurately priced in the risks” and that “the economic consequences are actually huge of what’s going on”.

Friday, 24 April 2020

Markets rise, economies shrink

Markets were mostly higher on Thursday.

The S&P 500 rose less than 0.1 percent while the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 jumped 1.5 percent.

Oil prices surged. West Texas Intermediate crude rose 19.7 percent and Brent rose 4.7 percent.

However, economic data released on Thursday were gloomy.

IHS Markit’s flash US composite output index plunged to 27.4 in April, the lowest since the series began in late 2009, from 40.9 in March.

IHS Markit’s flash eurozone composite PMI sank to 13.5 in April, its lowest reading since the survey began in mid-1998, from 29.7 in March. IHS Markit said the PMI was consistent with the bloc’s economy contracting 7.5 percent this quarter.

“The rather muted reaction relative to the amplitude of the misses proves the lack of surprise for markets, which are almost immune to data at the moment,” said Olivier Konzeoue at Saxo Markets.

However, as economies contract, Andrea Cicione, head of strategy at TS Lombard, said that the level of bad loans at banks is “worrying”.

“What the market is failing to appreciate is the size of the macroeconomic shock,” said Cicione.

Thursday, 23 April 2020

Markets rise but negative forces “remain very much intact”

Markets mostly rose on Wednesday.

The S&P 500 jumped 2.3 percent, the STOXX Europe 600 rose 1.8 percent and the Shanghai Composite rose 0.6 percent.

Oil rebounded. Brent crude rose 5.4 percent and West Texas Intermediate surged 19.1 percent.

“By no means does this suggest that a price bottom has been placed since the supply/demand forces that drove negative crude pricing this week remain very much intact,” said Jim Ritterbusch, president of Ritterbusch and Associates.

That could mean further pressure on stocks as well.

“The oil reality check has triggered a reassessment across risk assets,” wrote Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, in a note.

Indeed, Citi’s global equity strategy team says the bear market in stocks is not done.

“All bear markets include false rallies, often associated with supportive monetary policy. But markets only find a sustainable base when there are signs that cheap money is feeding through into the real economy, rather than temporarily supporting asset prices,” said the team led by Robert Buckland.