Friday, 31 July 2020

Markets fall on record US and German contraction

Markets fell on Thursday.

The S&P 500 fell 0.4 percent, the STOXX Europe 600 plunged 2.2 percent and the Shanghai Composite fell 0.2 percent.

Stocks were hit by a report that US GDP fell at a 32.9 percent annualised pace in the second quarter, the worst in history, although US stocks did recover most of its earlier loss by the end of the day.

“This is really a day that will live in infamy,” said Kent Engelke, chief economic strategist and managing director of Capitol Securities. “I could see the wall of worry increasing to a gargantuan cliff.”

In Europe, a preliminary reading showed Germany’s GDP shrank by 10.1 percent in the second quarter.

“Germany’s record drop in GDP fuels extra concern that the rest of Europe might have a deeper slump,” Edward Moya, a senior market analyst at Oanda, wrote in a note.

Thursday, 30 July 2020

US stocks rise as Fed promises “full range of tools to support the economy”

Markets were mixed on Wednesday.

The S&P 500 rose 1.2 percent but the STOXX Europe 600 slipped 0.1 percent.

Earlier in Asia, the Shanghai Composite surged 2.1 percent but the Nikkei 225 fell 1.2 percent.

At its monetary policy meeting, the Federal Reserve voted to keep its federal funds rate close to zero and again said it would keep interest rates near zero until employment recovers and inflation picks up.

At a press conference after the meeting, Fed Chairman Jerome Powell said that the Fed “is committed to using our full range of tools to support the economy and help assure that the recovery from this difficult period will be as robust as possible”.

Unfortunately, the surge in US COVID-19 cases may be hampering that recovery, with Reuters reporting that deaths nationally topped 150,000 on Wednesday.

“We have seen some signs in recent weeks that the increase in virus cases and the renewed measures to control it are starting to weigh on economic activity,” said Powell at the press conference.

Wednesday, 29 July 2020

Markets mixed, Fed to “sound prepared for further easing”

Markets were mixed on Tuesday.

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

Earlier in Asia, the Nikkei 225 fell 0.3 percent but the Shanghai Composite rose 0.7 percent.

The Conference Board’s US consumer-confidence index fell to 92.6 in July from a revised 98.3 reading in June, a sign, according to economists Kathy Bostjancic and Gregory Daco of Oxford Economics, that “consumers, in the face of rising virus cases and a reversal in labor market gains, are becoming more cautious about the continued healing of the economy”.

Still, the Federal Reserve started its two-day monetary policy meeting on Tuesday with analysts hopeful for more signs of policy easing.

“Even if tomorrow is unlikely to be the right moment for a more expansionary monetary policy approach, the Fed will no doubt sound prepared for further easing,” Commerzbank analysts told clients in a note.

The Fed on Tuesday announced that its board of governors had decided to extend until the end of the year several emergency loan programs that had been set to expire at the end of September.

Tuesday, 28 July 2020

Markets mixed as gold hits record high

Markets were mixed on Monday.

The S&P 500 rose 0.7 percent but the STOXX Europe 600 fell 0.3 percent.

Earlier in Asia, the Shanghai Composite rose 0.3 percent but the Nikkei 225 fell 0.2 percent.

Gold hit a record high, with futures settling 1.8 percent higher amid rising US-China tensions.

“Gold is probably giving us a warning,” said JJ Kinahan, chief market strategist at TD Ameritrade, but added that he is not ready to call the top.

Still, Ed Yardeni, chief investment strategist at Yardeni Research, warned that “recovery could be dampened or even aborted if the Covid-19 case count continues to mount and state governors slow or reverse the lifting of lockdown restrictions”.

Monday, 27 July 2020

Investors show “signs of trepidation” amid surging COVID-19 cases

The S&P 500 fell 0.3 percent last week amid resurgent COVID-19 case numbers in the US.

A Reuters report over the weekend said that investors are showing “signs of trepidation”. It noted that “investors poured a net $24.5 billion into bonds, the third largest weekly inflows ever recorded, while pulling $3.8 billion out of stocks”.

“We are definitely concerned,” said Nick Maroutsos, Head of Global Bonds at Janus Henderson Investors. “I don’t think you can blindly buy assets.”

Jeffrey Gundlach, chief executive officer of Doubleline Capital, said that the equity market’s leadership and frenzied buying by retail investors “is classic bear market rally activity”.

Meanwhile, this week's economic reporting started on a positive note with China reporting on Monday that profits at industrial firms rose 11.5 percent year-on-year in June, the second consecutive increase and the quickest profit profit growth since March 2019.

However, in the US, with COVID-19 cases surging, economic prospects may be about to take a turn for the worse.

“The number of outright failures of U.S. small businesses in the first months of the coronavirus pandemic was comparatively modest, but the months ahead look far grimmer as cash balances dwindle, federal help expires, and the disease surges back,” a Reuters report on Friday said.

The report noted that after a spate of optimism in June, a National Federation of Independent Business monthly survey found 23 percent of respondents in early July said they’d be out of business within six months “under current economic conditions”.

“We anticipate states will roll back or delay reopening plans ... possibly turning even more temporary closures into permanent ones,” said Yelp vice president for data science Justin Norman.

Saturday, 25 July 2020

Markets fall amid rising US-China tension

Markets fell on Friday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 fell 1.7 percent and the Shanghai Composite plunged 3.9 percent.

Markets fell after China announced on Friday that it had ordered the US to shut its consulate in Chengdu following the US demand for the closure of the Chinese consulate in Houston.

“Traders are fearful this could be the beginning of a tit-for-tat spat between the two largest economies in the world,” wrote David Madden, market analyst at CMC Markets UK.

Friday, 24 July 2020

US stocks fall as virus reasserts itself

The S&P 500 fell 1.2 percent on Thursday as investors sold large high-tech companies.

With the US now reporting a total of 3.9 million COVID-19 cases and 143,000 deaths, Michael Stritch, chief investment officer at BMO Wealth Management, said that “the virus has reasserted itself” and markets are likely to remain “aggressively flat”.

Bill Callahan, investment strategist at Schroder Investment Management, appears more optimistic.

“Washington and the Fed continue to push money into the system. And if the economy stays weak, then bonds and defensives will do quite well,” he said. “If cases slow down and the economy recovers, you’re going to see explosive moves higher in more cyclical equities and commodities.”

Thursday, 23 July 2020

Stock market in a bubble that is “likely to get bigger before it pops”

Markets were mixed on Wednesday.

The S&P 500 rose 0.6 percent but the STOXX Europe 600 fell 0.9 percent amid escalating tensions between the US and China after the US instructed China to close its consulate in Houston.

“The market feels a little more defensive than what we’ve seen,” said James Ragan, director of wealth management research at DA Davidson. “We can attribute that to the China flare up.”

Still, many analysts remain optimistic.

“A tailwind for stocks has been expectations for further stimulus from Washington and that there’s more to follow, which is warranted, given this is an election year,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman.

“There is a reasonably firm bid underneath stocks in general,” said Anik Sen, global head of equities at PineBridge Investments.

Nigam Arora wrote at MarketWatch that a new stock-market high is coming because of all the money that is being printed.

“Accept that this is a bubble, but know that this bubble is likely to get bigger before it pops,” he said.

Wednesday, 22 July 2020

Markets rise, “beginning a bull run”

Markets rose on Tuesday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.7 percent.

Market sentiment was boosted by the European Union's agreement on a €750 billion COVID-19 rescue fund.

“Today, you’re seeing optimism around a potential vaccine and also around further economic stimulus,” said Mike Skillman, chief executive officer at Cadence Capital.

Meanwhile, Matt Stucky, equity portfolio manager at Northwestern Mutual Wealth Management, said he expects the Federal Reserve and other global central banks to keep their feet “all the way down to the accelerator for awhile, which will permeate into equity prices”.

“The S&P 500 is breaking out of trading range,” said Crista Huff, founder of hedge fund Freedom Investment Partners. “We are beginning a bull run.”

Tuesday, 21 July 2020

Nasdaq, Shanghai surge but Europe has “leg up” over other regions

Markets rose on Monday.

In the US, the S&P 500 rose 0.8 percent while the Nasdaq Composite surged 2.5 percent.

Elsewhere, the STOXX Europe 600 rose 0.8 percent while the Shanghai Composite surged 3.1 percent.

Markets were boosted by news that EU leaders have a framework agreement on a recovery fund to stimulate euro zone economies.

Indeed, BlackRock said Europe has a “leg up” over other regions, including the US and emerging markets, as the global economic reopening gathers pace.

“Europe’s health capabilities and containment measures position the region well for a domestic recovery,” global chief investment strategist Mike Pyle said.

Monday, 20 July 2020

Stocks rise as COVID-19 cases surge at record rate

The S&P 500 rose 1.2 percent last week, fuelled by optimism over a coronavirus vaccine and hopes of a post-pandemic economic recovery.

In the meantime, though, the number of COVID-19 cases in the US and the rest of the world have continued to surge.

The total number of cases worldwide crossed 14 million on Friday as the World Health Organization reported a record increase of 237,743 cases.

This was followed by another record rise of 259,848 cases on Saturday, with the biggest increases coming from the US, Brazil, India and South Africa.

The largest increase came from the US, with 71,484 new cases. The total number of deaths in the country passed 140,000 on Saturday.

Saturday, 11 July 2020

Markets mixed as China surge ends

Markets were mixed on Friday.

The S&P 500 rose 1.1 percent and the STOXX Europe 600 rose 0.9 percent.

US stocks shrugged off another rise in COVID-19 cases while European stocks were boosted by positive industrial output data from Italy and France.

However, earlier in Asia, stocks fell. The Shanghai Composite fell 1.9 percent after an eight-day surge.

Matt Maley, chief market strategist at Miller Tabak, told CNBC on Thursday that Chinese stocks are vulnerable to a pullback.

“It’s the most overbought it’s been since 2014, even more overbought than its all-time high in 2016,” said Maley.

Friday, 10 July 2020

Markets mixed as full lockdown in US seen unlikely

Markets were mixed on Thursday.

In the US, the S&P 500 fell 0.6 percent but the Nasdaq Composite rose 0.5 percent to a record high.

Elsewhere, the STOXX Europe 600 fell 0.8 percent but Asian markets rose, with the Shanghai Composite jumping 1.4 percent and the Nikkei 225 rising 0.4 percent.

In the US, investors were concerned with the continuing rise in COVID-19 infections after cases in California, Texas and Florida hit new daily record highs on Wednesday.

“We have never gotten out of the first wave,” said Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases.

Still, David Bahnsen, chief investment officer of The Bahnsen Group, said that “mortalities are under control, and we’re not going back to a full societal lockdown”. In the meantime, it is “hard for the market to form an opinion against risk assets with the liquidity and tight spreads that the Fed has produced”.

In contrast, BofA head of equity research Savita Subramanian sees headwinds for the market.

“We’ve had a reopening frenzy, and now we’re seeing payback,” she said.

Thursday, 9 July 2020

Continuing US COVID-19 surge raising risk of lockdown

More than 60,000 new COVID-19 infections were reported across the US on Wednesday, the highest daily tally of any country since the virus emerged late last year in China, according to Reuters. Deaths rose by more than 900 for the second straight day, the highest level seen since early June.

The number of confirmed US cases had crossed the 3 million mark on Tuesday.

In response to the surge of cases across the country, New Jersey adopted a stringent face-mask order on Wednesday, and New York City unveiled a plan to allow public school students back into classrooms for just two or three days a week.

In Arizona, as hospital admissions rose because of rising infections, the occupancy rate of adult intensive care unit beds has risen to 91 percent.

While the S&P 500 rose 0.8 percent on Wednesday to resume its rally after falling 1.1 percent on Tuesday, some analysts are becoming concerned about the continuing surge in COVID-19 cases.

“Up until now the U.S. has been rewarded because of expectations that we wouldn’t see any kind of significant lockdowns even if infection rates grew,” Invesco chief global strategist Kristina Hooper told CNBC on Wednesday. “But the reality is that when the hospitals fill up and there are no more beds, then governors are forced to reimpose lockdown measures.”

Wednesday, 8 July 2020

Markets fall, US COVID-19 cases cross 3 million

Markets were mostly lower on Tuesday.

The S&P 500 fell 1.1 percent and the STOXX Europe 600 fell 0.6 percent.

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

US stocks fell amid unrelenting bad news on the COVID-19 spread in the country, which Reuters reported as having crossed 3 million confirmed cases on Tuesday.

The University of Washington’s Institute for Health Metrics and Evaluation projected on Tuesday that US deaths would reach 208,000 by 1 November.

Tuesday, 7 July 2020

Markets rise but face “second leg down” as COVID-19 cases surge

Markets rose on Monday.

The S&P 500 jumped 1.6 percent, the STOXX Europe 600 rose 1.6 percent and the Shanghai Composite soared 5.7 percent.

Stocks in the US were boosted by a report from the Institute for Supply Management showing that its service sector index jumped to 57.1 in June from 45.4 in May.

Still, with COVID-19 cases continuing to surge, some analysts warned that the improvement in the economy may not be sustained.

“Over the last few weeks, the COVID situation in the U.S. has worsened signi´Čücantly to the point where the U.S. is now a notable outlier among advanced economies,” Goldman Sachs chief economist Jan Hatzius wrote in a note.

Hatzius now expects a contraction in 2020 US GDP of 4.6 percent compared to a previous forecast for a 4.2 percent decline.

However, BCA Research chief global strategist Peter Berezin remains confident that markets will be able to shrug off concerns over COVID-19.

“While the pace of reopening will slow, there is little appetite for the sort of extreme lockdown measures that were implemented in March,” he said. “Around the world, both fiscal and monetary policy will remain highly accommodative, which should provide a supportive backdrop for stocks.”

In contrast, financial analyst Gary Shilling thinks there will be “a second leg down” for stocks.

Monday, 6 July 2020

US jobs rebound in June but “much tougher slogging ahead”

The S&P 500 rose 4 percent last week.

The gain in stocks was partly attributed to the better than expected US employment report on Thursday, which showed that the economy added 4.8 million jobs in June and the unemployment rate fell to 11.1 percent from 13.3 percent in May.

However, with the COVID-19 pandemic still raging in the US, it may be difficult for the US economy to maintain the improvement.

“The end of the lockdowns has allowed for a faster than expected recovery in jobs in the past two months, but more recent events and data suggest much tougher slogging ahead,” said Sal Guatieri, senior economist at BMO Capital Markets.

“The data was collected through the middle of June,” Crossmark Global Investments’ chief market strategist Victoria Fernandez told CNBC last week. “It was really the second half of June when we saw states like where I am here in Texas start to reverse their opening up plans. That did not get captured in this number completely.”

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”.