Saturday, 31 July 2021

Markets fall, eurozone economy rebounds

Markets fell on Friday.

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

A preliminary estiimate of eurozone GDP growth on Friday showed that the group grew 2 percent in the second quarter, rebounding from contractions in the prior two quarters.

Claus Vistesen, chief Europe economist at Pantheon Macro, said in a note this week that “the third quarter will be even better, as momentum carries over uninterrupted” but added that “new virus cases are now shooting higher — driven by the Delta variant — and evidence from the U.K. suggests that it is holding back economic activity”.

COVID-19 is also a concern in the US, where Brian Belski, chief investment strategist at BMO, suggested that increased concerns over the delta variant and “its potential implications for reopening momentum” seemed to have played a “key role” in market action.

Indeed, it should now be clear to the Centers for Disease Control and Prevention that vaccination alone cannot prevent the spread of the variant after a study of a sample of cases from Massachusetts showed that 74 percent of them were already fully vaccinated while four out of five hospitalisations occurred among the fully vaccinated.

Friday, 30 July 2021

Markets rise, not too concerned with US growth

Markets rose on Thursday.

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

Investors shrugged off news that US second-quarter GDP accelerated 6.5 percent on an annualised basis, considerably less than the 8.4 percent Dow Jones estimate.

Craig Erlam, senior market analyst at Oanda, said that the less-than-expected GDP growth “was due to a drop in inventories so nothing to be too concerned about”.

Thursday, 29 July 2021

Markets mixed, Fed “some way away” from goal

Markets were mixed on Wednesday.

The S&P 500 was flat, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 fell 1.4 percent.

The Federal Reserve kept interest rates in a target range near zero, reiterating its view that the economy continues to “strengthen” despite the spread of the Delta variant of COVID-19.

“We have some ground to cover on the labor market side,” said Fed Chairman Jerome Powell in a press conference. “I think we’re some way away from having had substantial further progress toward the maximum employment goal.”

Wednesday, 28 July 2021

Markets fall, CDC reverses mask recommendation for vaccinated people

Markets fell on Tuesday.

The S&P 500 fell 0.5 percent, snapping a five-day winning streak. The STOXX Europe 600 also fell 0.5 percent.

“Market volatility is on the rise, as worries about new virus strains have been exacerbated by stretched positioning and light summer trading,” Jean Boivin, head of BlackRock Investment Institute, said in a note.

Indeed, the Delta variant of the COVID-19 virus has forced the Centers for Disease Control and Prevention to acknolwedge what had already been known elsewhere: that vaccination alone is not enough to halt the spread of the disease.

“In recent days I have seen new scientific data from recent outbreak investigations showing that the Delta variant behaves uniquely differently from past strains of the virus that cause Covid-19,” said CDC Director Dr Rochelle Walensky on Tuesday.

“In areas with substantial and high transmission, CDC recommends fully vaccinated people wear masks in public, indoor settings, to help prevent the spread of the Delta variant and protect others -- this includes schools.”

Tuesday, 27 July 2021

US stocks rise but face “most formidable version” of COVID-19

Markets were mixed on Monday.

The S&P 500 rose 0.2 percent to a record high but the STOXX Europe 600 dipped 0.1 percent.

Asian stocks were also mostly lower. The Shanghai Composite tumbled 2.3 percent and the Hang Seng plunged 4.1 percent but the Nikkei 225 rose 1.0 percent on its return to trading.

Craig Johnson, chief market technician at Piper Sandler, said that US stocks “remain resilient” as an “impressive start to earnings season has kept the buy the dip sentiment alive”.

Indeed, investors shrugged off a report showing that new home sales in the US unexpectedly fell 6.6 percent in June.

In the meantime, David Kostin, Goldman Sachs’ head of US equity strategy, said that rising infections from the Delta variant of the COVID-19 virus “should not pose a major market risk”.

That remains to be seen, though, as many are considering the re-imposition of mask requirements, social distancing and other measures as vaccinations are proving to be less effective in stemming the disease than previously hoped.

Reuters reports that in Singapore, where Delta is the most common variant, three quarters of COVID-19 cases occurred among vaccinated individuals while in Israel, 60 percent of hospitalised cases are in vaccinated people.

“The last thing you want is to loosen restrictions when you're confronting the most formidable version of the virus yet,” said Eric Topol, director of the Scripps Research Translational Institute in La Jolla, California.

Monday, 26 July 2021

S&P 500 at new high while COVID-19 spirals "out of control"

The S&P 500 rose 2 percent last week to end at a new all-time high.

The resurgence of COVID-19 in the US has not put investors off stocks, but whether that continues remains to be seen.

On Sunday, Dr Jerome Adams, the former surgeon general during the Trump administration, told CBS News that the pandemic is "spiraling out of control" again.

"More mitigation is coming, whether it's masking or whether it's closures or whether it's your kids having to return to virtual learning, that is coming," said Adams.

Saturday, 24 July 2021

Markets mixed, COVID-19 resurgence threatens economy

Markets were mixed on Friday.

The S&P 500 rose 1.0 percent and the STOXX Europe 600 jumped 1.1 percent. However, the Shanghai Composite fell 0.7 percent.

Strong earnings reports, especially from technology stocks, helped boost sentiment in the US, and the economy is expected to acccelerate to a 9.2 percent growth rate in the second quarter.

However, the resurgence of COVID-19 in the US and around the world may dampen economic growth.

“Export platforms like Vietnam are being locked down now,” said Joseph Brusuelas, chief economist at consulting firm RSM. That could hurt global supply chains.

The US reported an average of about 43,700 new cases per day over the past week, up 65 percent over the previous seven days and nearly three times as high as the level two weeks ago.

And while much hope for containing the pandemic has been pinned on vaccination, Israel, where the Delta variant is the dominant strain, has reported that Pfizer and BioNTech’s COVID-19 vaccine is just 39 percent effective.

Friday, 23 July 2021

Markets rise amid “pretty positive backdrop”

Markets rose on Thursday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.6 percent and the Shanghai Composite rose 0.3 percent.

Investors shrugged off news that US jobless claims unexpectedly rose to 419,000 last week.

“This economy is still in an incredibly strong rebound, corporate revenue and profits are increasing sharply, and it’s a pretty positive backdrop,” said Ron Temple, head of US equities and co-head of multi-asset investing at Lazard Asset Management.

Investors were encouraged by the European Central Bank's announcement on Thursday after its monetary policy meeting that it would maintain a “persistently accommodative” stance until it meets its target of inflation stabilising at two percent over the medium term.

COVID-19 remains a threat, with the seven-day average of new cases in the US up about 53 percent from last week, hospitalisations up 32 percent and deaths up 19 percent.

The director of the Centers for Disease Control and Prevention, Dr Rochelle Walensky, said on Thursday that the Delta variant “is one of the most infectious respiratory viruses we know of”.

Still, there is also hopeful news on the pandemic front, with former FDA chief Dr Scott Gottlieb saying on Thursday that the US will see “a peak sometime probably around late August, early September” and that “this may be over sooner than we think”.

Thursday, 22 July 2021

Markets rise, investors “conditioned to buy the dip”

Markets rose on Wednesday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 jumped 1.6 percent and the Nikkei 225 rose 0.6 percent.

Investors shrugged off the continuing rise in COVID-19 cases even as local US officials are asking Americans to once again wear masks indoors as the Delta variant surges in the country.

“Perhaps investors have just come to embrace the notion that the reaction function to a new wave of the virus is unlikely to be the same as the reaction function employed in the spring of 2020,” said Goldman Sachs’ Chris Hussey.

“We will get a follow-on rally as investors have been conditioned to buy the dip,” said Rich Steinberg, chief market strategist at The Colony Group.

In contrast, Matt Maley, equity strategist at Miller Tabak, said that “what we’ve seen here are the early warning shots of a correction that we’ll see probably... in late August, September, October”.

Wednesday, 21 July 2021

Markets rebound, economy to “fully recover”

Markets rose on Tuesday.

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

“We remain constructive on equities and see the latest round of growth and slowdown fears premature and overblown,” wrote Dubravko Lakos-Bujas, head of US equity strategy at JPMorgan.

While COVID-19 infections continue to rise in much of the world, with the US for example averaging about 26,000 daily cases in the last seven days, more than double the average from a month ago, many analysts do not see much impact on the economic recovery.

Chris Zaccarelli, CIO at Independent Advisor Alliance, said that it is “willing to let the sell-off run its course and buy the dip on the belief that the economy will fully recover and return to its prior growth trajectory, bringing most of the cyclical companies in the airline, travel and leisure industries along with it”.

Tuesday, 20 July 2021

Stocks fall, oil plunges

Markets fell on Monday.

The S&P 500 tumbled 1.6 percent, the STOXX Europe 600 plunged 2.3 percent and the Nikkei 225 fell 1.3 percent.

Oil prices plunged after OPEC and its allies agreed to raise output. West Texas Intermediate crude fell 7.5 percent while Brent fell 6.8 percent.

Allianz chief economic advisor Mohamed El-Erian said that markets are exhibiting “concerns about market technicals and concerns about growth”.

Morgan Stanley chief US equity strategist Mike Wilson noted: “Market breadth has been deteriorating for months and is just another confirmation of the mid-cycle transition, in our view. It usually ends with a material (10-20%) index level correction.”

Rising COVID-19 cases also remained a concern, with the US reporting nearly 26,000 new cases a day in the last seven days through Sunday, up from a seven-day average of around 11,000 cases a day a month ago.

Still, billionaire investor Bill Ackman is relatively sanguine about the surge in cases, saying on Monday: “I don’t think it’s going to change behavior to a great extent.”

“We are going to have an extremely strong economy coming in the fall,” he added.

Monday, 19 July 2021

England celebrates "Freedom Day"

England marks the end of more than a year of COVID-19 lockdown restrictions on Monday, a day that local media have dubbed "Freedom Day".

From midnight, laws in England requiring facemasks to be worn in shops and other indoor settings lapsed, as did capacity limits in bars and restaurants, and rules limiting the number of people who can socialise together.

"This is the right moment but we’ve got to do it cautiously. We’ve got to remember that this virus is sadly still out there," said UK Prime Minister Boris Johnson in a video message recorded on Sunday.

Not everybody will be heeding the advice on caution though.

"I want to dance, I want to hear live music, I want the vibe of being at a gig, of being around other people," a member of the public in London was quoted as saying.

Britain reported 48,161 new cases on Sunday and is forecast to soon have more new infections each day than it did at the height of a second wave of the virus earlier this year.

The government is hoping that the relatively high vaccination rate in the country will keep severe illness and deaths low.

Saturday, 17 July 2021

Markets fall amid “concerns over surging inflation” and rising COVID-19 infections

Markets fell on Friday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 fell 1.0 percent.

A report on Friday showed that the preliminary consumer sentiment index for July from the University of Michigan came in at 80.8, down from 85.5 last month.

Andrew Hunter, senior US economist at Capital Economics, said that the report suggested “concerns over surging inflation”.

And while many companies have posted strong earnings results, JJ Kinahan, TD Ameritrade chief market strategist, said that “with earnings expectations so high in general, it takes a really big beat for a company to impress”.

Meanwhile, in Europe, the UK reported 51,870 new COVID-19 cases on Friday, the first time since mid-January that daily infections have risen above 50,000.

With the UK government remaining committed to plans to ease almost all pandemic restrictions, there is widespread fears that the country was heading for disaster.

“Policies that open up the country in the midst of a growing wave of infections are counterproductive in the most extreme,” warned William Haseltine, a US virologist and chair and president of ACCESS Health International.

Christina Pagel, director of the Clinical Operational Research Unit of London’s UCL, warned that there was potential for a new variant of COVID-19 to emerge this summer, and “any variant that becomes dominant in the UK will likely spread to the rest of the world”.

Infections in the US may also be following the same trajectory, with the seven-day average of new daily infections standing at 26,448, up 67 percent from a week ago.

Dr Scott Gottlieb, former commissioner of the Food and Drug Administration, warned that with so many people still unvaccinated and unwilling to wear masks, “this is just going to spread through the population”.

Friday, 16 July 2021

Markets fall, could “grind higher” with continued Fed stimulus

Markets mostly fell on Thursday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 1 percent and the Nikkei 225 fell 1.2 percent.

However, the Shanghai Composite rose 1.0 percent. Reports on Thursday showed that China's GDP grew 7.9 percent year-on-year in the second quarter while retail sales and industrial production rose 12.1 and 8.3 percent respectively in June from a year earlier.

In the US, stocks fell despite positive data. Initial jobless claims for the week ending 10 July was 360,000, a new pandemic-era low, while second-quarter earnings results continued to beat expectations.

“A lot of news has been priced in,” suggested Liz Ann Sonders, chief investment strategist at Charles Schwab.

Still, Federal Reserve Chair Jerome Powell on Thursday told the Senate banking panel that the central bank will maintain its accommodative monetary policies unless high inflation is sustained for a longer period than is currently expected.

Jeffrey Gundlach, DoubleLine Capital chief executive, said that as long as the Fed maintains its “free money stimulus ... I think the stock market can stay at nosebleed levels as it has been and continue to grind higher”.

Thursday, 15 July 2021

Markets mixed, “economic reactivation will be very difficult”

Markets were mixed on Wednesday.

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

In his semiannual testimony before the House Committee on Financial Services on Wednesday, Federal Reserve Chairman Jerome Powell reitered his view that the central bank can wait before it starts to ease its bond purchases despite surging inflation readings.

World Health Organization officials reported in a briefing on Wednesday that COVID-19 infections are rapidly rising again in the US and Latin America.

“Health and well-being must be prerequisites for reactivating the economy in the context of COVID-19 because if the pandemic is not brought under control, economic reactivation will be very difficult,” said Dr Carissa Etienne, director of the Pan American Health Organization, the WHO’s regional bureau for the Americas.

Wednesday, 14 July 2021

US inflation, COVID-19 cases jump

Markets were mixed on Tuesday.

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

US stocks were weighed down by a report showing that the consumer price index increased 5.4 percent in June from a year earlier, the largest jump since August 2008.

“What this really shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period,” said Sarah House, senior economist for Wells Fargo’s corporate and investment bank.

In contrast, Cliff Hodge, chief investment officer at Cornerstone Wealth, said: “Moving forward we expect these inflation numbers to begin to cool.”

In Europe, concerns over the fast-spreading Delta variant of COVID-19 weighed on sentiment after France, the Netherlands, Greece and Spain announced new restrictions on Monday.

In the meantime, infections in the US are once again on the rise as the Delta variant takes hold as the dominant strain, with the seven-day average of newly confirmed cases having climbed to about 23,300 a day, almost double the average from a week ago.

“Unfortunately that’s also been accompanied by some increases in the number hospitalized, as well as emergency department evaluations, for people who are ultimately confirmed to have Covid-19,” said Dr Jay Butler, deputy director for infectious diseases at the Centers for Disease Control and Prevention.

Tuesday, 13 July 2021

US, European stocks hits record highs

Markets rose on Monday.

The S&P 500 rose 0.4 percent to a record high and the STOXX Europe 600 rose 0.7 percent to also hit a record high.

“Most investors are expecting blockbuster earnings results and these will likely be peak earnings results,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors.

“Continued earnings momentum should refuel investors’ confidence in the recovery amid slowdown concerns and drive a rotation back into Value,” said Bank of America’s Savita Subramanian in a note on Sunday.

Investors mostly shrugged off the continuing COVID-19 pandemic.

“The delta variant is ripping around the world at a scorching pace, driving a new spike in cases and death,” World Health Organization Director-General Tedros Adhanom Ghebreyesus said.

However, Dr Soumya Swaminathan, the WHO’s chief scientist, said that among vaccinated populations, the majority of cases “are mild or asymptomatic infections”.

Saturday, 10 July 2021

S&P 500 hits record high amid “strong growth backdrop”

Markets mostly rose on Friday.

The S&P 500 rose 1.1 percent to a record high and the STOXX Europe 600 rose 1.3 percent. However, the Nikkei 225 fell 0.6 percent.

Tom Lee, Fundstrat’s head of research, said in a note that the “growth scare” may have peaked on Thursday and that “equities might be shifting toward a broader risk on”.

Mike Wilson, Morgan Stanley’s chief US equity strategist, told clients that “a correction will create buying opportunities given a still strong growth backdrop”.

Friday, 9 July 2021

Markets fall as COVID-19 cases rise

Markets fell on Thursday.

The S&P 500 fell 0.9 percent and the STOXX Europe 600 plunged 1.7 percent.

“Increased Covid cases, particularly delta variants, have caused concerns that the economic acceleration will slow,” said Timothy Lesko of Granite Investment Advisors. “With markets at all-time highs and some valuations stretched there is little room for economic slowdown in this market.”

Indeed, with the highly transmissible delta variant now the dominant COVID-19 strain in the US, scientists and other health experts have warned that indoor mask mandates and other public health measures will likely make a return in the country this fall.

“We are heading for a very dangerous fall, with large swaths of the country still unvaccinated, a surging delta variant and people taking off their masks,” said Lawrence Gostin, director of the World Health Organization’s Collaborating Center on National and Global Health Law.

Thursday, 8 July 2021

S&P 500 hits record high, COVID-19 cases rising again

The S&P 500 rose 0.3 percent to a record high on Wednesday.

“Traders will be watching as the S&P 500 tech index moves closer to its relative price high established last September,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “A break above that level would certainly reinforce a sustained leadership cycle for tech.”

Meanwhile, though, the threat from COVID-19 lingers, with the US government deploying a COVID-19 surge team to provide public health support in southwest Missouri, where the spread of the virus is filling up hospital beds once again.

“We're already starting to see places with low vaccination rates starting to have relatively big spikes from the Delta variant,” said Dr Ashish Jha, dean of the Brown University School of Public Health.

Indeed, even in the UK, where 64.6 percent of the population are reportedly fully vaccinated but infections are nevertheless rising again, some scientists have condemned the government's reopening plans as “dangerous and unethical”.

Wednesday, 7 July 2021

Stocks mixed, oil hits highest level in 6 years

US stocks were mixed on Tuesday, with the S&P 500 down 0.2 percent but the Nasdaq Composite up 0.2 percent.

Analysts have become more cautious on stocks.

Michael Wilson, chief US equity strategist at Morgan Stanley, said in a note that “equity markets are likely to take a break this summer as things heat up”.

Sarat Sethi, portfolio manager at DCLA, warned that “we’re in a little bit of a euphoria short-term” and that “the market’s going to be very picky as to what sectors are going to do well”.

Citi analysts think that July could be “an unsettling month” due to “loftier inherent expectations” following such strong first-quarter reports.

Oil prices fluctuated sharply. It jumped to its highest level in six years after talks between OPEC and its oil-producing allies were postponed indefinitely but ended the day down.

Tuesday, 6 July 2021

Markets mixed, OPEC meeting cancelled

Markets were mixed on Monday.

The STOXX Europe 600 rose 0.3 percent and the Shanghai Composite rose 0.4 percent but the Nikkei 225 fell 0.6 percent.

The US stock market was closed for a holiday.

Oil prices rose after a meeting between oil producer group OPEC and its partners aimed at fixing crude output was called off.

Monday, 5 July 2021

Stocks expensive as economy expected to boom

The S&P 500 rose 1.7 percent last week, boosted on Friday by a report that the US economy added 850,000 jobs in June.

The persistent rise in the stock market means that stocks are now expensive.

“Valuations are rapidly approaching historically expensive levels, and some experts are worried about how high stocks are relative to their earnings,” CNN's Paul La Monica wrote over the weekend.

La Monica noted that the cyclically adjusted price-to-earnings ratio, or CAPE, is currently hovering around 38.

“That's well above levels of about 27 from late 2007 right before the global financial crisis and it's also significantly higher than the CAPE ratio of around 33 way back in September 1929 just before the historic October market crash at the onset of the Great Depression,” he wrote.

Still, some analysts remain sanguine.

“The [CAPE] ratio is less useful after a recession or a period of deep earnings growth contraction,” said Sean Darby, global head of strategy for Jefferies.

La Monica also cited Aash Shah, senior portfolio manager with Summit Global Investments, who thinks that stocks will rise with a booming economy.

Saturday, 3 July 2021

S&P 500 hits record high after “goldilocks-type” jobs report

Markets were mostly higher on Friday.

The S&P 500 rose 0.8 percent to a record high, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.3 percent. However, the Shanghai Composite plunged 2.0 percent.

A report in the US showing a gain of 850,000 jobs last month was greeted positively by analysts.

Aberdeen Standard Investments deputy chief economist James McCann called it “a strong report”.

Angelo Kourkafas, an investment strategist at Edward Jones, said that “it was one of these goldilocks-type of reports”, suggesting that it would not trigger an earlier Federal Reserve tightening.

Friday, 2 July 2021

S&P 500 hits record high, economic growth to “stay strong”

Markets were mostly higher on Thursday.

the S&P 500 rose 0.5 percent to a record high and the STOXX Europe 600 rose 0.6 percent. However, the Nikkei 225 fell 0.3 percent.

Economic data on Thursday were mixed.

The ISM manufacturing PMI fell to 60.6 in June from 61.2 in May.

The Caixin/Markit China manufacturing PMI fell to 51.3 in June from 52.0 in May.

IHS Markit’s eurozone manufacturing PMI rose to 63.4 in June, the highest reading since the survey began in June 1997, from 63.1 in May.

Brent Schutte, chief investment strategist at Northwestern Mutual, said that he expected economic growth is “going to stay strong” and that “you still want to be invested in things where earnings growth is more cyclical in nature”.

Thursday, 1 July 2021

Markets mixed, “litany of reasons to stay constructive”

Markets were mixed on Wednesday.

The S&P 500 rose 0.1 percent to a record high, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 was flat.

With the S&P 500 rising 2 percent in June, its fifth positive month in a row, Tom Lee, managing partner and head of research at Fundstrat Global Advisors, said that investors have “a litany of reasons to stay constructive”.

Jeff Kilburg, the chief investment officer at Sanctuary Wealth, cited the Federal Reserve's continued commitment to the economic recovery as reason for optimism.

Meanwhile, the rise in the COVID-19 delta variant across the world has not dampened sentiment in most developed nations.

Dr Scott Gottlieb, the former Food and Drug Administration commissioner, told CNBC on Wednesday that the overall impact of the variant will “be substantially reduced because so many people have become vaccinated”.