Markets rise, “will rally into the end of the year”

Markets rose on Thursday.

The S&P 500 jumped 1.3 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 surged 2.1 percent.

China’s Commerce Ministry issued a statement on Thursday morning saying that the two sides agreed to resume trade negotiations early next month.

US economic data on Thursday were mostly positive. The private sector added 195,000 jobs in August while the ISM nonmanufacturing index rose to 56.4 in August from 53.7 in July.

However, Markit's services PMI fell from 53.0 in July to 50.7 in August, below the “flash” estimate issued two weeks ago.

Still, Mislav Matejka, JP Morgan’s chief global equity strategist, thinks that the US economy “is not headed for a recession” and that “the market will rally into the end of the year”.

Markets rise, S&P 500 expected to advance further by year end

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

Earlier in Asia, the Nikkei 225 rose 0.1 percent and the Hang Seng jumped 3.9 percent after Hong Kong Chief Executive Carrie Lam said she would scrap an extradition bill that sparked months of protests in the city.

Oil rose. West Texas Intermediate crude surged 4.3 percent and Brent jumped 4.2 percent.

The Federal Reserve's beige book released on Wednesday showed that, overall, the US economy expanded at the same “modest pace” seen in earlier reports this year as a majority of business owners “remain optimistic about the near-term outlook”.

Wall Street also remains relatively optimistic, with the 17 top stock prognosticators tracked by CNBC’s Market Strategist Survey expecting the S&P 500 to rise 2.2 percent from current levels on average by the end of the year.

Markets mixed as US manufacturing data add to fears of more weakness ahead

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 0.2 percent while the Nikkei 225 was flat.

US economic data on Tuesday were mixed.

The ISM manufacturing index fell to 49.1 in August from 51.2 in July but Markit's manufacturing PMI for August came in at 50.3, above an initial estimate of 49.9.

Jim O’Sullivan chief US economist with High Frequency Economics, wrote that while the ISM data does not yet signal a recession, it was “weaker than expected” and “will undoubtedly add to fears that more weakness is ahead”.

US construction spending rose 0.1 percent in July, below expectations but rebounding partially from a 1.3 percent fall in June.

Stocks mixed, risk assets may be driven “a lot higher” by year’s end

Markets were mixed on Monday.

The STOXX Europe 600 rose 0.3 percent and the Shanghai Composite jumped 1.3 percent but the Nikkei 225 fell 0.4 percent.

US markets were closed for a holiday.

Economic data were relatively positive.

The Caixin/Markit China manufacturing PMI for August was 50.4, better than expected and indicating an expansion, in contrast to the government PMI released over the weekend.

While the eurozone manufacturing PMI showed a contraction in August, it rose to 47.0 from 46.5 in July.

Leuthold Group’s chief investment strategist Jim Paulsen told CNBC last week that he expects a breakout for stocks by year’s end as the economy improves.

He said that with “all of the policy stimulus we’ve introduced...I think it’s going to start to improve economic reports”.

“If we find out it turns out better than feared, many, many portfolios are under allocated to risk assets and will have to re-adjust themselves trying to get more risk which could drive risk assets a lot higher,” he said.

US and China raise tariffs, China plans more support for economy as manufacturing weakens

A new round of tariffs were imposed on Sunday by the US and China on each other's goods.

The US began imposing 15 percent tariffs on a variety of Chinese goods including footwear, smart watches and flat-panel televisions while China began imposing new duties on US crude oil.

Meanwhile, the trade war between the two countries may already be impacting the Chinese economy.

A report on Saturday by China’s National Bureau of Statistics showed that its manufacturing purchasing managers' index fell to 49.5 in August from 49.7 in July.

The report was followed by an announcement by the State Council on Sunday that the government plans to provide more support for its economy, including investing in infrastructure projects and regional development.

Markets rise as tumbling sentiment triggers “buy signal”

Markets rose on Friday.

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

US economic data on Friday were mixed.

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

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

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

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

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

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

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

Stocks may decline further, signs indicate “excessive optimism”

Markets were mostly higher on Thursday.

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

Some analysts think that stocks may see further declines.

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

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

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

However, that could represent a “buying opportunity”.

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

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

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

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

US yield curve inverts further but stocks have time to soar

Markets were mixed on Wednesday.

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

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

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

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

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

Markets mixed, "downside risks are increasing"

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

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

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

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

A slowdown in the US is becoming evident though.

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

Markets mixed amid signs of waning confidence

Markets were mixed on Monday.

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

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

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

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

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

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

Confidence in corporate America may also be declining.

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

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

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

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

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

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

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

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

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

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

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

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

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

US stocks plunge after US-China trade war escalates

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

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

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

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

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

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

Markets mixed, US manufacturing PMI falls below 50

Markets were mixed on Thursday.

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

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

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

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

Markets were mostly higher on Wednesday.

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

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

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

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

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

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

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

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

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

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

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

Markets fall with Treasury yields

Markets were mostly lower on Tuesday.

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

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

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

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

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

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

Markets rise but US recession widely expected by 2021

Markets rose on Monday.

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

However, the rally may not last.

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

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

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

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

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

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

Stocks seen falling further

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

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

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

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

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

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

Markets rose on Friday.

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

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

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

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

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

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

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

Markets were mixed on Thursday.

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

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

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

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

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

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

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

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

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

US stocks plunge, yield curve inverts amid weak economic data

Markets were mostly lower on Wednesday.

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

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

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

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

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

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

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

Markets were mixed on Tuesday.

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

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

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

However, some analysts remain cautious.

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

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

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

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

US stocks fall as recession risk raised

Markets were mixed on Monday.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Markets were mostly lower on Friday.

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

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

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

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

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

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

Markets rose on Thursday.

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

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

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

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

Stocks turn around from sharp fall, oil plunges

Markets were mixed on Wednesday.

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

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

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

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

US stocks rebound but more weakness and volatility expected

Markets were mixed on Tuesday.

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

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

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

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

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

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

Markets tumble as US-China trade war escalates further

Markets fell sharply on Monday.

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

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

That provoked the US to label China a currency manipulator.

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

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

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

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

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

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

US stocks could see continued volatility

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

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

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

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

Markets fall amid escalating trade tensions

Markets fell on Friday.

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

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

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

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

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

Markets were mixed on Thursday.

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

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

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

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

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

Fed disappoints investors despite cutting interest rates

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

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

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

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

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

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

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

Markets mixed as US-China trade tension rises with Trump warning

Markets were mixed on Tuesday.

The S&P 500 fell 0.3 percent and the STOXX Europe 600 plunged 1.5 percent.

However, earlier in Asia, both the Nikkei 225 and the Shanghai Composite rose 0.4 percent.

Investors became concerned after US President Donald Trump warned China that if no trade agreement is reached before the US presidential elections and he is re-elected next year, the terms of an agreement would be much tougher than what is currently being discussed.

Meanwhile, though, Goldman Sachs has raised its year-end target for the S&P 500 to 3,100 from 3,000.

“The dovish Fed pivot has driven the equity market rally in 2019, and we expect low interest rates will continue to support above-average valuations going forward,” wrote David Kostin, the bank’s chief US equity analyst.

Kostin did acknowledge that policy uncertainty, arising, for example, from the US-China trade war, is a risk to stocks.

Indeed, Morgan Stanley chief economist, Chetan Ahya said that “easing won’t suffice to power a strong recovery”. Rather, “the key to reviving corporate confidence and growth lies in addressing the fundamental economic headwind of the day ... trade tensions today”.

Stocks mixed, sterling falls on prospect of no-deal Brexit

Markets were mixed on Monday.

The S&P 500 slipped 0.2 percent and the Nikkei 225 fell 0.2 percent but the STOXX Europe 600 was flat.

As US stocks pulled back from record highs, Michael Wilson, chief equity strategist at Morgan Stanley, wrote in a note to clients: “We think this latest surge will fail again, as we don’t expect a Fed cut to rekindle growth the way market participants may be hoping, and now pricing.”

In Europe, sterling fell over 1 percent, touching a 28-month low.

Sterling fell after Michael Gove, a member of newly-elected UK prime minister Boris Johnson's cabinet who is in charge of planning for a no-deal Brexit, wrote in the Sunday Times: “No deal is now a very real prospect.”

Narrow US stock market rally at risk from volatility spike

The S&P 500 rose 1.7 percent last week, ending at a record high.

Sven Henrich, founder and lead market strategist at NorthmanTrader, noted that the stock market's rally to all-time highs has been accompanied by falling volatility as measured by the CBOE Volatility Index or VIX.

“The VIX follows some very specific patterns that show compression,” he told CNBC on Friday, pointing to a series of lower highs and lower lows in the VIX.

Henrich said that when volatility “compresses too much, then we see these spikes” in the VIX.

Henrich added that the Federal Reserve's monetary policy decision this week, widely expected to be a rate cut, could be the trigger for such a spike.

Henrich also said that “while we see the Nasdaq making new highs, there’s no visible expansion in new highs versus new lows in these indicators”, indicating that “participation [is] waning in favor of a few individual stocks on the Nasdaq”.

Brendan Coffey at Forbes made a similar point for the market as a whole.

Coffey noted that the Russell 2000 has started lagging the S&P 500 “by an unusually wide amount”.

He said that it is “still a bull market, but there are signs it may be going to pasture”.

US stocks hit record highs as economy grows better than expected

Markets mostly rose on Friday.

The S&P 500 rose 0.7 percent to a record high and the STOXX Europe 600 rose 0.3 percent.

However, Asian markets were mixed, with the Shanghai Composite rising 0.2 percent but the Nikkei 225 falling 0.5 percent.

A report on Friday showed that the US economy grew at a 2.1 percent rate in the second quarter, better than economists expected.

US corporate results announced on Friday were also generally better than expected. Alphabet in particular jumped 9.6 percent after announcing a massive buyback programme.

Indeed, Blackstone chief investment strategist Joseph Zidle told CNBC that the Federal Reserve may not cut rates as much as many are expecting.

“Inflation is not nearly as weak as the market expects,” he said. “Economic growth is slowing, but I think we’re going to avoid a recession for a long time.”

Zidle added that that could lead to increased volatility due to a “rerating of risk assets”.

In contrast, Richard Bernstein Advisors portfolio strategist Dan Suzuki told CNBC that correction risks are rising because growth is slowing.

“When the Fed has historically cut rates, unless you had some kind of combined effort from the fiscal stimulus side of things, it’s been generally more of a bearish sign than it has a bullish sign,” said Suzuki.

US and European stocks fall despite ECB expecting interest rates “at their present or lower levels”

Markets were mixed on Thursday.

The S&P 500 fell 0.5 percent, the STOXX Europe 600 fell 0.6 percent but the Shanghai Composite rose 0.5 percent.

The European Central Bank prepared markets for more easing measures on Thursday, saying that it expects its key interest rates to remain “at their present or lower levels” at least through the first half of 2020.

ECB President Mario Draghi said at a press conference on Thursday that “a significant degree of monetary stimulus continues to be necessary to ensure that financial conditions remain very favorable and support the euro area expansion.”

However, not everyone was impressed by the announcement.

“No meat on the bone on what the package/stimuli might entail,” wrote Piet Christiansen, senior ECB/euro-area analyst at Danske Bank, in a tweet.

Meanwhile, some positive economic data from the US also failed to boost stocks. Durable goods orders rose 2 percent last month while new applications for jobless benefits fell to 206,000 during the week ended 20 July.

“P/E expansion is responsible for almost all the price appreciation this year, and stocks are starting to look a little pricey. Not yet to scary levels, but something to watch,” wrote Ed Keon, chief investment strategist at QMA, a quantitative equity arm of PGIM.

Markets rise amid “mixed technical backdrop”

Markets rose on Wednesday.

The S&P 500 rose 0.5 percent to a record high, the STOXX Europe 600 rose less than 0.1 percent and the Shanghai Composite rose 0.8 percent.

“The mixed earnings picture and comments on the economy that we have heard from companies so far now coincides with a somewhat mixed technical backdrop for the market in the near-term,” said Dan Russo, chief market strategist at Chaikin Analytics.

Indeed, MarketWatch reported that measures of market breadth have deteriorated in recent weeks.

And corporate earnings could remain weaker than currently expected.

“Anything less than a rapid rebound in the global economy will probably result in weaker earnings than the [current forecasts],” said Oliver Jones, economist at Capital Economics, “which in turn would probably cause global equities to struggle”.

Markets rise on trade hopes and earnings reports, UK faces hard Brexit

Markets rose on Tuesday.

The S&P 500 rose 0.7 percent, the STOXX Europe 600 rose 1.0 percent and the Nikkei 225 rose 1.0 percent.

Stocks were boosted by news that face-to-face talks between US and Chinese trade negotiators would begin next week as well as stronger-than-expected earnings reports.

“Any incremental news on trade will be received well,” said Doug Foreman, chief investment officer at Kayne Anderson Rudnick.

Meanwhile, more than 18 percent of S&P 500 companies have posted quarterly results this earnings season. According to FactSet data, more than 78 percent of them have reported better-than-expected earnings.

In the UK, Boris Johnson was elected to lead the Conservative Party and become the next prime minister. Johnson has insisted that the UK must leave the EU by the 31 October deadline “come what may”, creating concerns that it would do so without a deal.

US economy at risk of recession, Fed easing could make it worse

Democratic presidential candidate Elizabeth Warren sees a possible US recession.

I warned about an economic crash years before the 2008 crisis, but the people in power wouldn’t listen...

When I look at the economy today, I see a lot to worry about again. I see a manufacturing sector in recession. I see a precarious economy that is built on debt — both household debt and corporate debt — and that is vulnerable to shocks. And I see a number of serious shocks on the horizon that could cause our economy’s shaky foundation to crumble.

While Warren is a politician and may have a political agenda in warning about a recession, others have also sounded such a warning.

Morgan Stanley's chief US economist Ellen Zentner said in a report that “the path to the bear case of a U.S. recession is still narrow, but not unrealistic”, with a probability of about 20 percent.

However, she added that if trade tensions escalate further, growth could be cut from a projected 2.2 percent in 2019 to a negative 0.1 percent in 2020.

And while the Federal Reserve is expected to cut interest rates, Zentner warned that Fed policy easing could be negated by increasing pressure from tariffs that could pull both the US and global economy into recession.

Indeed, Steve Ricchiuto, the US chief economist of Mizuho Americas, said that Fed easing could exacerbate any coming economic slowdown by keeping interest rates excessively low.

A rate cut “will incite undesired risk taking by borrowers and deepen the next recession, which will unnecessarily increase the cost to society,” Ricchiuto told clients in a recent research note.

US economic data suggesting recession risk

The S&P 500 fell 1.2 percent last week as investors continued to watch for clues relating to a Federal Reserve interest rate cut at its monetary policy meeting later this month while also monitoring corporate earnings reports.

In the meantime, one of the more prominent bears is warning of a possible US economic recession.

Gluskin Sheff’s David Rosenberg told CNBC last Thursday that economic data are “certainly suggesting of a significant growth turndown right now in the U.S. economy”.

David Haggith at The Great Recession Blog lists several indicators suggesting that the US economy may be headed for a recession.

US stocks fall as NY Fed clarifies rate stance

Markets were mixed on Friday.

The S&P 500 fell 0.6 percent but the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 surged 2.0 percent.

US stocks lost momentum after investors realised that the Federal Reserve may not be as prepared for a big rate cut as previously expected. A spokeman for the New York Federal Reserve said that President John Williams’ assertion that policymakers need to “act quickly” as economic growth slows was drawing from research, not hinting at what may happen at this month’s Federal Open Market Committee meeting.

Still, some continue to expect a big cut.

“They really need to convince guys like me and the people that control a lot of the money on Wall Street that they are truly serious about reinflating the economy,” said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management.

US stocks rise but US-China trade war still poses a risk

Markets were mixed on Thursday.

The S&P 500 rose 0.4 percent but the STOXX Europe 600 fell 0.2 percent and the Nikkei 225 plunged 2.0 percent.

In the US, stocks were supported by a comment by New York Federal Reserve President John Williams that the central bank needed to “act quickly” when the economy was slowing and rates were low.

Japanese stocks were dragged down by a report showing that Japan's exports fell 6.7 percent in June from a year earlier.

Asian stocks in general were also weighed down by trade issues.

“Donald Trump’s renewed trade threats this week undermine relief from the resumption of US-China trade talks agreed to by Presidents Trump and Xi at June’s G20 meeting,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note.

And US stocks could still get hit by the trade war, according to CFRA Research investment strategist Lindsey Bell.

Bell noted that “we haven’t gotten indication that they’re making major progress yet”.

Bell said that there are risks to corporate earnings “primarily in the fourth quarter of this year” and that corporations “are going to bring guidance down as they release second-quarter earnings”.

Markets fall, US-China trade talks still have a “long way to go”

Markets fell on Wednesday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 0.3 percent.

Markets may have been weighed down by comments from US President Donald Trump on Tuesday that the US and China still have a “long way to go” on trade and that the US could still slap additional tariffs on Chinese goods.

Meanwhile, US economic data released on Wednesday were mixed. While the Federal Reserve's beige book survey showed that businesses were generally positive, another report showed that new building permits fell 6.1 percent in June while housing starts fell 0.9 percent.

Some analysts remain homeful on the market.

“There are good reasons to believe that despite the downbeat expectations, earnings season could come in better than expected—which would be good for markets,” Brad McMillan, chief investment officer at Commonwealth Financial Network said in a note.

Markets mixed, “pain trade remains up”

Markets were mixed on Tuesday.

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

“The bullish move that some equity markets enjoyed thanks to the slight improvement in U.S.-China trade talks, and the chatter about the Federal Reserve lowering rates, has run out of steam, and some traders are taking a breather,” wrote David Madden, market analyst at CMC Markets UK.

However, the latest Bank of America Merrill Lynch fund managers survey suggests that there is room for further gains as cash allocations remain well ahead of historical averages.

“The dovish Fed and trade truce have caused investors to reduce cash and add risk, but their expectations of an earnings recession and debt deflation still dominate sentiment,” Michael Hartnett, BofAML’s chief investment strategist, said in a statement. “The pain trade for the summer remains up in stocks and yields.”

JP Morgan sees “upside case for equities”

Markets rose on Monday, with US indices eking out gains to close at record highs.

A report on Monday showed that China’s GDP growth slowed in the second quarter to 6.2 percent, the lowest since 1992, but markets reacted little to it.

“The GDP figures matched market expectations to the dot,” wrote Carl Weinberg, chief international economist at High Frequency Economics.

Instead, investors may be mostly focusing on potential rate cuts by central banks.

In a note on Monday, JP Morgan's chief US equity strategist Dubravko Lakos-Bujas wrote that they are “raising our S&P 500 12-month price target to 3,200 as our upside case for equities is increasingly in play with Fed and Trump easing on policy while investor positioning/sentiment remains low”.

A stock market melt-up, however, is unlikely, according to Mark Haefele, global chief investment officer at UBS Global Wealth Management.

“While we expect modest upside for stocks in our base case, valuations and corporate fundamentals don’t point to a ‘melt-up’. Earnings growth remains subdued and multiples have only modest scope for further expansion,” he wrote.

S&P 500 at record high at risk of rate-cut disappointment

The S&P 500 closed at an all-time high of 3,013.75 on Friday.

Stocks were driven by expectations for an interest rate cut by the Federal Reserve at the end of this month after Fed Chairman Jerome Powell's congressional testimony last week.

In his testimony Powell said that the Fed is prepared to “act as appropriate to sustain the expansion”.

Indeed, some investors think a 50 basis-point cut is possible, with the Fed funds futures market placing a 23.5 percent chance of such a move as of Friday.

“Historically the Fed has wanted shock and awe when they ease,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.

In contrast, some question the need for a rate cut at all.

“Unemployment is below the Fed’s maximum employment target, prices are as stable as they have ever been in the history of the country, and the yield on a 30-year Treasury yield is 50 basis points above its all-time low,” noted Michael O’Rourke, chief market strategist at JonesTrading.

“I’m having a hard time figuring out why they’re planning to cut,” said Mark Stoeckle, CEO and senior portfolio manager at Adams Funds.

Indeed, Michael Schumacher, global head of rate strategy and managing director at Wells Fargo Securities, suggested that the Fed is “going to disappoint the market” by not cutting as much as it already anticipates.

Anthony Grisanti, founder and president of GRZ Energy, said: “I don’t think he’s going to cut rates at the end of the month.”

S&P 500 closes at new high, driven by “Fed put”

Markets mostly rose on Friday.

The S&P 500 rose 0.5 percent to close above 3,000 for the first time ever. The Nikkei 225 rose 0.2 percent and the STOXX Europe 600 rose marginally.

Rate cuts continued to be a focus of attention on Friday, with Chicago Federal Reserve president Charles Evans saying that “a couple of rate cuts” is needed “in order to get the inflation outlook up”.

Patti Domm at CNBC noted that the rate-cut talks have encouraged the view that there is a “Fed put” on the stock market.

The Fed “is the factor,” she quoted Michael Farr of Farr, Miller & Washington as saying.

“I’ve now come to the conclusion the Fed is going to to cut rates not because of the weakness in the U.S. economy but because they want to make the coordinated effort to forestall a global recession,” said Sam Stovall, chief investment strategist at CFRA.

Indeed, Domm noted that the “Fed’s anticipated rate cut is unusual in that it comes at a time of very low unemployment and an economy that is growing at trend of about 2%” and “with core CPI rising at a 2.1% pace year over year, one of the highest readings during the recovery”.

S&P 500 hits new high as Powell gives strong hint of rate cut

Markets were mixed on Thursday.

The S&P 500 rose 0.2 percent to an all-time high while the Nikkei 225 rose 0.5 percent. However, the STOXX Europe 600 fell 0.1 percent.

Hopes for a rate cut by the Federal Reserve continued to drive market gains after Fed Chairman Jerome Powell told the Senate Banking Committee on Thursday that a preemptive rate cut could be necessary even if economic and job growth remain strong.

“Markets were in buoyant mood on Thursday as Fed Chairman Jerome Powell gave his strongest indication yet that the Federal Reserve will slash interest rates at the July 30-31 meeting,” said Raffi Boyadjian, senior investment analyst at XM.

Rajeev De Mello, chief investment officer at Bank of Singapore, said that “it’s much clearer that we have a rate cut” at the end of this month, “probably followed by one or more rate cuts” in the next few months.

However, the US 10-year Treasury yield rose 5.8 basis points after an afternoon Treasury bond sale saw weaker-than-expected demand.

US stocks rise as July rate cut seen as “all but certain”

Markets were mixed on Wednesday.

In the US, the Nasdaq Composite rose 0.7 percent to a record high while the S&P 500 rose 0.5 percent, touching an intraday record high in the process.

However, elsewhere, the STOXX Europe 600 fell 0.2 percent and the Shanghai Composite fell 0.4 percent.

US stocks rose after Federal Reserve Jerome Powell indicated that the central bank is considering interest rate cuts.

In his testimony to the US Congress, Powell said that “economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the U.S. economy”. He added that the Fed is prepared to “act as appropriate to sustain the expansion”.

“A rate cut in July is now all but certain,” said Aberdeen Standard Investments senior global economist James McCann.

Markets mixed, US economy showing “broad signs of recovery”

Markets were mixed on Tuesday.

The S&P 500 rose 0.1 percent but the STOXX Europe 600 fell 0.5 percent.

Earlier in Asia, the Nikkei 225 rose 0.1 percent but the Shanghai Composite fell 0.2 percent.

Many investors are probably waiting for the two-day testimony before Congress by Federal Reserve Chairman Jerome Powell due to start Wednesday to gain more insights into Fed monetary policy after a strong jobs report last week lowered expectations for a rate cut.

Indeed, forecasters at UBS think that the US economy is bouncing back.

“We are growing again. Across a lot of indicators, there are broad signs of recovery since the first quarter,” said UBS economist Sam Coffin.

Markets fall on lower rate-cut expectations, Japan-S Korea dispute

Markets fell on Monday.

The S&P 500 fell 0.7 percent while the STOXX Europe 600 dipped slightly.

Earlier in Asia, though, stocks were sharply lower. The Shanghai Composite plunged 2.6 percent and the KOSPI tumbled 2.2 percent. The Nikkei 225 fell 1.0 percent.

Markets mostly fell on lowered expectations for interest rate cuts but in Asia, a political dispute between Japan and South Korea over wartime labour added to concerns.

Japan imposed restriction on exports to the latter after recent South Korean court rulings awarded damages to Koreans claiming to have been forced to work for Japanese firms during World War II. Koreans are calling for a boycott of Japanese goods in retaliation.

Meanwhile, BlackRock has downgraded its global growth outlook for the second half of the year but still sees a good environment for US stocks.

Jean Boivin, head of the BlackRock Investment Institute, wrote that central banks are creating a “benign environment” and does not see a risk of recession for this year. “Based on that, the next few months do look pretty constructive for markets,” he said.

In contrast, Morgan Stanley has downgraded global equities despite expecting a rate cut because it believes economic weakness matters more for stocks.

Fed rate cut may not happen but stocks may rally anyway

The S&P 500 rose 1.7 percent last week despite a 0.2 percent decline on Friday after hitting a record high on the previous trading session.

The S&P 500 fell on Friday after the US employment report showed that the economy gained 224,000 new jobs in June. That report lowered expectations for a 50-basis-point rate cut by the Federal Reserve in July although a 25-basis-point cut is still expected.

“A rate cut in July is still all but inevitable,” wrote Luke Bartholomew, investment strategist at Aberdeen Standard Investments.

However, a MarketWatch report suggested that that may not be accurate.

The report noted that “at the June Fed meeting the median forecast by Fed officials was for no rate cuts in 2019, and some voting members of the Fed’s interest-rate-setting committee, such as the bank’s vice chairman for supervision, Randy Quarles, have publicly taken aim at any justification for a rate cut”.

“The level of certainty [that the Fed will cut in July] is not justified,” John Vail, chief global strategist at Nikko Asset Management, was quoted as saying.

Still, PNC Financial co-chief investment strategist Jeffrey Mills thinks that a rate cut may not be necessary to sustain the stock market rally.

“You have about 50% of individual stocks in the S&P 500 now trading above their one month highs,” Mills said, suggesting that market technicals are in good shape.

Markets dip after strong US jobs report

Markets were mixed on Friday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 fell 0.7 percent.

Earlier in the day, though, Asian stocks rose. The Nikkei 225 and the Shanghai Composite both rose 0.2 percent.

Investor sentiment turned down after a report showing that the US economy created 224,000 new jobs in June. That lowered expectations for a 50-basis-point rate cut by the Federal Reserve in July although a 25-basis-point cut is still expected.

“I don’t think it is large enough to steer them away from an interest-rate cut,” said Carl Tannenbaum, chief economist at Northern Trust.

“I think we’ll get 25 basis points. Anything more is hallucinatory,” said Brian Bethune, chief economist for Alpha Economic Foresights.

Italian stocks jump after reprieve from European Commission

Markets were mostly higher on Thursday.

The STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.3 percent. The US stock market was closed for a holiday.

Italy's MIB rose 1.0 percent after the European Commission dropped its threat of disciplinary action against Italy on Wednesday after the latter took actions to curb its growing debt.

Investors are likely to turn their attention to the US nonfarm payrolls report next. The report is set to be released on Friday.

“If job growth falls short of expectations, the market could immediately move to pricing in a July interest rate cut,” said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management.

Financial assets become “pricey” amid low interest rates

Markets were mixed on Wednesday.

The S&P 500 rose 0.8 percent to a record high while the STOXX Europe 600 rose 0.9 percent. However, the Nikkei 225 fell 0.5 percent.

Market sentiment may have been boosted by the nomination of current International Monetary Fund Managing Director Christine Lagarde as the replacement for Mario Draghi as the head of the European Central Bank. Lagarde is widely seen as inclined towards easier monetary policy.

Government bond yields fell, with the German 10-year bund yield falling to a fresh record low of minus 0.386 percent.

Indeed, Mark DeCambre at MarketWatch noted that stocks, bonds and gold have all become “pricey”.

“I think one of the unintended, yet in hindsight predictable, outcomes of ZIRP [zero interest-rate policy] was to force investors into looking for returns anywhere they can find it,” Michael Antonelli, a market strategist at Baird, was quoted as saying.

And yet, DeCambre also noted that easy monetary policy may be becoming less effective.

DeCambre cited a report by Torsten Slok, chief economist at Deutsche Bank Securities, titled “QE no longer works”.

“Given the current level of inflation expectations and the current level of rates, doing QE again is not going to create the same surprise effects,” wrote Slok.

DeCambre also cited a paper that suggested that “a persistently easy-money environment provides little leeway for stimulus if inflation proves preternaturally sluggish, as it has thus far”.

Stocks rise, oil plunges amid “increasing demand concerns”

Markets rose on Tuesday.

The S&P 500 rose 0.3 percent to a record high, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.1 percent.

However, government bond yields fell. The US 10-year Treasury yield closed at 1.977 percent, its lowest in more than two years, while the 10-year German Bund yield hit an all-time low of -0.363 percent on Tuesday morning.

Oil prices plunged. West Texas Intermediate crude fell 4.8 percent and Brent fell 4.1 percent.

Tyler Richey, co-editor of Sevens Report Research, said that oil fell “because of increasing demand concerns”, noting that the recent manufacturing PMI data were “universally bad when factoring details in”.

Lukman Otunuga, research analyst a brokerage FXTM, said that the truce on the US-China trade war agreed to at the G-20 meeting over the weekend may not help much “given how the implemented tariffs are denting global growth and still remain unresolved—nothing much has changed”.

Markets rise on US-China trade war truce

Markets rose on Monday.

The S&P 500 rose 0.8 percent, the STOXX Euurope 600 rose 0.8 percent and the Nikkei 225 surged 2.1 percent.

Markets rose after US President Donald Trump and Chinese President Xi Jinping agreed to refrain from escalating their trade dispute in discussions on the sidelines of a meeting of the G20 in Japan.

Despite the truce in the trade war, some analysts remain cautious.

“The biggest question on everyone’s mind is will any armistice stick or will history repeat, and trade war gridlock set in?” asked Stephen Innes, managing partner at Vanguard Markets.

James Cox, managing partner at Harris Financial Group, said that “the reality of the situation is that the potential damage of the trade war is already done”.

Tom Essaye, president of the Sevens Report, wrote on Monday: “Every manufacturing PMI missed expectations this morning, including those from China, Germany, the EU and Great Britain. All of those PMIs are now below 50, signaling widespread contraction in manufacturing activity.”

In the US, the Institute for Supply Management’s manufacturing index fell to 51.7 in June from 52.1 in May but the IHS-Markit purchasing-manager’s index rose to 50.6 in June from 50.1 in May.

Markets jump in June but hopes from a Fed rate cut “is a mistake”

The S&P 500 rose 6.9 percent in June, its best June gain since 1955. It gained 17.4 percent over the first half of the year.

The rise in the S&P 500 means that it is now trading at a price-to-earnings ratio of 21.83, compared with a 10-year average of 17.87.

It is not just stocks that has been rallying. So are bonds and gold.

Mark DeCambre at MarketWatch noted that the US 10-year Treasury yield finished last week at 2 percent, about half-a-percentage point below the 10-year average of 2.482 percent, while the price of gold finished at US$1,413.70, not far from its highest level in six years.

DeCambre also noted that Bank of America Merrill Lynch analysts led by Michael Hartnett, the chief investment strategist, say that investors have never been so negative on a market that is rallying so briskly while Lindsey Bell, investment strategist at CFRA, said that “things can quickly change on a dime”.

Indeed, while markets have been rising on the perception that the Federal Reserve will ease monetary policy, John Hussman reminded us that “with the exception of 1967 and 1996, every initial easing of monetary policy by the Federal Reserve has been associated with an oncoming or ongoing recession”.

“Blind faith that rate cuts are always positive for the stock market is a mistake,” wrote Hussman. “This assumption is likely to be the hook that keeps investors holding on through a 60-65% market collapse over the completion of this market cycle.”

Markets mostly higher as “all eyes on G-20”

Markets were mostly higher on Friday.

The S&P 500 rose 0.6 percent while the STOXX Europe 600 rose 0.7 percent. However, the Nikkei 225 fell 0.3 percent.

“All eyes are on the G-20,” said James Masserio, head of equity derivatives trading of the Americas at Societe Generale, ahead of the meeting between US President Donald Trump and Chinese President Xi Jinping at the G-20 summit in Japan.

Analysts generally do not expect much from the meeting but think that a ceasefire in the trade war is likely.

“The Trump administration has signaled for weeks that the president again wants a trade deal with China,” said Derek Scissors, an analyst with the American Enterprise Institute. “The U.S. will agree to suspend the $300 billion tariff and talks will restart.”

Markets mixed ahead of Trump-Xi meeting

Markets were mixed on Thursday.

The S&P 500 rose 0.4 percent while the Nikkei 225 jumped 1.2 percent. However, the STOXX Europe 600 was flat.

While the coming meeting between US President Donald Trump and Chinese President Xi Jinping at the G-20 meeting has raised hopes for a reduction in trade tensions, comments by the Chinese Ministry of Commerce on Thursday suggested a firm stance by the latter is likely.

“We urge the US to immediately cancel its pressure and sanction measures on Huawei and other Chinese companies, and push for the stable and healthy development of China-US trade relations,” said Gao Feng, spokesman for the Ministry of Commerce, according to a CNBC translation.

Still, June has been a good month for stocks in the US, where cyclicals have been the best performers, according to a MarketWatch report.

However, some analysts think that investors are ignoring mounting evidence of major global risks.

“Can equity inflows continue in the face of falling bond yields and weak data?” Deutsche Bank strategists wondered in their weekly report on North American fund flows.

Stock market rally loses steam after being driven by defensives and buybacks

Markets fell on Wednesday.

The S&P 500 fell 0.1 percent, its fourth consecutive decline, the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 fell 0.5 percent.

Stocks fell despite the approaching meeting between US President Donald Trump and Chinese President Xi Jinping at the Group of 20 meeting in Japan later this week.

“I am not optimistic of anything of significance to be achieved for the meetings in Japan this week,” said Mariann Montagne, a portfolio manager at Gradient Investments.

Some analysts also noted that US stocks are already near all-time highs.

“If it’s trade or another factor, the market does feel vulnerable to a setback,” said Jeff Kleintop, chief global investment strategist at Charles Schwab.

Indeed, JP Morgan has noted that the recent US stock market rally has been driven by defensive stocks rather than cyclical stocks.

“Rally leadership doesn’t inspire a lot of confidence yet,” said Jason Hunter, a chart analyst at JP Morgan. “In our view, that cross-market divergence can only persist for a short period of time, and the S&P 500 Index rally potential is limited under the current conditions.”

One thing that appears to be supporting the stock market though is stock buybacks.

“Really, the main marginal buyer of the public equity asset class has been companies, not your regular investor,” said Robert Buckland, chief global equity strategist and managing director at Citi Research.

Markets fall but melt-up possible

Markets fell on Tuesday.

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

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

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

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

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

Markets lower amid Middle East tension, expecting Fed rate cuts

Markets were mostly lower on Monday.

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

Oil prices were mixed on Monday even as tension in the Middle East persisted, with the US announcing financial sanctions on Iranian leaders. West Texas Intermediate crude rose 0.8 percent but Brent fell 0.5 percent.

Investors are probably also looking forward to the outcome of the meeting between US President Donald Trump and Chinese President Xi Jinping at the G-20 summit later this week.

“Financial markets welcomed the announcement that a full-blown standalone US-China ‘bilateral’ meeting would be held in the margins of the annual G20 Summit,” said Christopher Granville, managing director of global political research at TS Lombard.

However, Mike Mangieri, managing partner at Seven Points Capital, said: “It’s the Fed and nothing else matters.”

Indeed, the Federal Reserve could be about to make a big impact on markets, according to Bianco Research president James Bianco.

“The market is pricing in four cuts over the next year,” he said. That, he claimed, will eventually “drag the Fed kicking and screaming into it”.

With S&P 500 at record high, stocks could be at “biggest selling opportunity in a decade”

Stock rallied last week, with the S&P 500 jumping 2.2 percent and hitting a record high of 2,954.18 on Thursday in the process.

However, some analysts think that risks to the stock market rally abound.

“This is probably one of the riskiest points you’re ever going to see in the stock market,” said Michael O’Rourke, chief market strategist at JonesTrading. “The price level here is not supported by fundamentals. It’s supported by sentiment and hype and hopefulness about monetary policy.”

Sven Henrich, founder and the lead market strategist of NorthmanTrader.com, said that with high debt levels and limited ammunition to deal with a new recession, “everything points to a more fragile system”.

“Therefore, we may be looking at the biggest selling opportunity in a decade,” he concluded.

Leon Cooperman, Omega Advisors chairman and CEO, warned that a really big move higher in stocks could signal “the close-out move”, meaning the end of the recent bullish run.

Cooperman said that if the S&P 500 hits 3,100, it would be “knocking on the door of euphoria” and that he would “be reducing my exposure” in stocks.

Markets fall, lower corporate earnings estimates “could exert more downward pressure”

Markets fell on Friday.

The S&P 500 fell 0.1 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 1.0 percent.

Some investors may have turned cautious after gains made by stocks in previous sessions on the back of a dovish turn in the Federal Reserve's monetary policy stance.

“If the Fed is going to cut rates it means that the economic environment is slowing down,” said Lindsey Bell, investment strategist at CFRA. “You have investors looking to bonds to hide out in. You’re also seeing a big move up in gold on the back of the Fed’s decision as well.”

Indeed, Mark Tepper, president and CEO of Strategic Wealth Partners, thinks that with second half 2019 corporate earnings estimates “way too high” and set to fall, “that could exert even more downward pressure on stocks”.