Friday, 9 December 2016

Markets rise as ECB extends asset purchases

Markets rose on Thursday.

The S&P 500 rose 0.2 percent to a new record high, the STOXX Europe 600 jumped 1.2 percent and the Nikkei 225 and Shanghai Composite both rose 0.7 percent.

West Texas Intermediate crude jumped 2.2 percent and US 10-year Treasury yields rose seven basis points to 2.41 percent.

The European Central Bank sent mixed signals at its monetary policy meeting on Thursday.

The ECB announced that its asset-buying programme will be extended from March next year to the end of 2017 but at a reduced pace of 60 billion euros from April from the current 80 billion euros.

Despite the reduced pace of buying, ECB President Mario Draghi told a press conference that there "is no question about tapering".

The ECB also added that if "the outlook becomes less favorable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation", then it would increase the programme again in terms of size and/or duration.

Thursday, 8 December 2016

Markets rise amid strong risk appetite

Markets rose on Wednesday.

The S&P 500 jumped 1.3 percent to an all-time high while the STOXX Europe 600 rose 0.9 percent.

Earlier on Wednesday, Asian stocks also rose. Both the Nikkei 225 and Shanghai Composite Index rose 0.7 percent.

Government bonds also rose on Wednesday. US 10-year Treasury yields fell five basis points to 2.35 percent and Germany's 10-year bond yields fell three basis points to 0.35 percent.

“Appetite for riskier assets is strong amid investors and nothing is stopping them from beefing up their bullish bets,” said Naeem Aslam, chief market analyst in London at Think Markets UK Ltd.

However, oil prices fell. West Texas Intermediate crude fell 2.3 percent amid speculation increased that production by US shale producers will counter output cuts from OPEC.

Wednesday, 7 December 2016

Markets rise, Dow breaks record again

Markets rose on Tuesday.

The S&P 500 rose 0.3 percent. The Dow Jones Industrial Average rose 0.2 percent to finish at an all-time high for the second consecutive day.

The STOXX Europe 600 rose 1.0 percent as Italy's FTSE MIB surged 4.2 percent.

Earlier in Asia, the Nikkei 225 rose 0.5 percent while the Hang Seng rose 0.8 percent.

The focus is “back to reflation and it’s back to assessing 2017”, said Chris Weston, chief market strategist at IG.

Tuesday, 6 December 2016

Stocks shrug off Italian political uncertainty, surge may be around the corner

Markets were mostly higher at the start of the week despite political uncertainty in Italy.

Italian Prime Minister Matteo Renzi resigned on Monday after losing a referendum he had called to push through constitutional changes.

Asian markets fell on the news. The Nikkei 225 fell 0.8 percent and the Shanghai Composite tumbled 1.2 percent.

However, European markets closed higher. The STOXX Europe 600 rose 0.6 percent.

In the US, the S&P 500 rose 0.6 percent.

However, Peter Cardillo, chief market economist at First Standard Financial, warned that this was just "the calm before the storm" while Claus Vistesen, chief euro zone economist at Pantheon Macro, wrote in a note: "The economy could easily grind to a halt due to political uncertainty."

Still, some analysts think that the stock market rally has at least a bit more to run.

Jeffrey Saut, the chief investment strategist at Raymond James, wrote on Monday that after a pause last week, the S&P 500 has entered the final surge of a buying climax.

Also on Monday, Todd Gordon of TradingAnalysis.com said on CNBC that another big surge for the small caps is around the corner.

Monday, 5 December 2016

S&P 500 valuation stretched but may be sustainable

The S&P 500 fell 1 percent last week, its first weekly drop sine the US presidential election.

The pause in the US stock market rally last week came as USA Today reported that market valuations have become stretched.

“Since Election Day, the price-to-earnings (P-E) ratio, a common metric used to measure whether stocks are cheap or overvalued, have swelled further to 17.1 times earnings from 16.2 times, which is well above the long-term average of 15.3 over the past 30 years, according to Thomson Reuters,” wrote Adam Shell in the report.

“The market is pricing in great expectations,” says David Kotok, chief investment officer at Cumberland Advisors. “There is little margin for disappointment.”

However, other analysts remain sanguine.

“When there is a quantum shift in growth expectations, the arithmetic of P-E multiples fails to capture the value in stocks,” argues Don Luskin, chief investment officer at TrendMacro.

Jim Paulsen says the stock market’s current valuation is “not excessive” and that “a P-E of about 17 is probably a sustainable multiple for the overall market”.

Saturday, 3 December 2016

S&P 500 flat despite positive jobs number

Markets were mostly lower on Friday.

In the US, the S&P 500 was flat but the Dow Jones Industrial Average fell 0.1 percent.

European stocks fell, with the CAC 40 in particular falling 0.7 percent and the FTSE 100 falling 0.3 percent.

In Asia, the Nikkei 225 fell 0.5 percent while the Hang Seng slumped 1.4 percent.

The US employment report on Friday showing an increase of 178,000 jobs in November had little impact on markets. While the headline number was positive, the report also showed fewer people looked for work and hourly wages fell.

Indeed, bond prices rose. The yield on the US 10-year Treasury note fell to 2.39 percent from 2.45 percent on Thursday.

Oil continued to rally. US crude rose 1.2 percent while Brent rose 1 percent.