Tag: stocks

Former adviser of British PM in full panic mode

A former adviser to Gordon Brown is in full-blown panic mode over China’s Black Monday, and has urged people to stock up on canned goods and bottled water as stock markets around the world slide.

Damian McBride appeared to suggest that the stock market dip could lead to civil disorder or other situations where it would be unreasonable for someone to leave the house.

“Advice on the looming crash, No.1: get hard cash in a safe place now; don’t assume banks & cashpoints will be open, or bank cards will work,” he tweeted.

“Crash advice No.2: do you have enough bottled water, tinned goods & other essentials at home to live a month indoors? If not, get shopping.

“Crash advice No.3: agree a rally point with your loved ones in case transport and communication gets cut off; somewhere you can all head to.”

China shares take a dive

Alarm bells rang across world markets on Monday as a near 9 percent dive in China shares and a sharp drop in the dollar and major commodities panicked investors.

European stocks were more than 5 percent in the red and Wall Street was braced for similar losses after Asian shares slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand.

Oil plunged another 4 percent, while safe-haven government U.S. an German bonds and the yen and the euro rallied as widespread fears of a China-led global economic slowdown and currency war kicked in.

“It is a China driven macro panic,” said Didier Duret, chief investment officer at ABN Amro. “Volatility will persist until we see better data there or strong policy action through forceful monetary easing.”

With serious doubts also now emerging about the likelihood of a U.S. interest rate rise this year, the dollar slid against other major currencies.

The near 9 percent slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2007 and wiped out what was left of the 2015 gains, which in June has been more than 50 percent.

With the latest slide rooted in disappointment that Beijing did not announce expected policy support over the weekend, all index futures contracts slumped by their 10 percent daily limit, pointing to more bad days ahead.

Source: Reuters

China believes hostile short-sellers caused panic

A recent sell-off in China’s stock markets is the first major challenge facing the country since the introduction of margin trading, and is believed to have been caused by hostile short-sellers.

In a report on the Chinese news site ifeng.com, an analyst said the sell-off was similar to what took place in Hong Kong in 1997, when the territory’s benchmark Hang Seng Index plunged 60% after peaking at 16,673 points.

The steep drop in share prices in Hong Kong in 1997 was caused by financier George Soros, who shorted both the Hong Kong dollar and the Hang Seng Index futures, the analyst said, adding that similar practices were observed in the last two trading sessions in China.

According to the analyst, massive funds entered the futures market, building a short position and leading to declines in the stock markets. The size of the funds and the sophisticated trading methods are beyond the ability of Chinese institutional investors, the analyst said.

In fact, Bill Gross of Janus Capital, a co-founder of global investment firm PIMCO, said in early June that the Shenzhen Stock Exchange’s Component Index presented perfect short-selling opportunities.

At the time, the index was at a seven-year high but plummeted 30% on Gross’s comments. Morgan Stanley and Credit Suisse have also been bearish on Chinese shares recently.

Several measures introduced or announced by the Chinese government, such as lower interest rates, required reserve ratio cuts, and a plan to allow the investment of pension funds in equities, have failed to prop up the Chinese stock markets.

The Chinese government is expected to introduce new policies to rescue the market, since further a decline will hurt companies’ ability to borrow money and will put pressure on the economy.

The China Securities Regulatory Commission reportedly was soliciting proposals from institutions to rescue the market.

There have also been reports of brokerages promising not to force liquidation of shares held by investors facing margin calls.

Source: China Times

Shares fall and gold rises as global worries mount

Shares across the world fell sharply on Friday, pushing a global index to a six-month low, as investors worried about the prospect of a widespread economic slowdown while U.S. monetary stimulus nears its end.

Assets which depend on economic growth, such as shares and oil, have been hit by a raft of weak indicators from Europe at a time when other big economies, including China, Japan and Brazil face their own hardships.

Meanwhile, the U.S. Federal Reserve is set to wind down later this month the asset purchase programme which has boosted markets over the past two years. Many observers doubt the recent stimulus measures unveiled by the European Central Bank will make up for it.

Brent crude futures tumbled to their lowest since 2010 while gold, seen as a safe asset at times of uncertainty, was headed for its best week in nearly four months.

“There has been a barrage of negative thoughts on growth and growth assets,” Stewart Richardson, a partner of macro hedge fund, RMG Wealth Management, said.

“I believe we’re entering a bear market. We’ve been trying to be short equities and we’ve been focusing our shorts in Europe and small caps,” he said, referring to bets that shares in those markets will keep falling.

The MSCI All-Country World index .MIWD00000PUS fell 0.6 percent to its lowest level since April 18 at 404.50 points, taking its loss since the start of the week to 1.6 percent.

The index, which is eyeing its third consecutive weekly fall, has retreated by nearly 7 percent since testing an all-time high last month.

A string of dismal data from Germany and other large euro zone economies in recent weeks has fed anxieties about a possible recession in the region while the jury is still out on the European Central Bank’s proposed policy response.

The ECB’s covered bond buying programme, a key part of the bank’s latest package, has yet to kick in and some investors remain doubtful it will be sufficient to shore up growth and inflation in the currency bloc while the Fed reins in its own stimulus.

Adding to jitters about monetary policy expectations, St. Louis Federal Reserve Bank President James Bullard said he was concerned by a disconnect between the market’s view of the Fed’s rate-increase path and the central bank’s own view.

Financial markets have constantly expected much slower tightening by the Fed than U.S. central bank policymakers’ own projections.

The concerns on global growth hit oil prices hard. European benchmark Brent crude oil fell 1.1 percent at $89.08, having hit its lowest level since December 2010 at $88.11.

Gold, steady at $1,223.20, retained gains from a four-day rally and was headed for its best week in nearly four months.

Wall Street stocks had slumped 2 percent on Thursday, with the S&P 500 index .SPX hitting a two-month closing low. The CBOE volatility index .VIX, a measure of investor anxiety, rose to highs not seen since early February.

“If U.S. stocks jumped back today, then the market could go back to the same habit of assuming everything will be alright. But if they fall big for two days in a row, markets will be clearly entering a whole new phase,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp. – Reuters

 

US indexes hit record highs

It was another good week for the stock market. The Dow Jones industrial average and Standard & Poor’s 500 index both ended Friday at record highs. It was the third consecutive day the S&P 500 index reached a new record, and it’s now up 6.2% for 2014. The Dow is also up for the year at 2.2%. All the major stock indexes managed to finish the week ahead of where they started at the beginning of the week.

For the week, the S&P 500 index managed to gain 3.39 points to 1,962.87, an increase of 0.17%. The weekly gain is becoming a welcome trend. The S&P 500 has managed to end the week ahead in five of the last six weeks, and it’s the 22nd time this year it’s managed to hit a record high.

The Dow had a slightly smaller percentage gain in the S&P 500 coming in with an increase of 0.15%. That was 25.62 points more than the previous week, and the Dow ended at 16,947.08. This broke the previous record high which was set on June 10, 2014 when it ended at 16,945.92.

While the NASDAQ Composite continued to make gains, it’s still well below the soaring heights of the dot-com era when it managed to peak at over 5,000. It managed a 0.20% increase for the week, or 8.71 points, to end at 4,360.04. While not a all-time record, it is the highest level in 14 years

US government bonds slipped a fraction during the week, with the year for the 10 year Treasury note ending at 2.61%. This was down 0.01% from Thursday.

While all the major indexes were able to finish up, the moves have been coming in small increments. It appears the market is currently focusing on the specific performance of individual companies, rather than the geopolitical unrest in Iraq and Ukraine, and questions about the US economy.

The midweek remarks from the Federal Reserve indicating they plan to keep short-term interest rates low also helped stocks for the week. The Federal Open Market Committee (FOMC) release a statement saying interest rates remained unchanged at 0.00% to 0.25% at the end of their two-day meeting.

Whether week ahead brings about new record highs will depend a lot on housing data which will be coming out during next week, as well as if there are any major new geopolitical developments.

Gold prices up

Gold was up $42.70 per ounce in trading today.

The New York spot price was $1,320.20

Also on Wall Street, investors remained in a record-setting mood Thursday.

The Standard & Poor’s 500 index closed at an all-time high for the second time in two days and notched its fifth gain in five days.

The Dow Jones industrial average and Nasdaq composite ended mixed after drifting between small gains and losses for much of the day.

The three key stock indexes all opened higher, holding on to tiny gains in premarket trading as investors sized up the latest data on unemployment aid applications and an index of economic indicators.

The Labor Department reported that applications for unemployment benefits fell last week to 312,000, the lowest in more than six years. The Conference Board added to the good news, saying its index of leading indicators rose 0.5 percent in May from the previous month.

The market began to drift lower, however, as investors looked beyond the economic data and focused instead on a mixed bag of corporate earnings from companies such as Kroger, Rite Aid and Pier 1 Imports.

By midday, stocks veered into the red, where they remained until halfway through the final hour of trading, when a late push elevated the S&P 500 and Dow barely higher on the day.

The S&P 500 index rose 2.50 points, or 0.1 percent, to 1,959.48. That’s slightly above the prior day’s record close of 1,956.98. The last time the index closed at a record high was June 9th.

The Dow Jones industrial average added 14.84 points, or 0.1 percent, to 16,921.46. The Nasdaq composite slipped 3.51 points, or 0.1 percent, to 4,359.33.

The three indexes are all up for the year.

The U.S. economy shrank at an annual rate of 1 percent in the January-March quarter, the victim of a severe winter which slowed business activity in a number of areas. Many analysts anticipate growth rebounded strongly in the April-June quarter.

The market will get a sense of that next month, when the next round of corporate earnings begins. Until then, the next key market mover will likely be the June jobs report, due out the first week of July.

Bond prices fell, sending the yield on the 10-year Treasury note up to 2.63 percent from 2.59 percent late Wednesday.

Source: Elko Daily Free Press

Central Banks are buying stocks

The FT reports that “a cluster of central banking investors has become major players on world equity markets.”

The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which “could potentially contribute to overheated asset prices.” China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind.

Central banks around the world, including China’s, have shifted decisively into investing in equities as low interest rates have hit their revenues, according to a global study of 400 public sector institutions.

“A cluster of central banking investors has become major players on world equity markets,” says a report to be published this week by the Official Monetary and Financial Institutions Forum (Omfif), a central bank research and advisory group. The trend “could potentially contribute to overheated asset prices”, it warns.

The report, seen by the Financial Times, identifies $29.1tn in market investments, including gold, held by 400 public sector institutions in 162 countries.

China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, as the report argues is “partly strategic” because it “counters the monopoly power of the dollar” and reflects Beijing’s global financial ambitions.

In Europe, the Swiss and Danish central banks are among those investing in equities. The Swiss National Bank has an equity quota of about 15 per cent. Omfif quotes Thomas Jordan, SNB’s chairman, as saying: “We are now invested in large, mid- and small-cap stocks in developed markets worldwide.” The Danish central bank’s equity portfolio was worth about $500m at the end of last year.

 

 

Shares fall on European debt worries

(Reuters) – Asian shares fell on Thursday after a weak Spanish bond sale heightened concerns about funding difficulties for weaker euro zone countries, further undermining sentiment hurt by fading expectations of more stimulus from the U.S. Federal Reserve.

MSCI’s broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell for a second straight session, easing as much as 1.3 percent to a four-week low, while Japan’s Nikkei average .N225 fell 0.9 percent, also to a four-week low, after putting in its worst performance in five months a day earlier. .T

Shanghai shares .SSEC, which resumed trading after a three-day break, gained after a private sector survey of purchasing managers showed that China’s services sector expanded in March and business confidence hit an 11-month high, though overall activity remained below its long-term average.

The renewed risk aversion after a strong Asian equity performance in the first quarter comes as investors factor in less support for global economic growth, waning hopes of more monetary easing from the United States, and the potential fading of the effects of the European Central Bank’s huge liquidity injections.

“More policy support from the ECB in the near-term appears unlikely, following the hawkish slant in tone during its press conference,” said Barclays Capital analysts. “Widening peripheral European government bond spreads, higher Treasuries, higher implied vol, a lower EUR and a stronger USD are reminiscent of past episodes of elevated European concern.”

Risk currencies steadied, with the Australian dollar off a near three-month low of $1.0245 hit on Wednesday, and the euro holding above $1.3100 after falling nearly 1 percent the day before. Gold and oil also recovered on Thursday.

Spot gold inched up 0.3 percent to $1,624 an ounce. U.S. crude futures rose 0.8 percent to $102.23 a barrel while Brent crude added 0.5 percent at $122.90 a barrel.

On Wednesday, global stocks .MIWDPUS fell over 1 percent, gold tumbled to its lowest in nearly three months and oil shed more than 2 percent.

Asian credit markets weakened, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 5 basis points.

ASIA WARY OF INFLATION

Frances Cheung, senior strategist for Asia ex-Japan at Credit Agricole CIB in Hong Kong, said market liquidity was very thin and investors were digesting mixed signals about economic and monetary policy outlook.

“Triggered by inflation pressures, room for easing (by Asian central banks) is reduced now. Supply-side inflation is not good for the economy, so investors are more cautious,” she said, but added that the current market downturn was a correction from strong performance earlier in the year.

Inflation in most Southeast Asian countries has slowed, so policymakers are likely to continue supporting growth by keeping rates steady, but they remain wary of the recent rise in oil prices.

ECB CALM ON SPAIN

Borrowing costs for Spain, the euro zone’s fourth largest economy, jumped at bond auctions on Wednesday, with the 10-year bond yield leaping to 5.7 percent, its highest since January. It overshadowed a successful step back into debt markets by similarly highly indebted Portugal.

Ten-year Spanish yields had fallen as low as 4.6 percent in late January as cheap ECB cash fuelled a rally in weaker peripheral state debt.

But ECB President Mario Draghi appeared relaxed about the rise in Spanish yields, after the bank kept interest rates steady as expected at a policy meeting on Wednesday.

Draghi also dismissed a German-led push for the ECB to start planning a retreat from emergency crisis-fighting. But some financial market analysts detected a shift in the ECB’s monetary policy back to a more traditional one focusing on maintaining price stability, as Draghi stressed the bank was keeping a close eye on price pressures.

Some market players said such fears may be overdone, pointing to a key gauge of how investors perceive risk, the VIX index .VIX.

The VIX, which measures expected volatility in the Standard & Poor’s 500 index .SPX over the next 30 days, failed to keep its gains after rising above resistance at its 50-day moving average. The index hit a high of 17.74 on Wednesday, its highest in nearly a month, before retreating. A fall in the index reflects easing risk aversion.

Upbeat U.S. private-sector jobs data by payrolls processor ADP on Thursday suggested the labor market was continuing to strengthen ahead of key non-farm payrolls data due on Friday, which is expected to show the U.S. economy added 203,000 jobs last month, after February’s non-farm payrolls rose 227,000.