|Day's Range||20,579.98 - 20,719.31|
|52 Week Range||18,948.58 - 24,448.07|
(Bloomberg) -- U.S. stocks slumped and Treasuries rallied as the trade dispute between the world’s two largest economies deepened. The dollar fell.After the close of regular trading, President Donald Trump confirmed he’ll boost tariffs on Chinese imports in response to Beijing’s retaliation. The SPDR S&P 500 ETF Trust was little changed following the announcement. Prospects for heightened tension rattled markets Friday, overshadowing speculation that the Federal Reserve will cut rates after Chairman Jerome Powell’s remarks. Energy and tech stocks led losses in the S&P 500 Index, and the Dow Jones Industrial Average tumbled 623 points as only Boeing Co. advanced among its 30 blue-chip companies. The Nasdaq-100 Index plunged more than 3%The bond market’s U.S. recession indicator -- the spread between 2- and 10-year rates -- flirted with inversion again. Elsewhere in the yield curve, three-month and 10-year Treasuries hit the most-inverted level since March 2007. The greenback dropped as Trump said that “we have a very strong dollar and a very weak Fed,” fueling chatter about a possible move to weaken the currency. Oil sank, while gold surged.Read: ‘Much Tougher to Walk Back’: Investors on Trump-Tweet Stock RoutThe trade war escalation rekindled concerns about the outlook for global growth that’s already looking shaky. The announcement comes as leaders from the Group of Seven nations prepare to meet in France and central bankers gather in Jackson Hole. Trump tweeted that the Fed chairman could be a greater “enemy” of the U.S. than Chinese President Xi Jinping. “As usual, the Fed did NOTHING!,” he wrote.“Trade trumps Jackson Hole,” said John Augustine, chief investment officer at Huntington Private Bank. “Fed Chair Powell was fairly dovish today and markets were reacting to that positively, but when the trade tweet came out, that obviously changed market dynamics.”The plunge in the S&P 500 Friday destroyed what was shaping up to be a rally for the week. There have been just four other weeks during this bull market when a Friday rout erased a gain of more than 1% through Thursday, data compiled by SentimenTrader show. This had never occurred from 1950 to mid-1980s, and since then, it’s happened just 15 other times before this week.Read: Fed Rate-Cut Odds Jump as Powell and Then Trump Roil Markets“It’s all about trade, it’s all about global growth,” Scott Wren, senior global equity strategist for Wells Fargo Investment Institute, told Bloomberg TV. “Right now, people aren’t all that worried about the Fed. They’re a lot more worried about global growth and these trade negotiations.”Here are the main moves in markets:StocksThe S&P 500 sank 2.6% to 2,847.11.The CBOE Volatility Index surged 19%.The Stoxx Europe 600 Index declined 0.8%.The MSCI Asia Pacific Index climbed 0.4%.CurrenciesThe Bloomberg Dollar Spot Index sank 0.35%.The euro jumped 0.6% to $1.1144.The Japanese yen appreciated 1% to 105.39 per dollar.BondsThe yield on 10-year Treasuries fell eight basis points to 1.54%.Germany’s 10-year yield decreased three basis points to -0.68%.Britain’s 10-year yield declined four basis points to 0.481%.CommoditiesThe Bloomberg Commodity Index decreased 0.5%.West Texas Intermediate crude fell 2.1% to $54.17 a barrel.Gold surged 1.9% to $1,537.60 an ounce.\--With assistance from Caroline Hyde, Joanna Ossinger, Adam Haigh, Todd White, Yakob Peterseil, Namitha Jagadeesh, Susanne Barton, Sarah Ponczek, Dave Liedtka, Elena Popina, Alexandra Harris, Liz Capo McCormick and Nancy Moran.To contact the reporters on this story: Rita Nazareth in New York at email@example.com;Vildana Hajric in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Christopher Anstey at email@example.com, Rita Nazareth, Dave LiedtkaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
World stock markets and the dollar rose on Friday as investors looked to a speech by Federal Reserve chair Jerome Powell for clarification on whether the U.S. central bank remains on course to deliver another interest rate cut in next month. Britain's FTSE 100 index was up 0.71%. Powell is due to speak at 1400 GMT at a gathering of central bankers in Jackson Hole, Wyoming.
Powell is likely to set the tone in the global stock markets for several weeks when he delivers his speech at the Jackson Hole, Wyoming central bankers’ symposium. Investors are hoping Powell presents a dovish front by signaling a series of rate cuts over the next 12 months.
Stocks, the dollar and oil prices fell on Friday while safe havens rose after U.S. President Donald Trump threatened to further escalate his trade war with China "this afternoon," following a new round of retaliatory tariffs from Beijing. Earlier on Friday China's Commerce Ministry said in a statement it would impose tariffs on about $75 billion in imports from the United States including some agricultural products, crude oil and small aircraft. Trump cannot force U.S. companies to abandon China and he gave no detail on how he might proceed with any such order.
(Bloomberg) -- U.S. stocks were mixed as a slide in technology companies offset a rally in bank shares. Treasuries dropped as Federal Reserve officials cast doubt on further interest-rate cuts.The S&P 500 Index closed little changed, while the Dow Jones Industrial Average outperformed as Boeing Co. surged. The Nasdaq-100 Index fell. Ten-year yields climbed after Philadelphia Fed President Patrick Harker told CNBC that he’s “on hold” right now for further monetary easing. His comments were in line with those of Kansas City counterpart Esther George, who said the U.S. doesn’t need lower rates. Fed Bank of Dallas President Robert Kaplan said that he wanted to be careful about cutting interest rates again “unless we have to.”Read: Fed’s Regional Presidents Lining Up Against Additional Rate CutsMarkets have been whipsawed amid concern over economic weakness, the path of interest rates and U.S.-China trade tension. Fed Chairman Jerome Powell could provide more guidance on policy when he speaks Friday at the annual Jackson Hole symposium. Investors have priced in a quarter percentage-point rate cut next month, but dissenting Fed voices may limit the prospects for the larger move that some have advocated, including President Donald Trump.“The big question mark is just going to be Jackson Hole -- what’s Powell going to say?” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “You’re seeing the market going higher and lower this week heading into tomorrow, where we could get some market-moving commentary out of Powell’s speech.”Elsewhere, most euro-area government bonds fell as the European Central Bank expressed concern that investors were losing faith in its ability to revive inflation and after a measure of German manufacturers reinforced recession concern. The British pound jumped as investors seized on hints from European leaders that a Brexit deal could still be reached.Here are some notable events coming up:Fed Chairman Jerome Powell speaks at the central bank’s symposium in Jackson Hole, Wyoming, Friday.Here are some of the main moves in markets:StocksThe S&P 500 was little changed at 2,922.95 at 4 p.m. in New York.The Stoxx Europe 600 Index declined 0.4%.The MSCI Asia Pacific Index fell 0.4%.The MSCI Emerging Market Index dipped 0.8%.CurrenciesThe Bloomberg Dollar Spot Index was little changed.The euro was little changed at $1.1081.The British pound climbed 1% to $1.2256.The Japanese yen strengthened 0.2% to 106.40 per dollar.BondsThe yield on 10-year Treasuries increased two basis points to 1.61%.Germany’s 10-year yield gained three basis points to -0.64%.Britain’s 10-year yield rose four basis points to 0.517%.CommoditiesThe Bloomberg Commodity Index dropped 0.5%.West Texas Intermediate crude fell 0.6% to $55.35 a barrel.Gold dipped 0.5% to $1,508.50 an ounce.\--With assistance from David Wilson, Paul Allen, Adam Haigh, Yakob Peterseil, Todd White and Sarah Ponczek.To contact the reporters on this story: Rita Nazareth in New York at firstname.lastname@example.org;Vildana Hajric in New York at email@example.comTo contact the editors responsible for this story: Jeremy Herron at firstname.lastname@example.org, Rita NazarethFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Global markets turn cautions after FOMC minutes, yield-curve inversion despite better than expected results from the retailers.
Traders are blaming a number of factors on the weakness including concerns over U.S.-China trade relations, a potential global recession and political unrest in Hong Kong. Some say weak manufacturing activity in Japan helped turn the intraday trend lower.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.U.S. stocks pared gains and Treasuries fell as Federal Reserve minutes fell short of signaling the central bank was ready to cut rates sharply.The S&P 500 Index moved away from Wednesday’s highs and two-year Treasury yields surged after the minutes indicated the Fed is prepared to ease if economic conditions worsen, while hinting the committee didn’t view the July cut as part of an extended cycle of reductions. The two-year yield was briefly above the 10-year rate, a key signal watched by investors and seen as a harbinger of a recession. The bond market expects almost 65 basis points of interest-rate cuts by the end of the year.Read: Fed Strategy Review Is Keeping Everything on the Table“With hopes for Fed stimulus as the biggest driver of stocks’ buoyancy in the face of trade tensions and weakening global growth, today’s relatively dovish Fed minutes were about in line with investors’ high expectations,” said Alec Young, managing director of global markets research at FTSE Russell.Stocks already started the day higher after solid results from retailers Target Corp. and Lowe’s Cos. defied recession fears. Traders also assessed the latest developments in the U.S.-China trade spat, with President Donald Trump predicting the U.S. will “probably” make a deal. Trump also said Wednesday that the economy is strong and kept up his relentless attack on the central bank, claiming that “the only problem we have is Jay Powell and the Fed.”Elsewhere, most European bonds fell after Germany saw anemic demand for a 30-year bond offering zero coupon. The British pound slipped as the possibility of a so-called no-deal Brexit gained momentum. Oil slid as a surprise jump in U.S. diesel and gasoline stockpiles raised concerns about weakening demand.Here are some notable events coming up:Thursday brings the Bank Indonesia rate decision and press conference with Governor Perry Warjiyo.Flash PMIs are due for the euro area on Thursday.Kansas City Federal Reserve Bank hosts its annual central banking symposium in Jackson Hole, Wyoming, starting Thursday. Fed Chairman Jerome Powell will give remarks on Friday.Here are the main moves in markets:StocksThe S&P 500 rose 0.8% to 2,924.43 as of 4 p.m. New York time.The Stoxx Europe 600 Index gained 1.2%.The MSCI Asia Pacific Index decreased 0.4%.CurrenciesThe Bloomberg Dollar Spot Index increased 0.1%.The euro dipped 0.1% to $1.1085.The British pound declined 0.4% to $1.2125.The Japanese yen fell 0.3% to 106.60 per dollar.BondsThe yield on 10-year Treasuries rose three basis points to 1.58%.Germany’s 10-year yield climbed two basis points to -0.67%.Britain’s 10-year yield increased three basis points to 0.479%.CommoditiesThe Bloomberg Commodity Index advanced 0.1%.West Texas Intermediate crude declined 0.8% to $55.68 a barrel.\--With assistance from Adam Haigh, Robert Brand, Luke Kawa, Nancy Moran, Sophie Caronello, Brandon Kochkodin and Laura Curtis.To contact the reporters on this story: Rita Nazareth in New York at email@example.com;Sarah Ponczek in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Jeremy Herron at email@example.com, Rita NazarethFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The major European stock markets are trading higher at the mid-session and Asian shares finished mixed as investors await the release of the minutes from the U.S. Federal Reserve’s July monetary policy meeting. Additionally, there are reports that President Trump may be weighing measures to boost the U.S. economy. Perhaps keeping a lid on the markets are lingering concerns over U.S.-China relations after Trump “reiterated on Tuesday that he was not prepared to make a trade deal with China amid the current standoff, with Chinese communications giant Huawei still firmly in Washington’s cross hairs,” according to CNBC.
Apple will decide by the end of this year whether to take BOE on as a supplier of organic light-emitting displays (OLED), the Japanese business daily reported, citing sources. Apple did not immediately respond to a request for comment. The iPhone maker is "aggressively testing" BOE's flexible OLED, raising the possibility that Apple could for the first time source this advanced display technology from China, according to the report.
Japanese shares dropped on Wednesday as renewed worries about a global recession weighed on risk assets, while the U.S.-China trade war and political uncertainty in Italy and Britain added to the general air of caution in markets. The Nikkei share average took its cue from Wall Street's selloff overnight and fell 0.3% to 20,618.57. In particular, investors are focusing on comments from Federal Reserve Chairman Jerome Powell at the Jackson Hole symposium on Friday and the Group of Seven (G7) summit, to be held in southwestern France on Aug 24-26, for any signals of further support steps to boost economic growth.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.There’s something striking about the timing of Victor Li’s bid for Greene King, as the pound trades against the Hong Kong dollar near levels last seen in the mid-1980s. With about two months to go before the Brexit deadline, and further potential currency weakness, it fuels the debate about opportunities to scoop up U.K. assets that look cheap on paper.Maybe it’s little wonder that there’s interest, as U.K. domestic shares (with at least 70% of sales within their home market) have depreciated since 2018 and have just hit a 10-year low in U.S. dollar terms. The case for those stocks has been made before, but is gaining ground -- particularly in the leisure space.Morgan Stanley analysts have noted particular interest from private-equity funds for U.K. companies in the industry. In June, Merlin Entertainments recommended a cash offer at a 37% premium, while Flutter is the subject of takeover speculation in the market. In the brewing space, Ei Group has supported a bid from TDR’s Stonegate Pub Co., at a 39% premium, while Fuller sold its brewing business to Asahi at high valuation multiples (23.6x EV/Ebitda). Looking at average price targets below, analysts aren’t so upbeat about the stocks, however.Still, buyers don’t see it that way. Richard Marwood, senior fund manager at Royal London Asset Management says the bid for Greene King shows that British assets “are not a no-go zone” for foreign companies. “This is another example of an overseas buyer showing an interest in a U.K. company, which is a positive signal during what remains an unprecedented time in the U.K.’s economy,” he adds. (NOTE: RLAM holds about 2.8% of Greene King, according to data compiled by Bloomberg).According to Barclays analysts, private equity funds could leverage the freehold structure of several leisure companies, including Whitbread, which has been the laggard of the sector this year. Brewer and pub company Marston’s has the greatest business similarity to Greene King, they said.Greene King Deal May Spell More U.K. Pub Closures, Say AnalystsEven if there aren’t many companies with Greene King’s characteristics, as Bloomberg columnist Chris Hughes highlighted, the flurry of deals, combined with the weakness of the currency, may start to offset some Brexit risk. The relative outperformance of the FTSE 250 in August vs. the FTSE 100 -- it’s down 3.4% vs 6.1% for the big-cap index -- may signal that investors are more optimistic about the U.K. consumer, as confidence shows signs of improvement.In the meantime, Euro Stoxx 50 futures are rising 0.1% ahead of the open, while S&P 500 contracts are up 0.3%.SECTORS IN FOCUS TODAY:Watch Italian stocks and bonds on the aftermath of Prime Minister Conte’s resignation. Stocks didn’t take the news so well, falling yet again as analysts branded the situation a “total mess.” More uncertainty is on the menu.Watch the pound and U.K. stocks as U.K. Prime Minister Boris Johnson is set to visit Angela Merkel and Emmanuel Macron this week as he attempts to garner support for his plans to renegotiate the current Brexit deal. Those overtures fell on deaf ears with the EU. Beyond that, the U.K. may wait until after Brexit to name a successor to Mark Carney heading the Bank of England.Watch for central banks’ comments, starting with Fed’s minutes on Wednesday. Traders are starting to prepare for the possibility that even if Fed Chairman Jerome Powell does signal further easing at his speech on Friday, the overall tone may disappoint. Traders also continue to find ways to play the inverted yield curve, though a Japanese mega fund thinks markets are now so synchronized that managers risk losing on every front.Watch the Lira and Turkey-exposed stocks as the currency took a hit with the dollar strength catching up with favored yield play among currency investors. Traders seem to anticipate the central bank is taking an easier monetary policy path than anticipated, raising the risk things could overheat again.COMMENT:“Widening sovereign spreads between Italy and Spain, Portugal over the last few months are an indication of market concerns about the M5S-Lega government,” commented Matteo Ramenghi, Chief Investment Officer for Italy at UBS GWM. “A M5S-PD coalition would likely introduce more fiscal discipline, but its lifespan would probably be short. Conversely, should elections take place, a win by the center-right might prove more market friendly than the current government, but the prospect of a populist win would lead to a bumpy ride for Italian assets.”NOTES FROM THE SELL SIDE:Tullow’s “world class” Guyana assets can move the company to the next level, Peel Hunt says, initiating at buy with PT 250p.Berenberg double-downgrades Nostrum to sell and slashes price target almost 88% to a Street-low, as the broker struggles to see any value in the equity.Citi initiates SEB with a buy rating, saying the French household appliances maker has a cheap valuation. PT of EU163 offers 20% upside to Tuesday’s closing price.COMPANY NEWS AND M&A:Stadler Wins CHF270m Train Order From Poland’s PKP IntercityFerguson Sounds Out Top Investors on Moving Listing to U.S.: FTUniCredit Starts Sale of EU1b Unlikely-to-Pay Loans, MF SaysCommerzbank May Close 100-200 Retail Branches: HandelsblattEDF Venture in Talks for Part of Rolls-Royce Nuclear Unit: SkyAtos Wins $198m Contract With State of CaliforniaDanish FSA to Report Danske to Police for Investment Product: JPLeroy Second Quarter Adjusted Ebit 3.5% Below EstimatesSports Direct Approaches Mid-Tier Auditors on Possible Tender:FTTECHNICAL OUTLOOK for Stoxx 600 index:Resistance at 374.5 (61.8% Fibo); ~386 (uptrend); 395.1 (July high)Support at 371 (200-DMA); 365.5 (50% Fibo, May low)RSI: 42.6TECHNICAL OUTLOOK for Euro Stoxx 50 index:Resistance at ~3,400 (uptrend) 3,403 (61.8% Fibo); 3,442 (50-DMA)Support at 3,249 (June/August low); 3,302 (200-DMA)RSI: 44.8MAIN RESEARCH AND RATING CHANGES:UPGRADES:2020 Bulkers upgraded to buy at BTIG; PT Set to 100 KronerBakkafrost upgraded to buy at Kepler Cheuvreux; PT 610 KronerCapita upgraded to buy at Goldman; PT 2 PoundsGEA Group upgraded to buy at Goldman; PT 30 EurosGreene King upgraded to hold at BerenbergJyske upgraded to hold at ABG; PT 205 KronerLeoni upgraded to buy at HSBC; PT 11.75 EurosNext upgraded to add at AlphaValueRaysearch Upgraded to Buy at Pareto Securities; PT 180 KronorScatec Solar upgraded to buy at SpareBank; PT 120 KronerTokmanni Group upgraded to buy at Goldman; PT 11.50 EurosDOWNGRADES:Bakkafrost downgraded to hold at SEB Equities; PT 558 KronerGreene King downgraded to sector perform at RBC; PT 8.50 PoundsLegal & General downgraded to hold at HSBC; PT 2.60 PoundsNostrum Oil & Gas downgraded to sell at BerenbergTalanx downgraded to hold at Nord/LB; Price Target 40 EurosINITIATIONS:AIB Group rated new equal-weight at Barclays; PT 3.30 EurosSEB rated new buy at Citi; PT 163 EurosTullow rated new buy at Peel Hunt; PT 2.50 PoundsMARKETS:MSCI Asia Pacific up 0.5%, Nikkei 225 down 0.3% S&P 500 down 0.8%, Dow down 0.7%, Nasdaq down 0.7%Euro down 0.05% at $1.1095Dollar Index up 0.06% at 98.25Yen down 0.24% at 106.49Brent up 0.5% at $60.4/bbl, WTI up 0.4% to $56.4/bblLME 3m Copper up 0.3% at $5730/MTGold spot down 0.3% at $1503.1/ozUS 10Yr yield up 2bps at 1.58% ECONOMIC DATA (All times CET):10am: (SP) June Trade Balance, prior -2.11b10:30am: (UK) July Public Finances (PSNCR), prior 15.2b10:30am: (UK) July Central Government NCR, prior 13.5b10:30am: (UK) July Public Sector Net Borrowing, est. -3.4b, prior 6.5b10:30am: (UK) July PSNB ex Banking Groups, est. -2.9b, prior 7.2b\--With assistance from Lisa Pham and Jan-Patrick Barnert.To contact the reporter on this story: Michael Msika in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Blaise Robinson at email@example.com, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The Nikkei share average took its cue from Wall Street's selloff overnight and fell 0.4% to 20,596.92 by the midday break. In New York, all three major stock indexes retreated on Tuesday to end a three-day rally, with financial shares leading the losses. Trump said on Tuesday he had to confront China over trade even if it caused short-term harm to the U.S. economy because Beijing had been cheating Washington for decades.
As the markets prepare for the FOMC meeting minutes due out later today, Boris Johnson will be in focus early in the day.
Asian shares fell on Wednesday as fresh worries about a global recession led investors to dump risky assets, with U.S. President Donald Trump showing no signs of backing down in his trade war with China. Trump said on Tuesday he had to confront China over trade even if it caused short-term harm to the U.S. economy because Beijing had been cheating Washington for decades.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Stocks fell and Treasuries climbed as investors assessed the latest news on trade talks and awaited more clues on monetary policy.The S&P 500 Index halted a three-day rally after U.S. Secretary of State Michael Pompeo told CNBC that Huawei Technologies Co. isn’t the only Chinese company that poses risks. He also sees the U.S. and China continuing their talks -- at least by phone -- over the next week or 10 days. Later Tuesday, President Donald Trump said he’s not ready to make a deal with China and cited the need for a “big” Federal Reserve rate cut. Benchmark 10-year yields slumped while the dollar dropped from this year’s high. Italian bonds jumped as Prime Minister Giuseppe Conte resigned.Just a day after markets cheered progress on trade negotiations, investors took a more cautious approach. Trump’s top economic adviser, Larry Kudlow, speaks with business leaders this week amid concerns about a recession, the trade war and whipsawing markets. Pacific Investment Management Co. has reduced its positions in government debt on bets that a breakthrough in U.S.-China trade talks could trigger a violent sell-off, the Financial Times reported. Traders are also gearing up for a keynote speech from Fed Chairman Jerome Powell at the Jackson Hole symposium Friday.“It’s kind of a choppy environment,” Dan Skelly, head of equity model portfolios at Morgan Stanley Wealth Management, said in a phone interview. “The liquidity in August is going to be pretty poor, so that certainly in my view caps the potential upside, but it does raise the risk that you do have a more pronounced sell-off at some point.”Read: JPMorgan’s Kolanovic Sees Pivot Back to Stocks by End of AugustWall Street watchdogs handpicked by Trump eased the Volcker Rule’s controversial ban on banks making speculative investments, wrapping up a top deregulatory priority that’s long been sought by the financial industry. Still, bank stocks joined broader market losses.In corporate news, Home Depot Inc. surged after its results broadly cleared investor expectations -- or at least, were no worse than expected by Wall Street. Beyond Meat Inc. jumped after JPMorgan upgraded the stock to overweight from neutral. Baidu Inc. soared after the China-based Internet company unexpectedly reported revenue growth in its June quarter. Kohl’s Corp. fell on sales that fell short of expectations.Here are some notable events coming up:Minutes of the Fed’s July meeting will provide details on the discussions leading to the first interest-rate cut in a decade when they are released on Wednesday.Thursday brings the Bank Indonesia rate decision and press conference with Governor Perry Warjiyo.Flash PMIs are due for the euro area on Thursday.Kansas City Federal Reserve Bank hosts its annual central banking symposium in Jackson Hole, Wyoming, starting Thursday. Fed Chairman Jerome Powell will give remarks on Friday.Here are the main moves in markets:StocksThe S&P 500 fell 0.8% to 2,900.51 as of 4 p.m. New York time.The Stoxx Europe 600 Index decreased 0.7%.The MSCI Asia Pacific Index rose 0.6%.CurrenciesThe Bloomberg Dollar Spot Index declined 0.3%.The euro rose 0.2% to $1.1102.The Japanese yen increased 0.4% to 106.21 per dollar.BondsThe yield on 10-year Treasuries slid six basis points to 1.55%.Germany’s 10-year yield fell four basis points to -0.69%.Britain’s 10-year yield dropped two basis points to 0.452%.CommoditiesThe Bloomberg Commodity Index was little changed.West Texas Intermediate crude climbed 0.2% to $56.34 a barrel.Gold increased 0.3% to $1,516.70 an ounce.\--With assistance from Sybilla Gross, Andreea Papuc, Todd White and Laura Curtis.To contact the reporters on this story: Rita Nazareth in New York at firstname.lastname@example.org;Sarah Ponczek in New York at email@example.comTo contact the editors responsible for this story: Jeremy Herron at firstname.lastname@example.org, Rita NazarethFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Japan's Nikkei rose for a third straight day on Tuesday as investors tiptoed back into equities amid signs of a slight easing of trade tensions between the United States and China. On Monday, Washington extended a reprieve that permits China's Huawei Technologies to buy components from U.S. companies by 90 days, to supply existing customers. On Wall Street, all three major stock indexes gained overnight, with Apple jumping 1.9% to provide the biggest boost to the Nasdaq.
(Bloomberg) -- Last year, U.S. 10-year yields weren’t low enough to really boost the equity market’s appeal. This summer, the inversion of the yield curve is suddenly triggering worries of a U.S. recession, while bund yields are deep into negative territory as Germany seems heading for an economic downturn. Yet there’s few signs of panic among equity traders.Many in the market agree that a U.S. recession isn’t imminent. UBS strategists see the inverted yield curve more as “a statement on lackluster growth in the rest of the world,” and suggest a slowdown would take some time to materialize.One interesting point they note is that European equities seem to have been more vulnerable than U.S. stocks to the gyration of the U.S. 10-year bond yield over the past six months.The U.S. 10-year yield has only fallen below 1.6% on two previous occasions: mid-2012 and mid-2016. According to Citi strategist Jonathan Stubbs, it has worked well as a buy signal for European equities both times, with the DAX returning 23% on average over the next 12 months, the CAC 24%, and the FTSE 17%. Of course, with Fed cuts, ECB QE and trade concerns, things may be different this time, he says.So, should we be worried? Not yet, according to JPMorgan strategists including Mislav Matejka. Over the past six historical episodes, yield-curve inversion preceded recessions by 17 months on average, while the equity market peaked about 11 months after the inversion, they write. Even if the risk of a downturn next year is increasing, much can happen in the meantime. They still expect equities to make all-time highs into the first half of 2020 and see the current pull-back not lasting beyond early September as the ECB will start quantitative easing and the second Fed rate cut might be bigger than the first.The bounce in the U.S. 10-year yield over the past couple of days may have also provided some relief. Indeed, Bank of America technical analysts note that extreme momentum has pushed the monthly Relative Strength Index (RSI) of the U.S. 10- and 30-year bonds into their fourth and fifth-most overbought level ever. This may signal an imminent “key low” or “pivot low.”And not all is bad about negative yields anyway. The more bond yields move deep into negative territory, the more stocks are seen by many as the only attractive asset. Why buy a bond on which you’re guaranteed to lose money while you can buy stocks with lofty dividend yields of 5% or more?True, if held until maturity, government bond yields don’t look appealing. But on an absolute-return basis, some long-duration securities beat stocks. Notably this year, Austria’s 100-year note has delivered investors as much as an 80% return so far. Granted, the timing must be right and liquidity could be an issue.Finally, let’s not forget about another silver lining. With Germany facing the danger of a recession, the government has signaled it stands ready to inject stimulus if things turn sour. Since the bund curve has turned negative across all maturities, financing those fiscal measures in the long-term is even more appealing.In the meantime, Euro Stoxx 50 futures are trading little changed ahead of the open, while S&P 500 contracts are up 0.2%.SECTORS IN FOCUS TODAY:Watch the dollar after President Trump called for the Federal Reserve to cut rates by at least a full percentage point in order to weaken the U.S. currency. Fed Chairman Powell is expected to signal the potential for another cut on Friday, though some of his colleagues are not convinced.Watch the pound and U.K. stocks after U.K. Prime Minister Boris Johnson reiterated the country will be ready to leave the European Union without a deal by the current deadline at the end of October and is planning a September publicity blitz to prepare the public for a so-called hard Brexit. Meanwhile, the Labour party is gearing up for an election.COMMENT:“The flattening of the yield curve was pretty extreme and not what we would naturally expect with the Fed cutting rates, as news should generally affect near-term pricing more than the pricing of bonds maturing in 2040," Emiel Van Den Heiligenberg, head of asset allocation at LGIM, writes in a note. "We therefore aren’t convinced the current situation is sustainable, as the more the curve flattens, the more vocal some members of the Federal Open Market Committee will be in calling for rapid rate cuts.”NOTES FROM THE SELL SIDE:Peel Hunt initiates Playtech with an add rating, as the broker says that although the company is a “strategic muddle,” there is a will to sort out its issues which are “now exposed to daylight.”Jefferies says the biggest potential Brexit risks to the paper & pulp sector are goods-trade disruptions across U.K.-Europe borders as well as a potential macro slowdown next year in those markets. Mondi is seen as least exposed to U.K., SCA has the most U.K. sales exposure while DS Smith will see biggest FX sensitivity to earnings as a co. reporting in GBP with most profits coming from outside the U.K.European insurers have been surprisingly strong in the past 12 months but falling investment yields turns Bankhaus Lampe more cautious on the sector in a note downgrading its rating on Zurich to sell. Separately, Jefferies upgraded its rating on Zurich to buy.COMPANY NEWS AND M&A:BHP Gives Investors Bonanza Returns And a Trade Spat Warning (1)BHP CEO Says Top Miner Can Still Profit In Any Global DownturnBain, Carlyle Said to Weigh Raising Osram Bid to Counter AMSCasino Identifies New Asset Diposals Worth EU2bBNY Mellon, Societe Generale to Join German Cum-Ex Trial (1)Pandora Second Quarter Revenue 1.3% Above EstimatesBasilea Narrows FY Operating Loss View, Midpoint Wider Than Est.Seadrill Ltd 2Q Adjusted Ebitda Beats Highest Est.South Korea May Fine Audi, Porsche over Alleged Emission-RiggingColoplast Chairman Lars Rasmussen Sells Shares Using OptionsAmbea Second-Quarter Net Sales Beat Highest EstimateAnglo American Pledges $30m for Peru Projects to End ProtestsGreene King Banishes Brexit Blues With Some Help From Hong KongCarige Calls Investor Meeting to Back $1 Billion Rescue PlanTECHNICAL OUTLOOK for Stoxx 600 index:Resistance at 374.5 (61.8% Fibo); ~386 (uptrend); 395.1 (July high)Support at 370.9 (200-DMA); 365.5 (50% Fibo, May low)RSI: 45.5TECHNICAL OUTLOOK for Euro Stoxx 50 index:Resistance at ~3,400 (uptrend) 3,403 (61.8% Fibo); 3,443 (50-DMA)Support at 3,249 (June/August low); 3,301 (200-DMA)RSI: 46.8MAIN RESEARCH AND RATING CHANGES:UPGRADES:Alstria Office upgraded to overweight at JPMorgan; PT 18 EurosAntofagasta upgraded to neutral at Goldman; PT 8.50 PoundsFLSmidth upgraded to overweight at JPMorgan; PT 360 KronerGlencore upgraded to neutral at Goldman; PT 2.20 PoundsHumana upgraded to buy at Handelsbanken; PT 57 KronorZurich Ins. upgraded to buy at Jefferies; PT 380 FrancsDOWNGRADES:Continental cut to hold at Deutsche Bank; PT Set to 120 EurosGreene King cut to equal-weight at Morgan StanleyMetrovacesa downgraded to sell at Goldman; PT 8.12 EurosProximus downgraded to sell at Goldman; PT 21 EurosRentokil downgraded to sector perform at RBC; PT 4.70 PoundsRepsol downgraded to underweight at Barclays; PT 16 EurosZurich Ins. downgraded to sell at Bankhaus LampeINITIATIONS:Addiko rated new buy at Goldman; PT 27 EurosOlvi Oyj rated new buy at SEB Equities; PT 41 EurosPlaytech rated new add at Peel Hunt; PT 4.25 PoundsStobart rated new outperform at MacquarieMARKETS:MSCI Asia Pacific up 1%, Nikkei 225 up 0.5% S&P 500 up 1.2%, Dow up 1%, Nasdaq up 1.4%Euro up 0.05% at $1.1084Dollar Index down 0.01% at 98.34Yen up 0.11% at 106.52Brent up 0.1% at $59.8/bbl, WTI little changed at $56.2/bblLME 3m Copper down 0.1% at $5768/MTGold spot up 0.1% at $1497.4/ozUS 10Yr yield down 2bps at 1.59% ECONOMIC DATA (All times CET):11am: (EC) June Construction Output MoM, prior -0.3%11am: (EC) June Construction Output YoY, prior 2.0%12pm: (UK) Aug. CBI Trends Total Orders, est. -25, prior -3412pm: (UK) Aug. CBI Trends Selling Prices, prior 12To contact the reporters on this story: Michael Msika in London at email@example.com;Jan-Patrick Barnert in Frankfurt at firstname.lastname@example.orgTo contact the editors responsible for this story: Blaise Robinson at email@example.com, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Basically, the move by the Bit’s another way for companies to get cheaper money, which should be a positive for the economy and China’s stock market. In theory, the MLF rate could follow U.S. rates, which means if the Fed cuts rates, MLF rates will follow lower.