WSJ:
Global stocks rebounded Thursday but remained on track for quarterly losses after investor worries about rising rates, trade tensions and the health of the technology sector ended an extended period of calm.
Ahead of the long holiday weekend, the Stoxx Europe 600 was up 0.5% led by the auto sector, following small gains in Japan, Hong Kong and Shanghai. U.S. futures pointed to a 0.4% rise for the S&P 500 and a 0.8% boost for the Nasdaq .
For the first three months of 2018, however, the S&P 500 was poised to lose roughly 2.6%, ending a nine-quarter winning streak, while the Stoxx Europe 600 was on track to end 4.6% lower, the U.K.’s FTSE 100 8% lower, and Japan’s Nikkei 7.1% lower, also hit by the dollar’s weak trajectory.
While little was able to stir stocks for the past two years, markets have become more sensitive to any hints of bad news in the last two months, returning to a more elevated level of volatility and lower returns.
With central banks moving gradually away from stimulus, tax cuts already passed and the early signs of acceleration in the global economy in the rearview, “the question now is how much newsflow can there be about things getting incrementally better versus getting incrementally worse,” said Chris Dyer, director of global equity at Eaton Vance.
While he still is optimistic about global equities in light a healthy and upbeat corporate sector, “when you think about trade wars, North Korea, privacy and internet companies, there’s a lot that could scare investors,” he said.
The S&P 500 has fallen 4% so far in March, on pace for its worst month since 2016, while the Dow Jones Industrial Average has fallen 4.7%. Yields on 10-year Treasurys have risen to 2.77% from around 2.41% at the end of 2017.
“You’re losing money in fixed income, losing money in equities: The average balanced account at the end of the first quarter is going to be down,” said Philip Blancato, chief executive at Ladenburg Thalmann Asset Management.
Just a handful of equity markets have clung to small gains for the year, including Italy’s FTSE MIB index, the Nasdaq Composite, and Hong Kong’s Hang Seng.
Still, Mr. Blancato and many investors remain encouraged about the outlook for the second quarter, pointing to continued momentum in the economy and corporate earnings.
“You’ve got a strong consumer, great earnings growth because of less tax, and an expanding economy coupled with low inflation and low lending rates,” he said. “You still have all the underpinnings of a very strong stock market.”
Data Wednesday showed the U.S. economy grew more than previously estimated expected in the final three months of 2017, while figures Thursday showed the German unemployment rate hit a record low in March.
First-quarter earnings per share for the S&P 500 are meanwhile projected to rise 16.6%, according to CFRA Research, and 2018 earnings estimates for the tech sector, a current focus of market worry, have continued to move higher in the past month, according to FactSet.
The S&P 500 now trades at 16.3 times forward earnings, cheaper than where it started the year.
On Thursday, auto makers led gains in European stocks, with reports of merger talks between Japan’s Nissan Motor Co. and Renault boosting the sector. Renault shares were up 4.2%,
In Asian trading, many tech stocks took a hit following falls in the U.S. and recent declines in crude oil prices hit the energy sector, but a slight easing of geopolitical tensions, driven by speculation of a Japan-North Korea summit meeting, helped weaken the yen and support Japanese stocks.
Japan’s Asahi Shimbun newspaper reported that the country has reached out to North Korea about a meeting between Prime Minister Shinzo Abe and Kim Jong Un, who just shook hands with Chinese President Xi Jinping in Beijing and already has a summit planned with U.S. President Donald Trump.
Some investors took it as a sign that Pyongyang may be more open to negotiating an end to its nuclear-weapons program. The two Koreas agreed to an April 27 meeting.
The report came on top of a dollar rebound, which pushed the dollar up 1.4% against the yen on Wednesday, its biggest one-day gain since September. A weaker yen tends to boost shares of multinationals which translate earnings from abroad. The Nikkei rose 0.6%, pulled down slightly by shares of Takeda Pharmaceutical after the company said it was considering a takeover bid for London-listed Shire.
Still, for the quarter, the Nikkei ended sharply lower, hurt by a 5.6% climb in the yen against the U.S. dollar.
In China, news of a tax-cut plan boosted local shares. Shanghai stocks were up 1.2%, helped by Beijing’s plans to lower value-added taxes. The 400 billion yuan ($63.5 billion) measure, due to take effect in May, is expected to boost factory profits in China by a further 11% this year, said Li Xunlei, an economist at Zhongtai Securities.
Hong Kong’s Hang Seng edged up 0.2%, keeping it up 0.6% for the quarter.
The U.S. Commerce Department releases its report on February personal income and outlays on Thursday, which will be watched for any signs of a pickup in inflation. Federal Reserve Bank of Philadelphia President Patrick Harker said he expects officials will need to raise interest rates a total of three times this year, up from his earlier projection of two, due to stronger inflation.
https://www.wsj.com/articles/many-asia-markets-rebound-from-losses-1522293236
Submitted March 29, 2018 at 07:31AM by soup_nazi1 https://ift.tt/2pRkaPF
