Highlights Financial Markets

Posted on Posted in Global market, Investment strategy

EQUITY markets; Yesterday March 6 U.S. stocks fell and traders are betting on a 96% chance the Federal Reserve will raise rates this month, European stocks fell in a broad decline, Chinese shares traded in Hong Kong rose for a second day as investors assessed the impact of ongoing legislative meetings in Beijing. China has set a 2017 growth target of “around 6.5 percent, or higher if possible” as focus shifts to easing risk and ensuring stability before a twice-a-decade leadership transition this year. The Nikkei Stock Average Volatility Index fell to its lowest since July 2014 as investors focused on the outlook for interest-rate hikes in the U.S. beyond March.

BOND markets  ;  U.S. Treasury securities investors are no longer demanding extra compensation to own 10-year Treasuries instead of a series of shorter-maturity obligations, a spread known as the term premium. Demand for Treasuries has risen even as expectations for the Fed to raise interest rates next week become nearly unanimous. A rise of uncertainty in Europe encouraged investors to hold U.S. government debt and triggered buying in the safest of government debt from German bunds to Treasuries.

China Finance Minister Xiao Jie said, . “A growing Chinese economy and fiscal income are the fundamental supports to repay debts,” the government will increase government spending in line with the growing economy while also paying off debt.

OIL: Investors generally are not betting on a sharp rise in the price of crude oil any time soon, most supply growth is expected to come from the United States, the United States responds more rapidly to price signals than other producers. If prices remain closer to $50, shale output could fall from the early party of the next decade. We are witnessing the start of a second wave of U.S. supply growth, and its size will depend on where prices go.

Summary: We are likely to see some modest profit taking when the action gets underway stateside as the most recent news has not been market friendly. News overnight of rising geopolitical tensions in East Asia, as North Korea fired four ballistic missiles early in the day, while a squabble between China and South Korea over the missile defiance of the rogue nation deepened. Investors also are continuing to weigh the possibility of an interest-rate hike by Federal Reserve and what impact it would have on the recent progress of the U.S. economy, as well as a recently released slower 2017 growth target for China’s economy. And last, but certainly not least, investors are a bit unnerved by accusations by President Trump this weekend that his predecessor, Barack Obama, wiretapped him in the days leading up to the November election.

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Bart Van Wagenberg

Bart Van Wagenberg

Senior Portfolio Manager
Bart Van Wagenberg

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