European stock markets have tentatively tried to rise today after a generally positive session on Monday. Futures were looking quite upbeat but the open witnessed a sharp pullback in the Dax and FTSE although both have settled close to neutral. It’s a lot worse in Paris where shares are down 0.3 per cent.
Asian equities firmed broadly led by Hong Kong as China was said to be mulling CN¥2 trillion in stimulus to prop up markets. The Bank of Japan left policy rates unchanged, which helped nudge the yen to a week-high and cooled Tokyo’s recent equity market surge. Oil prices rose after fresh British and US strikes in Yemen. The European Central Bank meeting on Thursday is starting to come into view.
The Dow Jones achieved a fresh all-time high overnight while the S&P 500 rose 0.22 per cent, also a new record. Edward Yardeni said: “Now investors’ recession fears have abated, they’re focusing on company fundamentals. The possible result: an exuberant melt-up phase, which might already be underway and might become irrational, funded by money moving from interest-paying vehicles into stocks and bonds.”
Bank of America notes that the spread, however, is not good, with only the top two deciles of S&P 500 market cap actually in the green year-to-date. Meanwhile, hedge funds are shorting and DIY investors are not getting in on the wave. Small caps played some catchup but continue to lag – the Russell 2000 added 2 per cent to trim year-to-date losses to 2 per cent.
Tesla declined further, taking its YTD loss to almost 16 per cent as Morgan Stabley cut its price target, as well as estimates for EPS, margins, pricing and cash flow ahead of earnings tomorrow. They said: “Global EV momentum is stalling. The market is over-supplied …Fleets are cutting EVs.”
Netflix reports Q4 subscriber figures today as part of its earnings update. Has momentum from the forecast-beating prior quarter continued? It is emerging from the streaming wars as the champ.
The yen rose as the Bank of Japan left rates unchanged but talked up progress on achieving its inflation target and sounded optimistic about wage negotiations taking place this spring. It left its short-term rate at 0.1 per cent and the yield curve control envelope unchanged. April is the consensus now, though the BoJ did marginally lower its inflation outlook for fiscal 2024. The yen rallied to its best in a week, with USDJPY dipping below 147.
The Trader is written by Neil Wilson, chief market analyst at Finalto
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