Equity markets all over the world start corrections from record highs since August 2011?
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A trader reacts as he watches screens on the floor of the New York Stock Exchange in New York, U.S., February 5, 2018. REUTERS/Brendan McDermid
FEBRUARY 6, 2018 / 8:16 AM / UPDATED AN HOUR AGO
Asian shares set to tumble as 'goldilocks' trade unwinds
TOKYO (Reuters) - Asian shares were set to fall sharply on Tuesday after Wall Street suffered its biggest decline since 2011 as investors’ faith in factors underpinning a bull run in markets began to crumble. Australian shares dropped 2.7 percent in early trade to their lowest level since October while futures suggest Japan's Nikkei .N225 is on course to fall more than 4 percent. U.S. stocks plunged in highly volatile trading on Monday, with the Dow industrials falling nearly 1,600 points during the session, its biggest intraday decline in history, as investors grappled with rising bond yields and potentially firming inflation. “Since last autumn, investors had been betting on the goldilocks economy -- solid economic expansion, improving corporate earnings and stable inflation. But the tide seems to have changed,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. The benchmark S&P 500 .SPX fell 4.1 percent and the Dow .DJI 4.6 percent, suffering their biggest percentage drops since August 2011 as a long-awaited pullback from record highs deepened. The S&P 500 ended 7.8 percent down from its record high on Jan. 26 … for more, go to https://www.reuters.com/article/us-global-markets/asian-shares-set-to-tumble-as-goldilocks-trade-unwinds-idUSKBN1FQ00X
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Equity markets all over the world start corrections from record highs since August 2011?
Yesterday (Monday Feb, 5) was a nightmare for equity market players globally.
The Wall St. plunged 1,600 points, its biggest intraday fall in history and the benchmark S&P 500 and the Dow were inflicted with their biggest percentage drops since August 2011 - reportedly a long-awaited pullback from record highs deepened.
The intraday equity tumble has erased 2018’s gains?
“For the past six months, I have been advising Malaysians, in this blog, to be cautious with the turbulent global economy,” Gerakan Deputy Speaker Syed Abdul Razak Alsagoff said.
“And I also stressed that it is better to be cautious than to be sorry later,” he added.
Syed Razak said the FBMKLCI index saw a 17.41-point shave to end the day’s trading session at 1,853.07.
He said January 2018 saw news reports “glorifying” historic positive global market starts for the new year.
“But those who had warned that the partying will not last, and to be very afraid may be proven right after all,” he added.
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A trader reacts as he watches screens on the floor of the New York Stock Exchange in New York, U.S., February 5, 2018. REUTERS/Brendan McDermid
(Reuters) - - The S&P 500’s 4.10 percent slump on Monday was the deepest one-day percentage drop since Aug. 18, 2011, when the index fell 4.46 percent over fears about a weakening economy;
- Since last Thursday’s close, the S&P 500 has declined 6.13 percent, its deepest two-session loss since August 2015;
- The S&P 500 is down 7.79 percent from a record closing high on Jan. 26, and has declined 0.92 percent year-to-date. Monday was the first time in 2018 that the S&P 500 closed in negative territory for the year-to-date;
- The Dow Jones Industrial Average’s 4.6 percent loss on Monday was its largest in percentage terms since August 10, 2011, and the day’s 1,175 point loss was its largest ever in absolute terms. The index was briefly down more than 6 percent before recovering; … for more, go to https://www.reuters.com/article/us-stocks-usa-factbox/factbox-nine-year-u-s-bull-stock-market-suffers-rare-setback-idUSKBN1FP2VL?il=0
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“Do not treat the equity market like a gambling den or casino. You will live to regret it dearly.
“Go into the equity market for long-term gains, with holding power. If not, forget it,” he added.
He said all sorts of contradicting news analysts and assessments were published daily but “read and digest them and form your own cautious judgment”.
“And, don’t just blindly believe what they have to say because there is nothing better than your own cautious judgment and what you can afford to invest,” he added.
Here are four market reports reproduced for the convenience of readers:
"Wall St. plunges, S&P 500 erases 2018's gains(Update)
MARKETS
Tuesday, 6 Feb 2018
6:28 AM MYT
The final numbers of the day are shown above the floor of the New York Stock Exchange in New York, U.S., February 5, 2018. - Reuters
NEW YORK: U.S. stocks plunged in highly volatile trading on Monday, with the Dow industrials falling nearly 1,600 points during the session, its biggest intraday decline in history, as investors grappled with rising bond yields and potentially firming inflation.
The benchmark S&P 500 and the Dow suffered their biggest percentage drops since August 2011 as a long-awaited pullback from record highs deepened.
The financial <.SPSY>, healthcare <.SPXHC> and industrial <.SPLRCI> sectors fell the most, but declines were spread broadly as all major 11 S&P groups dropped at least 1.7 percent. All 30 of the blue-chip Dow industrial components finished negative.
With Monday's declines, the S&P 500 erased its gains for 2018 and is now down 0.9 percent in 2018.
Many investors have been bracing for a pullback for months, as the stock market has minted record high after record high with investors encouraged by solid economic data and corporate earnings prospects, the latter bolstered by recently passed U.S. corporate tax cuts.
Friday's January jobs report sparked worries over inflation and a surge in bond yields, as well as concerns that the Federal Reserve will raise rates at a faster pace than expected.
"The market has had an incredible run," said Michael O’Rourke, chief market strategist At JonesTrading In Greenwich, Connecticut.
"We have an environment where interest rates are rising. We have a stronger economy so the Fed should continue to tighten ... You're seeing real changes occur and different investments are adjusting to that," O'Rourke said.
The Dow Jones Industrial Average <.DJI> fell 1,175.21 points, or 4.6 percent, to 24,345.75, the S&P 500 <.SPX> lost 113.19 points, or 4.10 percent, to 2,648.94 and the Nasdaq Composite <.IXIC> dropped 273.42 points, or 3.78 percent, to 6,967.53.
The S&P 500 ended 7.8 percent down from its record high on Jan. 26, with the Dow down 8.5 percent over that time.
Even with the sharp declines, stocks finished above their lows touched during the session. At one point, the Dow fell 6.3 percent or 1,597 points, the biggest one-day points loss ever, as it breached both the 25,000 and 24,000 levels during trading.
The stock market has climbed to record peaks since President Donald Trump's election and remains up 23.8 percent since his victory. Trump has frequently touted the rise of the stock market during his presidency.
As the stock market fell on Monday, the White House said the fundamentals of the U.S. economy are strong.
The CBOE Volatility index <.VIX>, the closely followed measure of expected near-term stock market volatility, jumped 20 points to 30.71, its highest level since August 2015.
Until recently, gains for stocks have come as the market has been relatively subdued, and any declines were met with buyers looking for bargains.
“People who have been buying the dip are now going to be selling the rip," said Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas. "The psychology of the market changed today. It’ll take a while to get that psychology back.”
About 11.5 billion shares changed hands in U.S. exchanges, well above the 7.6 billion daily average over the last 20 sessions.
Declining issues outnumbered advancing ones on the NYSE by a 8.64-to-1 ratio; on Nasdaq, a 6.92-to-1 ratio favored decliners.
The S&P 500 posted 1 new 52-week highs and 38 new lows; the Nasdaq Composite recorded 17 new highs and 164 new lows. 37.32 - Reuters
Fact Box:
** The S&P 500's <.SPX> 4.10 percent slump on Monday was the deepest one-day percentage drop since Aug. 18, 2011, when the index fell 4.46 percent over fears about a weakening economy;
** Since last Thursday's close, the S&P 500 has declined 6.13 percent, its deepest two-session loss since August 2015;
** The S&P 500 is down 7.79 percent from a record closing high on Jan. 26, and has declined 0.92 percent year-to-date. Monday was the first time in 2018 that the S&P 500 closed in negative territory for the year-to-date;
** The Dow Jones Industrial Average's <.DJIA> 4.6 percent loss on Monday was its largest in percentage terms since August 10, 2011, and the day's 1,175 point loss was its largest ever in absolute terms. The index was briefly down more than 6 percent before recovering;
** Wall Street has been in a nine-year bull market that has tripled the S&P 500's value since the 2008/2009 financial crisis. Investors in recent months have become more wary of a pullback;
** The Dow's worst-performing stock on Monday was Boeing <BA.N>, down 5.74 percent;
** Microsoft <MSFT.O> and Wells Fargo & Co <WFC.N> fell 4.12 and 9.22 percent, respectively, and hurt the S&P 500 more than any other stocks;
** Around 6,986 U.S. stocks fell during the session, the greatest number in a single session since September 2016;
** Trading volume on Wall Street reached 11.5 billion shares, the highest since November 2016.
Comments:
JACK ABLIN, CHIEF INVESTMENT OFFICER, CRESSET WEALTH ADVISORS, CHICAGO.
“One thing is that going into the last week or so, investor bullishness was in the top decile of its historical range, which suggests that investors were pretty optimistic, with high expectations and largely complacent. There’s kind of an emotional reversal that’s going on.”
“I also think that perhaps this did coincide with the transition of Fed chairs from Janet Yellen to Jerome Powell. Investors don’t know much about Powell, where we did really know a lot about Yellen before she took her role."
GREG ADAMSICK, DIRECTOR OF GLOBAL FUTURES AND OPTIONS, RCM ALTERNATIVES, CHICAGO
“Equities had had such a muted reaction to higher yields. We reached a point that yields reached high enough that stocks look vulnerable. When S&P 500 broke 2,700, a lot of sell orders were activated. You have a lot of index exposure through passive investing with ETFs. Once the indexes get hit, selling follows."
JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY:
"It looks to me like a typical type of scenario when you see a single stock flash crash where you'll see bids just disappear, stop orders get kicked, in those particular names. The overall market could have taken a cue from some of the bigger names. There was also heavy futures activity at the time as well."
"It's tough to blame any particular person or event but it tells you the type of structure we have now certainly can't handle this type of volatility and volume still."
"I think there's still going to be pressure. There's going to be more. But then I think we're going to firm up. People will realize that the event we've been waiting for is now over. But the event has to get itself out of the way first."
STEVE WACHTEL, PORTFOLIO MANAGER, SSI INVESTMENT MANAGEMENT, LOS ANGELES
“Sharper sell-off than we expected but it’s technical based with mostly the machines selling. Seemed like there was a minor flash crash there around noon. We look at the credit markets closely when there is a large equity sell-off and the credit markets are still very healthy, just moderate spread widening today.”
NAEEM ASLAM, CHIEF MARKET ANALYST, THINKMARKETS, LONDON
“I have a strong feeling that this selloff is going to intensify because bears are seeing blood on the Street and all they want is right in front of them.”
LARRY MILSTEIN, HEAD OF GOVERNMENT AND AGENCY TRADING, R.W. PRESSPRICH & CO., NEW YORK
“We had a nice bounce from the lows there. It’s unsettled where we go from here at this point. Some technical levels were hit in the equity market where selling beget more selling. It was probably some ‘blackbox,’ algo selling in stocks and buying in bonds.
DENNIS DICK, PROPRIETARY TRADER, BRIGHT TRADING LLC, LAS VEGAS
“You’ve got to be prepared for all types of markets, and a lot of people who have been in this market for the past three or four years have never seen this before.”
“People who have been buying the dip are now going to be selling the rip. The psychology of the market changed today. It’ll take a while to get that psychology back.”
JEFFREY KLEINTOP, CHIEF GLOBAL INVESTMENT STRATEGIST, CHARLES SCHWAB & CO, BOSTON
"I certainly don't see anything fundamental. It wasn't driven by any macro event, rather it appears to be computer driven trading that led to an order imbalance. These things can happen quickly and tend to be corrected quickly.
"Last week we saw a broad pullback that was macro related. Instead of being tied to fears of economic weakness it was tied to too much growth and fears of inflation. Certainly fears that the Fed in the U.S. might get more aggressive in reigning in stimulus. But as long as growth remains intact, and we believe it will, stocks should rebound."
LOU BRIEN, MARKET STRATEGIST, DRW TRADING, CHICAGO
“The velocity of the market selloff picked up. For the first couple of days of it there hadn’t been much of a reaction in the long-end of the treasuries. Usually during a selloff there will be some kind of reaction. The magnitude of the selloff versus how far it’s come really didn’t raise any alarm bells in the stocks until the velocity picked up this afternoon.
"Partly, I think the argument could be made too that the heightened inflation expectations from the tax bill and from infrastructure output, and then you had that very misleading wage number the other day, all fed into inflation expectations and it wasn’t that the Fed was going to raise rates to much it was that they weren’t going to be quick enough.”
MICHAEL O’ROURKE, CHIEF MARKET STRATEGIST, JONESTRADING, GREENWICH, CONNECTICUT
"People who were not active, who tend to be in index products were looking to take profits today. They don't price until the end of the day. They probably put orders in to sell and book some profits."
"These orders have to be done by the end of the day. You want to make sure you get them done."
MARKETS:
BONDS: The 2- <US2YT=RR> Treasury note yield eased to 2.0767 percent, while the 10-year <US10YT=RR> bond yield rose to 2.8850, the highest since January 2014, before falling back to 2.7657.
FOREX: The dollar index <.DXY> was up 0.33 percent.
VIX: The Cboe volatility index more than doubled to 35.73, its highest since August 2015 and was last up 14.84 at 32.15. - Reuters
Global markets pullback, Bursa follows trend
MARKETS
Tuesday, 6 Feb 2018
by tee lin say
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Along with the rest of the region, Bursa Malaysia took its cue from the Dow Jones’ 665-point drop on Friday to stage a selldown yesterday, which most analysts see as a healthy and necessary correction after a 4% gain in January.
The Dow Jones made its first meaningful correction last Friday by tumbling 665 points or 2.5% after nine straight years of gains, and after rising 8% this year. This was its biggest one-day sell-off since June 2016.
Instinctively, the FBM KLCI opened yesterday morning by falling 25 points upon the opening bell. However, the fall wasn’t as painful as expected, mainly because stocks had started correcting some three weeks ago ahead of an upcoming election. Also, many felt this was a much-needed correction after 10 uninterrupted weeks of gains.
Like the Dow and S&P 500, the FBM KLCI had been partying in January, thanks to stronger global prospects, with the index gaining 71 points or 4% to close at 1,868 points.
The Dow and the S&P 500, which have been notching record highs, also had their best monthly gains last month, with an 8% and 5.6% gain, respectively, their best since March 2016.
The FBM KLCI finished the day down 17.41 points to 1,853.07 points on a volume of 2.64 billion shares.
It isn’t all bad for Malaysian stocks though as unlike the United States, Malaysian stocks had in fact started correcting some three weeks before as fears of an upcoming election had seen local investors starting to clear their position.
For example, Sapura Energy Bhd, which had been hogging the volume list over the past year and touched its 52-week high of RM1.15 on Jan 15, also corrected to close at 87.5 sen yesterday.
Analysts too aren’t getting bearish anytime soon.
“February has historically been a good month for the Malaysian market with a 40-year average monthly gain of 2.4%. We expect the FBM KLCI to track the performance of the regional markets in February. All eyes will be on how the corporates fare in the upcoming February results season and investors will continue to look for hints on when the 14th general election will be held. The current term of Parliament expires on June 24,” said CIMB Investment head of equity research Ivy Ng in her strategy note yesterday.
She added that the CIMB research team was on the road for most of January, marketing its economic and strategic outlook for 2018 to investors in Kuala Lumpur, Singapore, Thailand and Hong Kong.
“Foreign investors that we met have increased their holdings in Malaysian equities from a year ago. Generally, investors were cautiously optimistic about Malaysian equities. Similar to a year ago, we found Malaysian funds more upbeat than their overseas counterparts,” she said.
She added that the FBM KLCI’s January gains were the highest since September 2014 and was driven mainly by the stronger ringgit, foreign fund inflow and improved market sentiment globally.
The ringgit appreciated 3.8% in January, due partly to strong crude oil prices, the overnight policy rate hike of 25 basis points and inflow of foreign funds into Malaysia. Foreign investors increased their exposure, with a RM3.4bil net inflow during the month.
“Undeniably, though, markets are likely to remain volatile as they adjust to a new growth and interest rate environment. Malaysia will definitely be affected by the upward and downward moves of the US,” said one strategist.
As for the Dow’s fall, the chief reasons were rising inflation and a higher interest rate environment. On Friday, the US Labor Department reported that employment grew more than expected in January with the biggest wage gain in more than 8½ years.
The thought of workers commanding higher salaries fuelled expectations that inflation was on the rise, which would then prompt the Federal Reserve to take a more aggressive approach to rate hikes this year.
That caused the 10-year treasury yield to surge to 2.845%, the highest since January 2014, which could make returns on treasuries look more attractive relative to stocks.
But market players are not convinced that the bull market is over. In fact, many say a pullback is overdue.
“While we don’t believe a bear market (an extended market downturn of 20% or more, driven by fundamental reasons) looms, we think now is as good a time as any for investors to start preparing themselves for future market volatility.
“We aren’t saying volatility is due to return with a vengeance in 2018. Short-term moves are impossible to forecast, but it is a normal occurrence during bull markets. Better to start steeling your nerves now,” said FisherMarkerminder in its latest note on Feb 2.
Save your panic. This equity slump isn’t the end of days
MARKETS
Monday, 5 Feb 2018
2:33 PM MYT
HONG KONG: Is it a blip, a correction or the end of days?
Stock markets in Asia tumbled Monday, extending the biggest global selloff in two years. Equity investors are fretting as Treasury yields approach 3%. On Friday, 10-year returns touched 2.85%, and the dollar rallied 0.9%.
Some context, however. While the MSCI Asia ex-Japan Index’s 7.5% return in January was good, it’s not unprecedented. In January 2001, the benchmark soared 12.8%. Also, U.S. government bond yields have been on a steady rise since the start of the year, and that hasn’t stopped Asia from partying.
The key to Asia’s rally is a weak greenback. When investors pumped US$13bil into Chinese stocks last month -- the most in at least two years -- what they expected was not only capital returns, but foreign-exchange gains. No one’s very interested in the Philippines because of the weak peso; as a result, the Southeast Asian nation is home to the region’s worst-performing emerging market this year.
A currency’s strength is dictated by interest rate differentials, in theory at least. And it’s unclear the dollar will get much stronger. Based on the Bloomberg Dollar Spot Index, which determines currency weights according to their relative importance to the U.S. in terms of international trade, one-third of the dollar’s value is dictated by the euro. But five-year bunds finally offered you something last week, after being negative since 2015.
Next in line is the Japanese yen, which dictates 18% of the dollar’s value. There have been plenty of murmurings, from this columnist included, that the Bank of Japan will start stealth tightening, especially in a world of rising U.S. interest rates. After all, Japan’s central bank already owns an unprecedented 45% of the nation’s bond market; how much more entrenched can it get?
Interest rates have been climbing in emerging Asia as well. Malaysia and Pakistan have both embarked on tightening cycles while the Philippines is expected to hike by 50 basis points this year. Interest rates in China and India are also on the up, as Beijing limits credit expansion and Delhi can’t stop spending.
You get my point: Just because U.S. rates are strengthening doesn’t mean the dollar will necessarily follow suit.
In fact, rising U.S. rates and a weak dollar would be an ideal case for emerging Asia. U.S. stocks look expensive: Emerging Asia’s 6.1% earnings yield is more alluring than the S&P 500’s 4.5%. Plus the MSCI China Index is still 25% shy of its record 1993 high.
Don’t think I’m blindly bullish. Last month, I warned of overly optimistic sell-side analysts and said China’s big bank rally was progressing too fast. But unless we see a sustained stronger dollar, this selloff looks more like a blip. - Bloomberg
Most Asean markets mark steepest drop in over a year
MARKETS
Monday, 5 Feb 2018
1:33 PM MYT
Shares across Southeast Asia tumbled on Monday, as investors were unnerved by a spike in U.S. bond yields.
SINGAPORE: Shares across Southeast Asia tumbled on Monday, as investors were unnerved by a spike in U.S. bond yields over the possibility of more aggressive policy tightening by the Federal Reserve.
Asian shares fell the most in over a year as fears of resurgent inflation battered bonds and toppled Wall Street on Friday from all-time highs, with three major U.S. indexes logging their biggest weekly losses in two years.
"There is a cautious mood currently because of the sudden surge in yields, so I think markets are trying to adapt to this changing environment of changing yields and expectations of higher inflation going forward," said Joel Ng, as research analyst at KGI Securities in Singapore.
MSCI's broadest index of Asia-Pacific shares outside Japan slid as much as 2 percent in its biggest intraday drop since November 2016.
U.S. job growth surged in January and wages increased further, recording their largest annual gain in more than 8-1/2 years, bolstering expectations that inflation will push higher this year and the Fed might hasten to increase interest rates to stem inflation.
This compounded a bond market rout that pushed the yield on the benchmark 10-year Treasury note to a four-year high on Friday.
Philippine shares fell as much as 2.9 percent, giving up robust gains in January, and marking their biggest intraday percentage drop since November 2016.
Index heavyweights SM Investment and SM Prime Holdings fell as much as 4.6 percent and 4.5 percent, respectively, pulling the Philippine index down to its lowest in five weeks.
Singapore shares fell as much as 1.7 percent, led by losses in financials, and posted their biggest intraday percentage drop since January 2017.
Top lenders Oversea-Chinese Banking Corp and United Overseas Bank fell to their lowest in about a month, while DBS Group Holdings dropped 2.6 percent to an over two-week low.
Although higher interest rates tend to bode well for lenders, a sudden or much faster rise in yields will cause some problems in the equity markets, KGI analyst Ng said.
Indonesian shares fell as much as 1.6 percent, but recovered some of the losses to trade 0.3 percent lower.
Indonesia's economy grew at its fastest pace in four years in October-December, the statistics bureau said on Monday. Consumer stocks weighed on the index, with Astra International Tbk PT falling 2.9 percent and Unilever Indonesia Tbk PT dropping 2 percent.
Thai shares fell 1.5 percent, while Malaysian shares retreated 1.7 percent, with both markets posting their worst intraday percentage drop since November 2016. Vietnam shares fell as much as 3.2 percent, marking their steepest intraday drop since June 2016. - Reuters"
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N.37 LET BUKIT LANJAN SOAR WITH SYED ABDUL RAZAK ALSAGOFF
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