U.S stocks extended losses last night
U.S stocks extended losses last night after Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. economy is on “solid footing” and he would support continued cuts to stimulus. The SPX 500 has lost 1.6 percent in 2014, the worst start to a year since 2009. The Fed, who meet next on January 29, announced last month a reduction in its monthly bond-buying program, citing a recovery in the labour market.
Meanwhile, European equity stock futures have also retreated, indicating the regions equities will fall from their highest level since May 2008 amid concern over equity valuations. The Stoxx 600 currently trades at 13.9 times its members’ projected earnings. The gauge ended 2013 at its highest valuation since the end of 2009 with earnings for the index falling around 5 percent last year.
– Max Cohen
PM Analysis
What looked like a dismal start to the session soon turned into a significant reversal
The equity market has answered a question today. What looked like a dismal start to the session soon turned into a significant reversal, with investors’ appetite for risk not yet saturated from what has been a stellar 2013 for stocks.
European equity benchmarks opened some one percent lower this morning and headed higher from there. This is significant given the backdrop of continued outperformance from risk assets throughout last year. Indeed, if the market wasn’t in a phase where flows appeared inward, any period of selling could easily invoke more selling and create price shocks, particularly with pundits and commentators popularising how expensive everything’s becoming.
CPI and retail sales (US) data came in broadly in line with consensus, allowing for a continuation of the market in its current state. Data, while still key, is now being taken in sympathy of earnings news flow. If the market is to continue to expand, earnings must keep pace.
– David White
Original Post
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