AM Analysis
Japanese stocks fall after the New Year break
Japanese stocks fell after they resumed trading from the New Year break, with the Nikkei 225 posting its biggest drop since October. Japanese exporters were hit the most after a stronger Yen weighed on the stocks. Bank of Japan Governor Haruhiko Kuroda said Japan’s central bank won’t necessarily end or scale back stimulus in two years and will continue with the program until inflation stabilizes at 2 percent.
The majority of other Asian markets were in negative territory, falling to three-week lows after China’s services sector slowed sharply last month. The latest reading raises concerns about the pace of the recovery in the world’s second-largest economy. WTI crude remains steady ahead of ISM non-manufacturing data which is likely to show a rebound from 53.9 in November, maintaining the above 50 reading. which signals expansion among companies.
The week ahead will be an important one for UK retailers with Marks & Spencer and Tesco issuing a report on Thursday for their Christmas sales figures. This comes after Debenhams issued a major profit warning last week, highlighting it has been a tough Christmas as consumers search for online bargains.
Concluding the week, US monthly unemployment figures will be watched more closely than usual after the Federal Reserve slowed monetary stimulus last month. Non-farm employment rate are scheduled a reduced reading from last month at 194,000.
– Lee Mumford
PM Analysis
Speculation whether or not equities can continue with their incredible run.
Ever since the turn of the year, market participants have been speculating whether or not equities can continue with their incredible run after all major indices added significant gains in 2013.
Focusing on the SPX 500, more than 90% of the 500 equities comprising the index advanced. Equity funds attracted more than $160 billion in 2013, the most since 2000.
One significant statistic to bear in mind is that American stocks have never retreated after gains were as substantial in the past as they were in 2013. The S&P 500 rose 13 percent the year after 427 companies increased in 2009, whilst in 1997 when 402 stocks ended higher, the SPX 500 added 27 percent the next 12 months. Much of the gains seen in 2013 have been credited to a rotation from bond funds to equity funds.
Whilst analysts seem to agree that the valuation of equities is by no means overvalued, there seems to be a conflict regarding whether or not the market has accounted for improving earnings.
Additionally, stocks may suffer as the Federal Reserve begins to taper its bond-buying programme this year. The central bank said on December 18th that it would cut its monthly purchases by $10 billion to $75 billion, citing an improving economy.
– Max Cohen
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