Share rally stalls ahead of G20 meeting
By Jamie Chisholm, Global Markets Commentator.
Friday 08:00 GMT. Traders are in cautious mood as resurgent
concerns about the health of the European economy and wariness about
“currency wars” hobble the bullish momentum.
The result is a market that is having difficulty breaking out of recent tight ranges, though a week of meandering still leaves many bourses flirting with cyclical, and in some cases record, highs.
The tentative tone can be felt in the lack of strategic coherence across asset classes. Perceived havens are mixed: Treasuries are firmer with yields easing 1 basis point to 1.99 per cent, but the dollar index is slipping 0.1 per cent.
Industrial commodities are muddled: as copper rises 0.3 per cent to $3.75 a pound and Brent crude sheds 13 cents to $117.87 a barrel.
The FTSE All-World equity index is barely changed after the Asia-Pacific region dipped 0.1 per cent and as the FTSE Eurofirst 300 opens with a loss of 0.1 per cent.
US index futures suggest Wall Street’s S&P 500 will fall 3 points from Thursday’s fresh five-year high of 1,521.
Indeed, the New York benchmark sits less than 3 per cent below record levels, driven forward in recent months by optimism about
US and
Chinese economic prospects, waning eurozone debt fears, well-received corporate earnings and, of course, ongoing ultra-accommodative monetary policies from many of the world’s major central banks.
Bulls may have hoped that another
burst of M&A action this week, would have delivered the extra impetus to push stocks to fresh peaks.
But the S&P appears to be having real trouble breaking through resistance at 1,525, and its inability to do so is holding back many other developed-market stock barometers.
The bullish underpinnings noted above are being challenged by a surge in fretting about the eurozone economy and concerns that the volatility seen of late in currency markets may prove a destabilising factor, not just in the markets, but politically, too. The euro has steadied after
the previous session’s sharp fall, and is up 0.1 per cent to $1.3374.
There is also a sense among those of a more bearish nature that the “risk asset” rally is simply looking a bit tired after such an impressive run. The S&P, which has gained 12.4 per cent since its mid-November trough, has this week traded within an intraday range of just 11 points. Over the past four sessions the index has, by the close, moved an average of just 0.09 per cent.
In contrast, Japan’s stock market has been highly excitable as it reacts to sharp moves in the yen. The Japanese unit, which has been plunging in recent months on expectations of increasing Bank of Japan efforts to tackle deflation, is gaining 0.5 per cent to Y92.43 versus the dollar. The Nikkei has subsequently lost 1.2 per cent on Friday.
Investors are watching for any comments from the Group of 20 leading nations on Japan’s recent aggressive monetary easing amid growing tension over currency rates. Currencies are expected to be discussed at the G20 meeting, after Russia’s finance minister said G20 nations should take a stronger stance against forex manipulation.
Markets in mainland China and Taiwan will resume trading on Monday after being closed for the week for the Lunar New Year holiday.
Finally, gold bugs may be getting a bit worried about price action in the bullion. The yellow metal is down $3 to $1,631 an ounce and threatening to close the week at its cheapest since August. Followers of tehnical indicators will be keeping an eye on gold’s 200-day and 50-day moving averages, $1,665 and $1,670 respectively. Should the 50-day drop below the 200-day it would trigger what is known as a “death cross”, a move considered very bearish by some.
