Stocks falter, bonds rise on Trump troubles

MSCI’s all-country world stock index was unmoved by the uncertainty, rising 0.1% after the S&P 500 hit a record intraday high of 2,873.23, topping the 2,872.87 set on January 26.

The index was poised for the longest-running bull market in its history. Its relentless rise highlights the divergence in fortunes between US stocks — turbo-charged by tax cuts and share buybacks — and the rest of the world.

Year-on-year earnings growth in the US is expected to be about 24% this year. Europe is forecast to deliver about 9%. European shares were muted as the market awaited US-China trade talks, set to resume under the cloud of Trump’s prediction that they would make no real progress.

“The key point is these are midlevel officials,” said Donough Kilmurray, MD and head of the investment strategy group for Europe, Middle East and Africa at Goldman Sachs. “It’s good they are talking, but at that level of engagement we doubt anything significant will come out of it.”

The dollar inched up, however, after heavy selling following Trump’s criticism of the Federal Reserve’s rate rises in a Reuters interview.

The dollar index was 0.1% higher at 95.334, while the euro fell 0.1% on the day at $1.1558.

Emerging-market stocks climbed 0.3%, leaving 13-month lows further behind as the dollar’s losses helped ease pressure on emerging-market assets, which entered bear territory last week.

“If you look at the transmission from economic growth to earnings growth to shareholder returns, it’s strongest in the US, it’s OK in Europe and pretty weak in EM,” said Kilmurray, who has been underweight emerging markets for five years.

“The question we’re getting asked now by investors is whether what we see in EM is a sign that something bigger is going wrong in the global economy. Our answer to that is no, these issues have been local issues,” he said.

The threat of more US sanctions on Russia hit the rouble and backed the market’s view that Russian sanctions would increase in severity regardless of the Trump administration.

Source: businesslive.co.za