Global stocks were rattled by a major earthquake in Taiwan. The country is one of the biggest producers of microchips in the world and if it suffers production issues, the global markets will be affected.
Hedge fund managers have been enjoying a steady performance in 2024 and US Treasury Yields are pushing the US Dollar creating stock trading opportunities.
Today, we take a look at stock trading trends and provide insights for all traders
Stock Trading: Euro markets improve
Barclays just raised its forecast for the STOXX 600 index, a broad European stock benchmark, to 540 at the end of this year from 510 earlier this year.
Better days loom for Europe – lower borrowing costs, relatively attractive valuations and indications of stronger local economic growth all point to a more optimistic outlook.
That puts the estimated rise at nearly 6% from the index’s last closing number, 508.57, and aligns Barclays with financial giants like Citigroup and Goldman Sachs, which both set their target at 540 in March 2024.
The group’s statement noted that: “Europe’s market dynamics are becoming more positive. Going forward, Europe presents a more attractive investment opportunity than the US (especially if valuation and pricing persist) due to its relative value and its current positioning in the cycle.
Also benefitting from China’s restart will be a wide swathe of European sectors, such as luxury goods companies which see their primary market as China.”
Stock Trading: Eurozone dropped in March
The latest figures showing that inflation in the eurozone fell unexpectedly in March could speed up the process by which the European Central Bank will cut its historically high-interest rates.
Published on March 30, they show that inflation has been steadily falling over the past year or so and give rise to the question of when and by how much the ECB will cut rates.
Barclays cited economic recovery signs in Europe: upbeat news about the manufacturing sector, easing of financial conditions, and an improving consumer environment, as well as upgrading/downgrading investment ratings in some individual sectors in Europe; it began covering the European chemical sector as “overweight” and downgraded healthcare to “market weight”.
Stock Trading: Hedge Funds
Hedge funds did well in the first quarter, competing investor reports show, as gains in stocks, some commodities, and the US dollar buoyed returns even as rising interest rates made life more difficult for bond plays.
The biggest boost came from the stock-picking game, as funds seeking gains from correlations among equities (or sectors) rose 6.28%, along with systematic long/short funds with increases of 11%, according to the latest global tracking report by Goldman Sachs’ prime brokerage.
Pure-play tech funds did especially well, advancing 11.3%.
Stock Trading: S&P 500
The S&P 500 itself appreciated 9.09% that quarter, suggesting how much value investors can get from the handling of hedge funds into volatile and booming markets.
The early part of the year has been particularly strong for the hedge-fund industry, said Ryan Lobdell of Meketa consultancy, noting that ‘asset allocation has been very solid’, bolstering bets on more risky rising asset classes such as equities and commodities following the recent expectation that interest rates might have peaked.
Hedge funds are enjoying a broad rally this year, with bets across other sectors such as energy, financials and industrials joining bets against major tech giants.
Stock Trading: Portfolio Strategies
Other leverage in the portfolio strategies also contributed to generating higher returns. In particular, some of the hot strategies were record prices in commodities, especially in copper, gold and cocoa and profit-taking.
One of the strategies, AQR’s Heliz, made an 8.6% gain by being bearish in European energy and some commodities.
Multistrategy hedge funds also did well, with Schonfeld’s Strategic Partners up 6.2% for the quarter. Citadel reported that ‘all strategies’ contributed to its funds’ positive quarter-end results, with its Wellington flagship fund up 5.75%.
Among other bets that have paid off handsomely, Discovery, which is run by the macro hedge fund manager Rob Citrone, made most of its 17% net return this year in long positions on emerging markets in Latin America and China.
Stock Trading: Citadel
The troubles of the fixed-income sector became evident in many of Citadel’s strategies.
The firm’s Global Fixed Income fund managed 2.05%, by far the smallest gain among Citadel’s funds and a clear example of the difficulties faced by fixed income strategies in return-challenged markets as US Treasury yields rose.
Stock Trading: Hedge Fund Performance
The table below provides an overview of various hedge fund performances in Q1:
Hedge Fund Performance – Q1
Schonfeld Strategic Partners 6.2%
Citadel Wellington 5.75%
Discovery 17%
Coatue 6.6%
Bridgewater Pure Alpha 18% 15.9%
Third Point Offshore 8%
Third Point Ultra 8.7%
Citadel Global Equities 6.3%
Citadel Tactical Trading 7.6%
Citadel Global Fixed Income 2.05%
Schonfeld Fundamental Equity 5.9%
AQR Helix Strategy 8.6%
This summary details the range of tactics that hedge funds have executed to absorb the quarter’s fluctuations, some more successful than others, contingent on market environments and investment styles.
Stock Trading: Euro Stocks Move Sideways
European stocks traded sideways on Wednesday as investors didn’t make much use of the lacklustre European macroeconomic data, waiting instead for a key inflation report – which could sway the view of the European Central Bank about ending interest rate cuts – due later in the day.
By morning, Europe’s broad STOXX 600 share index had lost 0.1%.
Real estate shares, considered a barometer of interest rate moves, shed 0.9%. Meanwhile, banking shares were up 0.6%.
Stock Trading: Artificial Intelligence
All the more so after the eurozone’s economic heavyweight Germany’s published inflation forecast for February on Tuesday was lower than expected.
Even the wider eurozone’s inflation report, due this morning, is being looked at closely, with forecasters expecting to see a slight easing in the rate of rise in core consumer prices to 3% in March, down from 3.1% the month before.
This hints, as the Austrian ECB policymaker Robert Holzmann did a few weeks ago, of a move downward as early as June, and a little sooner than many expected, because of a mid-course drop in the inflation rate.
Market exuberance, bolstered by hopes for lower interest rates and expectations of a new technological revolution in artificial intelligence, has kept the index jam-packed at all-time highs, regardless of what happens at the market-close arena each day.
In the technology sector, rising 0.2%, worries about a large earthquake in Taiwan that threatens to rupture the semiconductor industry, the center of the global market rally of the past two quarters, could not be put to rest.
Stock Trading: US Fed In Focus
The listed company Meyer Burger had its shares fall 28.5% after a Morgan Stanley upgrade.
Later in the day, investors will be looking to comments from US Federal Reserve Chair Jerome Powell for hints on when the central bank will implement its long-telegraphed rate cut.
UK stocks dropped on Wednesday, following other global markets, as investors reassessed how quickly monetary policy could be tightened. The internationally exposed FTSE 100 fell 0.6% by 0812 GMT, headed for its worst single-day percentage decline in a month. The FTSE 250 – which is more domestically focused – also dipped 0.4%.
They appeared a few days after a wobble in Wall Street shares, which some analysts attributed to a loss of enthusiasm on the markets for US rate cuts happening imminently, and which had the effect of sending investors scurrying.
Investors are also waiting for a speech by Federal Reserve Chair Jerome Powell later in the session, while markets will also be monitoring data on US employment this week. The first details on Eurozone inflation for March are also expected at 0900 GMT.
One silver lining that emerged from the reports was that British supermarket sales have grown year-on-year in the four weeks after the introduction of Verification, as inflation rates have slowed enough for consumers to boost their spending.
On the corporate side of the thoroughfare, there were last-ditch sales for Topps Tiles after the tile-maker reported that ‘UK demand in the residential repair, maintenance, and improvement market is likely to negatively impact its half-year profits into 2024’ and was 3% down.
Stock Trading: Winners and losers
Renishaw, the engineering company, was 4.1% off after Siemens’ news that it would not be making an offer for the group.
On Wednesday, global equities began to sag as investors continued to mark up bond yields, weighing the prospects of ‘less’ interest rate cuts ahead in the US through the year while continuing unease over the impact of a major earthquake in Taiwan on the crucial semiconductor industry rounded out what was an eventful day for markets.
The rise in US data power, compounded by a surge in oil prices to a five-month high, prompted money managers to reduce their expectations of multiple Federal Reserve rate cuts for the year.
If markets are not heading for the central bank’s emergency room, US debt sales would likely penalise buyers – throwing a wrench into the rally.
The sudden drop in inventory bloat, however, sent 10-year US Treasury note yields to a five-month high on Thursday, yanking equities lower from their recent peaks.
The MSCI All-World index lost almost 0.1% today, a third consecutive day of losses. European stocks eked out small losses.
Futures in the US lost between 0.2% and 0.3%, ahead of a speech later by Federal Reserve Chair Jerome Powell, as well as data on US services and employment.
Stock Trading: Taiwan Quake Hits Chipmaker
Meanwhile, in Asia, a seven-point-two magnitude earthquake shook Taiwan, devastating its dining city of Hualien and killing at least 10 people.
On Taiwan’s stock market, shares of the chipmaker TSMC – the flagship firm of the nation’s largest industry – fell 0.9% as evacuations forced the company to shut down. Some 90% of TSMC’s production occurs in Taiwan.
Recent encouraging economic data in the US – manufacturing growth of 0.6% in May, the fastest in 19 months, and a small easing in the labour market – have left us wondering if the Fed can actually cut by as much as it says.
After a hiatus of more than a decade, the Federal Reserve Board (Fed) recently announced that it would be cutting interest rates, which it had been steadily raising since December 2015.
Yes, you read that right. Seven years on from the financial crisis, the Fed (finally, after countless economic difficulties) seemed to be acknowledging that the economy was operating at less than full capacity.
Stock Trading: Fed Expects Rate Cuts
Overall, some Fed officials have been quoted as saying that they expect three rate cuts this year, even as the market has priced in 69 basis points of easing.
Yields on the 10-year Treasury note edged up from a recent overnight peak. Lower-than-expected German inflation data was the latest to stoke questions about the strength of eurozone price growth.
A fresh round of inflation data from the eurozone on Friday will be carefully watched by market participants.
The US currency benefited from rising Treasury yields, while the yen largely hugged ranges that before had prompted interventions by Japanese monetary authorities.
Oil prices climbed to five-month highs as concerns over supply availability arose ahead of an OPEC+ meeting on Sunday to maintain its current output policy. Brent and US benchmark crude rose modestly.
Prices of gold recovered somewhat from the height of its rally, but somewhat subdued after earlier touches of new all-time peaks.
