European stock market close 20 February 2017
- FTSE flat
- Cac -0.1%
- Dax +0.6%
- Ibex +04%
- FTSE Mib -0.1%
- Italy 2.19% flat
- Spain 1.61% -2bp
- Portugal 4.00% -3bp
- Germany % bp
- Greece 7.50% -34bp
Japan’s publicly traded companies continue to return more profit to shareholders, with dividends headed toward a record 11.8 trillion yen ($104 billion) for fiscal 2016.
Payouts are on track to rise for a seventh straight year, climbing 7% from fiscal 2015 and doubling from the fiscal 2009 low in the wake of the global financial crisis. More than 600, or roughly 30%, of the companies with March book-closings plan to resume or increase dividends, as overall corporate profit looks set to reach a new high this fiscal year. Figures are based on Nikkei calculations of distributed and planned payouts.
The recovery in the resource market has put trading houses and related companies in a position to raise dividends as well. Mitsubishi Corp. had reported its first-ever net loss in fiscal 2015, hit by impairment charges from resource concessions. But with earnings rebounding sharply, the company plans to hike the full-year payout to 70 yen per share — up 20 yen from the prior year and equal to the previous high.
Advantest is among those boosting its payout ratio, or the portion of profit distributed as dividends. The manufacturer of chip-testing equipment is lifting the minimum ratio to 30% from 20% on a consolidated basis.
“We need to raise shareholder returns in order to retain long-term investors,” President Yoshiaki Yoshida said.
Tokyo Seimitsu, which produces chipmaking equipment, will increase its payout ratio and raise dividends even though net profit is projected to decline.
Retail investors directly hold just under 20% of listed companies’ shares, based on surveys by the Tokyo Stock Exchange and others. This means roughly 2 trillion yen will flow into pocketbooks, helping to underpin consumer spending.
Increased dividends help improve capital efficiency, a factor that can lead share prices higher.
“The ability of Japanese companies to sustain generous shareholder returns will influence the direction of Japan’s stock market,” said Kengo Nishiyama of Nomura Securities.
Norway’s government has proposed making the biggest changes to the world’s largest sovereign wealth fund in decades, increasing its risk by investing about $90bn more in stock markets and cutting the amount of oil money it can use in the budget.
The $900bn oil fund should be able to invest 70 per cent of its assets in equities, up from the current 60 per cent, as the centre-right government backed proposals by both the fund itself and an expert group.
The shift, which needs parliamentary approval, would be significant for global markets as the oil fund on average already owns 1.3 per cent of every listed company. The increase in equities would come at the expense of bonds, as the oil fund, which has an investment horizon of a century or more, tries to increase its returns.
After an initial delay, global stock markets have joined the Trump-flation euphoria in recent weeks. In fact, despite the dismal decline in global earnings, global stocks are now within inches of April 2015’s record highs, and are now the most overbought since July 2014.
Everything is awsome in the world again…
When global stocks reached this level previously, they plunged over 20% in the next 6 months.
When global stocks were this overbought in 2014, they plunged over 10% in 5 weeks.
Oh, just one more thing…
Global large-and-mid capitalisation stocks have climbed to within easy striking distance of setting a new all-time high for the first time in almost two years, led by a strong performance by US equities.
The MSCI all-world index, which tracks companies in 46 countries that account for 85 per cent of the investable equities market, closed on Monday at 441.14, just 0.35 per cent away from the all-time high it struck in May 2015.
The gauge has climbed by 23.5 per cent over the past 12 months, partly reflecting a sharp rebound from a fall at the start of last year.
Equity bourses around the world have been lifted by a brightening outlook for the world economy, along with a recovery in the price of oil.
World Bank economists reckon global growth will accelerate from 2.3 per cent in 2016, to 2.7 per cent this year, and 2.9 per cent the next year. The optimism has come as central banks in Europe and Asia have loosened monetary policy in a bid to spur faster growth.
In the US, the Federal Reserve has pledged to only “gradually” tighten policy. Some economists have also marked-up their estimates for the rate of expansion for the world’s biggest developed economy on expectations that Donald Trump and a Republican Congress will roll-out business-friendly policies.
Stocks around the world continued to push higher Monday, and U.S. indexes again hit records. Bond yields climbed.
The Standard & Poor’s 500 index rose 12.15 points, or 0.5%, to close at a record 2,328.25 and topped $20 trillion in market value for the first time ever. The Dow Jones industrial average rose 142.79 points, or 0.7%, to an all-time closing high of 20,412.16. The Nasdaq composite gained 29.83 points, or 0.5%, to a record 5,763.96.
Treasury yields also rose as the yield on the 10-year Treasury note rose to 2.43% from 2.41% late Friday. Two-year and 30-year Treasury yields also notched higher.
Roughly five stocks rose for every three that fell on the New York Stock Exchange. Financial stocks helped lead the way, and those in the S&P 500 rose 1.3%. That’s the largest gain among the 11 sectors that make up the index. Raw-material producers and industrial companies were also strong.
Stocks resumed their upward climb last week after stalling for a couple weeks. Strong earnings reports have helped drive the gains. The majority of companies in the S&P 500 that have reported fourth-quarter earnings so far, 69%, have beaten Wall Street’s expectations, according to S&P Global Market Intelligence. It’s mostly come through companies keeping control of costs better than analysts were forecasting.
Headline: Stocks Rose/Fell Today by 1% Because of _______
How to read it: Millions of shares traded hands today because investors all have different goals, strategies, risk profiles, holding periods and ideas.
Headline: [Popular economist/fund manager] Expects Market Volatility to Pick Up Later This Year
How to read it: Saying you expect volatility to pick up at some point in the future is like saying you expect it to rain at some point in the future. And volatility works both ways — to the upside and the downside — so really this is just a way of saying the markets will fluctuate, which of course they will.
Headline: George Soros Gained/Lost $1 Billion
How to read it: Soros has around $25 billion so what he does with his money shouldn’t concern most investors.
Headline: Markets Got Slaughtered Today: A Sign of Worse Things to Come?
How to read it: No one ever really knows why stocks rise or fall on a single day. The market is up just over 50% of all trading days and down just under 50% of all trading days so you can never put too much stock in any one day.
Headline: Investors Are Dealing With More Uncertainty
How to read it: The future is always uncertain. The past just feels more certain because now we know what really happened.
Headline: Are Market Overbought Here?
How to read it: Ask us again in a few months.
Headline: [Democrats/Republicans/current or past president] Caused X% of Economic or Stock Market Growth
How to read it: Presidents or political parties don’t personally control economies or stock markets made up of millions of participants and trillions of dollars all wrapped up within a complex adaptive system. These things don’t come with levers that you can pull to make them rise or fall.
Headline: The Stock Market Enters a Painful Correction
How to read it: Retirement savers rejoice as stocks fall on the week. Those with decades to save & invest should hope it continues.
Headline: _____ Could Cause Gold Could Rise to $1500/oz.
How to read it: Total guess. No one has a clue.
Headline: Is This the Stock-Picker’s Market We’ve Been Waiting For?
How to read it: It’s both always and never a stock-picker’s markets because it all depends on the quality of the stock-picker, not the market.
Headline: Goldman Sachs Expects Stocks to Rally For the Next 3 Months
How to read it: Big financial firms have so many strategists that there will surely be a research piece put out in the coming days that totally contradicts whatever they just predicted.
Headline: When Will the Fed Raise Rates?
How to read it: Has Fed policy really ever helped you make better investment decisions? Even if you knew exactly what they were going to do in the future you still have no idea how other investors will react.
Headline: Investors Panic as Stocks Enter a Bear Market
How to read it: Don’t panic — expected returns and dividend yields go up during bear markets. This is a good thing for long-term investors.
Headline: A Perfect Storm Caused Markets to Fall
How to read it: Stuff happens in the markets and we like to attach important-sounding narratives to everything. 100-year storms now seem to come around once a month or so.
Back in late 2015, when the Chinese stock bubble had violently burst and was suffering daily moves of 10% in either direction as retail traders scrambled to get out of what until recently was a “sure thing”, Beijing did what it does best, and found a convenient scapegoat on which to blame the market crash – which was function of the country’s relentless debt bubble and lack of trading regulations – in late 2015 it arrested one of the most prominent hedge fund traders, Xu Xiang, also known as “hedge fund brother No. 1” and “China’s Carl Icahn” for his phenomenal, and rigged, winning record in the stock market, who ran the Shanghai-based Zexi Investment.
The Dow Jones industrial average erased its gain for the year on Thursday, part of a pullback for stock indexes as Treasury yields continued their upward march.
The Dow Jones industrial average fell 72 points, or 0.4%, to 19,732.40. That puts the Dow down about 32 points for the year and will makes this the fifth straight day of losses. The Standard & Poor’s 500 index fell 0.4% to 2,263.69. The Nasdaq composite fell 0.3% to 5,540.08.
Four stocks fell for every one that rose on the New York Stock Exchange.
Stocks have slowed in 2017 following an electrifying jump higher since Election Day. Investors are waiting to see what a Donald Trump presidency will really mean for stocks. They’ve already seen the optimistic case, as shown in the nearly 6% jump for the S&P 500 since Donald Trump’s surprise victory of the White House, propelled by expectations for lower taxes and less regulation on businesses.
But on the possible downside, increased tariffs or trade restrictions could mean drops in profits for big U.S. companies.
Bond yields continued their march higher, and the 10-year Treasury yield rose to 2.47% from 2.43% late Wednesday. Yields have generally been climbing since Election Day on expectations that President-elect Donald Trump’s policies will spur more inflation and economic growth. The 10-year yield is still below its perch above 2.60% that it reached in mid-December, but it’s well above the 2.09% yield it was at a year ago.
Reports have shown that the U.S. economy has been improving recently, and the latest on Thursday showed encouraging signs for the housing and labor markets. The fewest number of workers sought unemployment claims last week in 43 years, a sign that corporate layoffs are subsiding.
As we observed in yesterday morning’s market wrap, while US traders took the day off for the MLK holiday, China was busy defending an accelerating selloff across its stock markets.
During Monday trading, having traded quietly lower for the past few days, Chinese stocks tumbled in early trading on the mainland and in Hong Kong’s offshore market amid weakness in Asian equities. The Shanghai Composite Index dropped as much as 2.2% to head for its fifth loss in as many days, its longest losing streak since Aug. 2015.However a sudden bout of late afternoon buying sent the loss down to just -0.3%, on speculation China’s national team was once again back in the markets.