Earnings estimates are still cut, while the future of world trade depends on talks that have so far resulted in little concrete developments. If the exchange rates stay where they are, the full year hit profits will be 6% to 7%, he said. While the index is volatile, Barclays also says the spreads of credit are reasonably predictive and have been on the road for two to three months. The Outlook index has clearly shown momentum in the past, with a 70% chance of falling again after falling in a month.
The rally has been broad, and in most asset classes. It has done little to stop outflows of funds though. Watching cryptocurrencies and related stocks after Bitcoin went back to where it was before the five-day rally just went through.
Barclays built an index of how companies’ prospects have changed based on the relative number of companies that see their prospects as improving, deteriorating or remaining neutral over the past three months. He says his high-quality corporate bond risk premium widening to 125-130 basis points over the next two months already suggests what means greater than 15 bps from Thursday near 111bp. What sounds like a great success is actually a sign of weakness. The bounce seen in the current quarter has been linked to the waning US-China trade tensions and decision by OPEC and Russia to deepen production cuts. On top of that, the euro zone has to figure out how the next tumbling dominoes will help Spain and Italy or what to do if one or both of them were brought down. Country by country, Spain is lagging behind in Europe, punished by weighting banks and utilities.
At the top of the Greek banks skyrocket, under the benchmark of the country’s ASE index just under 40% gains. Large investors in the market are still optimistic overall, but wish they had sold a bit more of their stocks before the rally reversed. Traders may need more than that to keep them going through the rest of the year.
Federal employment, meanwhile, is falling for the first time in the recovery. It has dropped from more than 52,000 jobs last year and is lower for the first time than when the recovery began. The companies are also cutting their forward financial performance forecasts. Although leaders have a better idea of what to tweak, proposals should be reviewed once.