New York Market: The Asian effect takes hold
Sunday 24 May 1998
"No one can stand up and say `I see the bottom here for the Asian economies,'" said Steve Guterman, at Salomon Brothers Asset Management, who predicts 30-year bond yields may fall to 5.5 per cent this year. "There's the potential for more weakness coming out of Asia and that's helping bonds."
US Treasury securities have traded in the narrowest range in almost 20 years since late January, as investors searched for hard evidence that turmoil across the Pacific will slow the US economy. They got it last week. Benchmark 30-year yields fell to the lowest in a month on Wednesday after a report showing the US trade gap swelled to its widest in six years in March.
Federal Reserve Chairman Alan Greenspan said Asia's financial woes are just now being felt in the US, and that the region's problems still may have "unexpectedly large negative effects" elsewhere in the world.
This means 30-year bond yields may soon break out of the 5.79 per cent and 6.07 per cent range, where they've been since 16 January.
Last week, bond yields fell 7 basis points to 5.90 per cent. "We'll be getting more in the bullish camp as the summer unfolds," said Michael Mullaney at Boston Partners Asset Management.
However, US stocks have little chance of reaching records until investors determine whether an expected pickup in corporate earnings later this year is fact or fiction. US stocks are up 14 per cent so far in 1998, leaving little room for disappointments.
"There is a level of risk in the market that doesn't give US stocks a great ability to endure surprises," said Karl Mills, a money manager at Jurika & Voyles.
Earnings for companies in the S&P 500 climbed just 1.5 per cent in the first quarter from a year earlier. Analysts expect profits to rise 4.3 per cent in the second quarter. Some investors are waiting to see the evidence of a rebound before they champion the merits of US stocks.
"We're focused on earnings, and would like to see some stronger results," said Charles Ritter, a money manager at Federated Investors. "Companies are having a problem raising prices while at the same time wages are going up, so that's putting pressure on [profit] margins."
Scepticism about earnings hurt major US stock indexes and averages last week. The Dow Jones Industrial Average gained just 0.2 per cent.
Copyright: IOS & Bloomberg
- 1 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
- 3 Lego breaks out of the toy box and heads for the gallery
- 4 Vogue under fire for 'Big Booty' article
- 5 Julian Assange and Edward Snowden join piracy mogul Kim Dotcom’s political campaign in New Zealand
British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Jihadi John': MI5 may have identified Isis militant who killed David Haines but options limited
Scottish independence: Police will be on high alert on Friday whatever the result
David Haines beheading: David Cameron says Britain will hunt down Isis 'monsters' shown in video murdering aid worker
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...