Di­mon says global eq­ui­ties re­bound as fore­cast

The Pak Banker - - COMPANIES/BOSS -

Even to hard­ened mar­ket veter­ans, the wild ride in stocks this year has been gutwrench­ing. Global eq­ui­ties de­liv­ered $8.6 tril­lion of losses through Feb. 11 as the MSCI All-Coun­try World In­dex tum­bled 12 per­cent. Talk of a global re­ces­sion and pow­er­less cen­tral banks could be heard from Tokyo to Lon­don to New York.

And then Jamie Di­mon ap­peared. Af­ter the close of trad­ing that day, news broke that the chair­man and chief ex­ec­u­tive of­fi­cer of JPMor­gan Chase & Co. spent $26.6 mil­lion to buy shares of his New York-based bank. The MSCI soared al­most 5 per­cent in the next four days, the start of a rally that -- bar­ring a disas­ter -will put the broad­est mea­sure of world­wide eq­ui­ties on track this week to erase its loss for the year.

To be sure, Di­mon's move -- which came as con­fi­dence in the world's big­gest fi­nan­cial in­sti­tu­tions was wan­ing -- is far from the only rea­son for the re­bound. Con­cern that China was about to em­bark on a mas­sive de­val­u­a­tion of its cur­rency has eased, oil prices are no longer in freefall and eco­nomic data have on av­er­age im­proved.

And yet for all the pos­i­tive sig­nals be­ing sent by stocks, buy­ers aren't storm­ing back. In fact, go­ing by one mea­sure of U.S. out­flows, in­vestors just yanked more money from Amer­i­can eq­ui­ties that any time since Septem­ber. En­thu­si­asm re­mains bri­dled as a log­jam of in­vestor con­cerns, from China growth to in­ef­fec­tive cen­tral­bank pol­icy and weak­en­ing prof­its, shows no signs of dis­si­pat­ing.

"The ques­tion ev­ery­one should be ask­ing is what has re­ally changed in the last three months?" said John Canally, chief eco­nomic strate­gist at LPL Fi­nan­cial in Bos­ton, which over­sees about $460 bil- lion. "Global con­cerns, while slightly less, are still there."

Even as bench­mark mea­sures are pulling even for the year, the re­bound has been any­thing but unan­i­mous. The Stoxx Europe 600 In­dex re­mains down 6.8 per­cent and strate­gists are pre­dict­ing lit­tle im­prove­ment as in­vestors as­sess whether Mario Draghi's neg­a­tive in­ter­est rates are the right pre­scrip­tion for the econ­omy. It's the same story in Ja­pan, where the Topix in­dex has lost 13 per­cent. The MSCI gauge slipped 0.2 per­cent at 8:46 a.m. in Lon­don.

In fact, most of the heavy lift­ing in the global re­bound has been done not in the de­vel­oped world, where an MSCI in­dex was down 1 per­cent this year through Fri­day, but in the emerg­ing, where shares are up 4.1 per­cent. The out­per­for­mance is the third-big­gest of any sim­i­lar stretch since 2009.

In­vestors of vir­tu­ally all types have sold more stock than they've pur­chased, ac­cord­ing to Bank of Amer­ica Corp. In the week ended March 11, the bank's hedge fund, in­sti­tu­tional and pri­vate clients sold $3.7 bil­lion, the most since Septem­ber and the sev­enth con­sec­u­tive week of with­drawals, the com­pany said in a note last week. Net sales by in­sti­tu­tions were the se­cond-big­gest since record­ing the data.

The other is­sue is earn­ings. As econ­o­mists low­ered pro­jec­tions for this year's global growth to 3 per­cent from 3.6 per­cent in Au­gust, an­a­lysts cut profit es­ti­mates. They now ex­pect a 2.9 per­cent in­crease in net in­come for U.S. com­pa­nies in 2016, down from 7.1 per­cent in De­cem­ber, and profit de­clines in Europe. World­wide, there have never been as many earn­ings down­grades ver­sus up­grades as there are now, ac­cord­ing to the an­nual av­er­ages of a Cit­i­group Inc. in­dex track­ing the changes.

the bank be­gan

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