Record S&P500 eyes 5,000, China deflated

A look at the day ahead in US and global markets from Mike Dolan

Buoyed by another strong earnings season and quiet bond markets, a record high S&P 500 is now trying to breach the 5,000-point barrier for the first time – just as China’s worrying deflation approaches its Lunar New Year break. I have gone deep into it.

With US economic growth above 3%, unemployment below 4% and total annual profit growth above 8%, the S&P500 has risen 21% since the end of October.

Excluding China’s ailing market, the MSCI world index of developed-economy shares also hit a record on Thursday – surpassing the January 2022 high reached earlier this week. MSCI’s all-country index is at its highest level in two years.

Even though regulatory controls and personnel changes this week managed to bounce mainland China shares off a 5-year low – they saw their best week in more than a year – before concluding the week starting Friday – The underlying economic crisis was also in focus.

China’s consumer prices fell at the fastest pace in more than 14 years in January, while producer prices also fell, putting more pressure on policymakers to revive an economy facing low confidence and deflation risks. The pressure to try increased.

The consumer price index fell 0.8% for January, after a 0.3% decline in December and exceeding economists’ 0.5% forecast.

Also, Hong Kong’s Hang Seng fell again – down 1.3% and Alibaba dropped 6.1% after the Internet giant missed quarterly revenue estimates.

On Wall St., the latest surge in the stock market was helped by a calm in the recently turbulent bond market, with good demand for a record $54 billion of 10-year Treasury notes on Wednesday helping to calm the horses.

About $25 billion of the 30-year bonds will be auctioned off later today.

The still softness in crude oil also helped…

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