Rush to cash, but no equities exodus so far -Barclays

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S&P 500, Nasdaq higher early, Dow flat

Energy leads S&P 500 sector gainers; utilities down the most

Euro STOXX 600 index up 0.2%

Gold down; dollar, crude, bitcoin up

U.S. 10-Year Treasury yield falls to ~4.52%

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After a strong first half of the year that saw markets betting on a soft landing for the economy with the help ofresilient earnings, the narrative since mid-summerhas shifted back to worries about stagflation.

Sticky inflation and resilient labor markets both in Europe and in the U.S. pushed the central banks to pull out their claws and reaffirm that interest rates will have to stay higher for longer.

This hawkish view, underscoredby Federal Reserve Chair Jerome Powell's speech last week and the latest European Central Bank's rate hike, has hurt equities, prompting even more inflows to money markets, Barclays strategist wrote in a note Wednesday.

Along with cash, which saw the biggest inflows in September, U.S. dollar, oil and gold are the stagflation winners.

Since the beginning of the year, equities investors have lost part of their enthusiasm, with Europe's benchmark STOXX 600 .STOXX falling around 3% since the start ofthe second half of the year.

Despite the recent sell-off, equity flows have held up for now, suggesting that investors were likely well hedged and did not panic.

"The reason why they have not seen much outflow despite renewed stagflation fears is that earnings revisions continue to hold up," Barclays said.

One question is whether third-quarter results, expected to start being released in the next few weeks, can change investors' views.

(Matteo Allievi)



Asia-dedicated funds cut their holdings in mainland China in August, according to a note by HSBC, making it the second-biggest underweight in their portfolio.

Meanwhile, GEM funds reduced their underweight on mainland China at the cost of India last month, the note by HSBC's head of Asia Pacific equity research Herald van der Linde added. However, China remained the biggest underweight in their portfolio.

China stocks have struggled this year amid lingering economic and geopolitical concerns in the world's second-largest economy, with shares posting their seventh week of foreign outflows on Friday.

In the latest sign that some global investors are avoiding China, asset manager Vontobel said last week it was launching an emerging markets ex-China equity fund, responding to growing demand for such a strategy.

There has been a steady rise in the net assets of GEM ex China funds, Linde said, with assets under management rising fivefold since October 2021.

(Bansari Mayur Kamdar)



With just three trading days to go in September, the month is once again shaping up to be a rough one for the S&P 500 index .SPX.

Indeed, using LSEG data and looking back to 1950, on average, September ranks as the worst month of the year for the benchmark index. As stands, the SPX is down around 5.2% so far this month, which is well above September's 0.66% average loss.

With the current slide, this September is tracking to be the SPX's worst month since December of last year.

And, although there will still be one quarter of trading to go in 2023, this September has the potential to be the worst month of the year for a third-straight time as September lived up to its reputation in both 2021 and 2022.

On the plus side, on average, October's change is positive 0.86%, which makes the absolute value of the average month-over-month change in October 1.52%, which is the highest of the year.

And another potential positive is that although the SPX is only down about 7% from its late-July closing high, one measure of internal strength, the percentage of index stocks trading above their 50-day moving average, may be at, or near, washed-out levels:

This measure has plunged to just 13.8%, which puts it below its March low, which occurred in the depths of the regional banking crisis.

In fact, 13.8% is the lowest reading since an 11% print on Oct. 14 of last year.

Thus, given this measure's current low reading, traders toes are starting to tingle given that the stage may be being set for an oversold bounce, or, indeed, a significant market bottom.

That said, this measure could still fall closer to zero as happened in June of last year and as major declines in late 2018, early 2020, and late 2022 were concluding.

On June 16, 2022 this measure fell to 1.99%. The SPX found a low that day before posting an 18% surge into its mid-August 2022 high.

This measure's 0.6% and 1.39% lows on Dec. 24, 2018 and March 23, 2020 coincided with the SPX's low close for its late 2018 rates-driven and 2020 pandemic-driven collapses.

On Sept. 30, 2022, this measure bottomed at 2.79%. The SPX posted the low close for its 2022 decline just eight trading days later, on Oct. 12, after losing just an additional 0.24%.

(Terence Gabriel)




(Terence Gabriel is a Reuters market analyst. The views expressed are his own)


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