Key momentsSign up for our daily business newsletter hereStock markets climb a wall of fear
Some Wall Street banks are warning clients to prepare for a market pullback, even as Wall Street indices rebounded from last week’s sell-off.
Morgan Stanley, Deutsche Bank and Evercore all cautioned that the S&P 500 index is due for a near-term drop due the fallout from President Trump’s trade war, including slowing consumer spending, weaker economic growth, higher unemployment and potentially rising inflation.
Mike Wilson, the Morgan Stanley strategist, forecasts a correction of up to 10 per cent this quarter, while Evercore’s Julian Emanuel is expecting as much as 15 per cent.
For now stock markets seem unfazed. Shares in Asia rose for a second day. Japan’s Nikkei gained 0.6 per cent, supported by data showing a jump in the nation’s service sector activity in July. Meanwhile, mainland China’s SSE Composite gained 0.5 per cent after services activity expanded at its fastest pace in 14 months in July.
The FTSE 100 is forecast to open 30 points higher when trading begins.