Friday, December 26, 2014

Higher markets in light holiday trading

Dow climbed 58, advancers over decliners almost 3-1 & NAZ gained 25. The MLP index was off 1+ to the 458s & the REIT index inched up fractionally in the 331s.  Junk bond funds rose & Treasuries had a modest advance.  Oil prices slipped back although fighting intensified around Libya's biggest port (threatening supplies) & gold shot up, nearing 1200.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM...Crude Oil Feb 15...55.87 Up .....0.03 (0.1%)

GCF15.CMX...Gold Jan 15......1,193.60 Up ...20.30 (1.7%)

3 Stocks You Should Own Right Now - Click Here!

Gas station in Tokyo
Photo:    Bloomberg

Japan's inflation slowed for a 4rth month in Nov, & industrial production & retail sales unexpectedly dropped, pointing to further weakness in an economy Prime Minister Abe is trying to revive from recession.  Output fell 0.6% in Nov from a month earlier, the trade ministry said, against an estimate of a 0.8% increase.  Retail sales slid 0.3%, while consumer prices excluding fresh food rose 2.7% from a year earlier.  Real wages fell the most since 2009.  With little sign of a rebound in domestic demand, the world’s 3rd-largest economy may rely on exports to avert a 3rd straight quarterly contraction in Q4.  Today’s reports add pressure on Abe, whose gov tomorrow will unveil a stimulus package, & who pledged growth-inducing structural changes after winning re-election this month.  Stripped of the effect of the Apr sales-tax increase, core consumer prices rose 0.7%, moving further away from the BOJ’s 2% goal.  Tumbling oil prices could push Japan’s inflation as low as 0.5% by the middle of next year.  BOJ Governor Haruhiko Kuroda said that over the longer term, cheaper oil will support the economy & spur consumer prices.

Japan Struggles to Escape Recession as Production Drops: Economy

Vehicles in Riyadh
Photo:   Bloomberg

Saudi Arabia’s 2015 budget is probably assuming an oil price of $80 a barrel, & will be seen as a sign of confidence in the market, according to a former economic adviser to the country’s gov.  The assumption is down from $103 a barrel for this year, John Sfakianakis, who used to be chief economic adviser to Saudi Arabia’s Ministry of Finance, said.  The world’s biggest crude exporter set 2015 spending at 860B riyals ($229B) with revenue falling to 715B riyals from 1.046B riyals in 2014, the Finance Ministry said.  Oil accounted for 89% of 2014 revenue.  “Everyone was expecting to see a budget built on a price around $60 but that would have sent a negative message to the oil market,” Sfakianakis said.  “With a fiscal break even price of $80 a barrel, the government is sending a message to the market that we are expecting to see a rebound in oil prices.”  Saudi Arabia is confident that crude prices will rebound with global economic growth boosting demand as high-cost producers cut back, Oil Minister Ali Al-Naimi said on Sun.  “I’m 100 percent sure prices will go up, they have no other direction but to go up.”  US stockpiles climbed 7.27M barrels in the latest week as imports surged, according to the Energy Information Administration.  Saudi Arabia has 265B barrels of oil reserves, with production of 9.65M barrels a day in Nov.  Iraq, the 2nd-biggest producer, was pumping 3.35M barrels.

Saudi Arabia Seen by Former Adviser Assuming $80 Oil

Caterpillar, a Dow stock, already battered by a slump in demand for its mining machinery, faces slowing sales of compressors, pumps & gas turbines as oil companies reduce spending.  The impact will be felt in early 2015 as drillers cut back & exploration declines, CEO Doug Oberhelman said.  The energy & transportation segment had been a bright spot amid the gloom in the construction & mining markets.  Revenue fell by about $10B since 2012 as lower metals & coal prices meant miners bought fewer shovels & trucks.  Construction-equipment sales have been slow to recover since the recession.  While the company’s yellow diggers & trucks are still a core business, it has expanded in the energy market with the acquisition of German engine maker MWM Holding.  CAT may look at more oil & gas deals, Oberhelman said.  CAT turbines are found on offshore oil rigs while its engines & compressors are used to move oil from wells to pipelines & rail cars.  The oil & gas industry accounts for about $6-$7B of sales.  The stock rose 54¢.  If you would like to learn more about CAT, click on this link:

Caterpillar Recovery Threatened by Oil Price Plunge

Caterpillar (CAT)

Volume is very light.  Traders are busy at stores exchanging their holiday gifts.  Increased fighting in Libya can become an important factor in oil prices if it reduces exports.  In the meantime, Dow is up a massive 1.5K YTD.  Investors are more concerned with US economic data than overseas news. 

Dow Jones Industrials

No comments: