Friday, February 13, 2015

Markets advance as oil rallies

Dow rose 46, advancers over decliners 3-2 & NAZ added 12.  The MLP index rose 6+ to 454 &the REIT index fell back 2+ tp 341.  Junk bond funds crawled higher & Treasuries dropped, taking the yield on the 10 year Treasury over 2%.  Oil jumped over 53 & gold also went up.

AMJ (Alerian MLP Index tracking fund)

CLH15.NYM...Crude Oil Mar 15...52.84 Up ...1.63 (3.2%)

GCG15.CMX...Gold Feb 15......1,229.90 Up ...9.80 (0.8%)

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Consumer confidence fell in Feb as gas prices started to rise from a 6-year low & damped Americans’ optimism about the economy.  The Thomson Reuters/University of Michigan preliminary sentiment index decreased to 93.6 from a final Jan reading of 98.1 (the highest since the start of 2004).  The projection called for no change.  Prices at the gas pump have climbed this month from a 6-year low, & the survey showed more Americans were less upbeat about the labor market after hearing of dismissals in the oil patch.  Consumers also said they were less enthusiastic about making big purchases.  “Low gas prices have especially helped lower-income households, although consumers now widely anticipate that gas prices will edge upward during the year ahead,” Richard Curtin, director of the Michigan Survey of Consumers, said.  The survey’s index of expectations 6 months from now decreased to 87.5 from 91 last month & the gauge of current conditions fell to 103.1 from 109.3 a month earlier (the highest since Jan 2007).  Americans expected an inflation rate of 2.8% in the next year, up from 2.5% in Jan.  The average cost of a gallon of regular gasoline was $2.23 as of Feb 11, edging u up from an almost 6-year low of $2.03 reached 2 weeks earlier.  The Michigan index averaged 75.5 from the start of this expansion through last month, compared with 88.8 in the 5 years leading to the last downturn that started in Dec 2007.

Down from 11-Year High

China’s broadest measure of new credit rose for a 3rd straight month, suggesting stimulus measures are cushioning a slowdown in the economy.  Aggregate financing was 2.05T yuan ($328B) in Jan, according to the People’s Bank of China (PBOC), matching estimates.  Trust & entrusted loans, vehicles for shadow lending, dropped from Dec as local-currency bank lending doubled from a month earlier.  With annual economic growth sliding toward 7% in the final months of 2014, the PBOC cut benchmark interest rates in Nov & followed up that move this month by lowering banks’ required reserve ratios to counter capital outflows.  New yuan loans totaled 1.47T yuan, up from 697M in Dec.  M2 money supply rose 10.8% from a year earlier, the slowest pace since at least 1996.  Entrusted loans totaled 80.4B yuan, while trust loans, which are pooled loans sold as funds to investors, were just 5.2B yuan in Jan.  China last week cut the amount of cash banks must set aside as reserves.  The 50 basis point RRR reduction was the first across-the-board cut since May 2012.  It could inject as much as 600B yuan into the banking system.  Analysts forecast more cuts to the RRR & benchmark rate in H1.

China Credit Growth Rebounds in January as Stimulus Spurs Loans

German economic growth accelerated at the end of last year while France’s slowed, signaling that the euro-area recovery remained uneven as the ECB prepared to pledge unlimited quantitative easing.  German GDP rose 0.7% in Q4 after expanding 0.1% in Q3, the Federal Statistics Office said.  The French economy grew 0.1% after 0.3% in Q3.  Analysts predicted Q4 growth of 0.3% & 0.1%, respectively.  7 years after the onset of the global economic crisis, the 19-nation euro area is still plagued by falling prices & high unemployment, while a showdown between Greece & its European partners over the country’s debt has rekindled the risk of a euro break up.  A slump in oil prices is helping domestic demand & more stimulus is the pipeline from the QE plan by the ECB that has already weakened the euro.  Euro-area GDP probably expanded 0.2% last qtr after growing at the same rate Q3.  The Slovak economy grew 2.4% in Q4 from a year ago, & the Dutch recorded an increase in GDP of 0.5% from Q3.  Spain, the euro-area’s 4th-largest economy, reported its economy expanded at the fastest pace in 7 years in Q4, with GDP rising 0.7% from the previous one.

German Growth Accelerates Unexpectedly

Price swings in oil have become a major driver or the stock market in the last month or 2.  Oil bounced off its lows in the 45s at the end of Jan & has erased the decline in Jan.  Bulls have taken the Dow back over 18K even though the fundamentals remain the same, an oversupply of oil around the globe that shows no sign of ending soon.

Dow Jones Industrials

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