Monday, March 14, 2016

Markets slip lower as oil declines

Dow fell 26, decliners over advancers almost 2-1 & NAZ lost 7.  The MLP index dropped 4+ to the 257s & the REIT index was off 1+ to the 326s.  Junk bond funds were mixed & there was buying in Treasuries.  Oil sank to the 37s & gold  was also weaker.

AMJ (Alerian MLP Index tracking fund)

CLJ16.NYM....Crude Oil Apr 16...37.41 Down ...1.09  (2.8%)

GCH16.CMX...Gold Mar 16....1,252.50 Down ...6.20  (0.5%)

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Chinese stocks climbed the most in more than a week after the new head of the securities regulator signaled he will keep propping up the equity market & developers announced acquisitions.  The Shanghai Composite Index advanced 1.8%, with more than 50 shares rising for each one that fell.  Liu Shiyu, chairman of the China Securities Regulatory Commission, said it was too early to think about the state rescue fund leaving the market, while a new registration-based system for IPOs would take time.  Data over the weekend showed the industrial production & retail sales both grew less than forecast in Jan-Feb, while China's broadest measure of new credit for Feb came in less than ½ of the estimate. 

The Shanghai Composite rose to 2859 & the ChiNext Index of smaller companies jumped 4.6%, the most in 6 weeks.  Liu vowed to step in “decisively” if needed to curb panic & defended intervention following last summer's $5T selloff.  Trading on the stock market tumbled last week to the lowest level since 2014 as margin traders unwound bullish positions despite suspected state support for equities.  China's benchmark gauge has lost 19% this year, still the most among 93 global benchmark indices.  Industrial output rose 5.4% from a year earlier in Jan & Feb, the National Bureau of Statistics said, compared with the 5.6% estimate.  Retail sales climbed 10.2% from a year earlier, missing the 11% projected estimate, while fixed-asset investment exceeded estimates with a 10.2% increase.

China's Stocks Jump on Support Pledge as Deals Spur Developers

Oil fell 3% after Iran dashed hopes of a coordinated production freeze any time soon, returning bearish sentiment to the market over a supply glut that has sent prices crashing.  Iran's oil exports are due to reach 2M bpd in the Iranian month that ends on Mar 19, up from 1.75M in the previous month.  Saudi Arabia appeared to have stuck to a preliminary deal with some other producers to freeze output, as its crude production held steady in Feb at 10.22M bpd.  OPEC members & non-OPEC producers are likely to hold their next meeting to discuss an output freeze in mid-Apr.  A Mar 20 meeting in Russia, which was part of an earlier plan, now looks unlikely.  Worries about demand fundamentals moved back into the spotlight on warnings that a slowing global economy & high production would prevent any sharp rises in oil prices.  In a sign that investors are growing more skeptical about a rebound in oil prices, ICE data showed that speculators had cut net long Brent crude positions by 9½K contracts last week.

Oil Back Below $40 on Iran Output Comments

The number of rigs drilling for oil & natural gas in the US fell by 9 to 480 in the latest week, the lowest level on record, according to Baker Hughes, going back to late 1948.  The number of drilling rigs, viewed as a proxy for activity in the energy industry, has fallen sharply as oil & natural-gas prices have slumped in the past 2 years.  The oil-rig count fell by 6 to 386 in the latest week, the lowest level since 2009.  The number of natural-gas rigs fell 3 to 94, the lowest level since Baker Hughes began to separately count oil & natural-gas rigs in 1987.  This week's total rig count surpasses the low set in 1999.   Rig efficiency is constantly improving, making it difficult to compare the rig count across decades.

U.S. Oil and Natural-Gas Rig Count Falls to Record Low

The stock market is churning ahead of the big Fed meeting on Wed.  Everybody is guessing whether there will be a rate hake.  The decline in oil prices is disturbing to the bulls.  WTI stalled out when it tried to get up to 40 & that ceiling may be too much.  Optimistic sentiment is vanishing with a growing awareness there will be little agreement about limiting production among oil producers.  But Dow is well above 17K for the time being.

Dow Jones Industrials


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