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Tuesday, June 14, 2016
Markets retreat on turmoil in financial markets
Dow fell 85, decliners over advancers almost 3-1 & NAZ lost 19. The MLP index dropped 4+ to the 302s & the REIT index lost 1+ to the 343s. Junk bond funds were mixed & Treasuries traded a little higher. Oil declined again & gold crawled higher on uncertainties in financial markets.
Retail sales rose more than forecast in May, showing consumer spending will help boost economic growth in Q2. The
0.5% increase in purchases followed a 1.3% jump the
previous month that was the biggest gain in a year, according to the Commerce Dept. The forecast projected a 0.3% advance.
Excluding purchases of autos & gasoline, sales climbed 0.3%.
Steady
gains in consumption will help the economy accelerate from a soft patch
at the start of the year, bolstering forecasts by the Federal Reserve
that the slowdown would prove temporary. A pickup in wages
generated by continued increases in employment will help ensure
households remain a mainstay of the economic expansion. 9
of 13 major categories showed increases in demand from the prior
month, led by a 1.3% jump at non-store retailers, which include
online merchants. Sales also rose 1.3% at sporting goods stores& 0.8% at clothing stores, marking the biggest advance since
Nov. Automobile dealers’ sales increased 0.5%
after a jumping 3.1% the prior month, roughly in line with
figures earlier this month that showed US vehicle sales were little
changed in May from the month before. Receipts
at gasoline stations climbed 2.1% last month. Retail sales data aren't
adjusted for prices, so higher fuel costs can boost filling-station
receipts. The figures used
to calculate GDP, which exclude categories such as
food services, auto dealers, home-improvement stores & service
stations, increased 0.4% after rising 1% the month
before (the biggest advance in 2 years).
China’s near-term economic outlook is being buoyed by policy support
even as its medium-term prospects become more uncertain because of
rapidly rising credit, excess industrial capacity & financial sector
risks, the IMF said. Overall reforms have advanced impressively in areas from shifting to
services as a greater driver of growth to liberalization of financial
markets, the IMF added. Because of a lack of progress reining in credit
growth & hardening budget constraints on state enterprises,
vulnerabilities are still rising even as the buffers to deal with shocks
are eroding. A
plan to address high & fast-rising corp debt is "imperative" to
avoid "serious problems" down the road & a comprehensive plan is
needed to harden budget constraints on state enterprises, restructure or
liquidate weak firms & recognize & allocate losses. The nation's is broadly in line
with fundamentals & is becoming more flexible & market based. "China continues its transition to a
sustainable growth path and is making progress on many dimensions of
rebalancing," the IMF said. "Yet progress has also been uneven."
The yield on Germany's 10-year gov bund, Europe's benchmark
security, fell below zero for the first time on record, as investors’
seemingly insatiable demand for haven assets created another bond-market
milestone. The nation joined Japan & Switzerland in having
10-year bond yields of less than zero. The plunge in yields, which has
been driven by ECB's policy of negative interest rates & asset purchases, has accelerated amid a weakening global economic
outlook & as polls indicate the “Leave” campaign in Britain’s EU referendum is gaining momentum.
Benchmark German 10-year bund yields fell to minus 0.02 %, having touched minus 0.033 earlier today. The 0.5% security
due Feb 2026 rose 0.42, or €4.20 per €1,000 ($1122) face
amount, to 105. Bond have been rallying around the world, with
yields on 10-year UK, Swiss & Japanese bonds also falling to
records, as investors seek shelter before Britain votes on whether to
exit the world's largest trading bloc after a referendum next week. 4
opinion polls have put the campaign for Britain to leave the EU in front of the ‘Remain’ camp.
The attempt to restart the bull market has failed. Stocks are being sold again. Growing negative yields are scary because they are negative bets on the health of economies. Nigeria, a major source of oil, is chaotic with the rebels making demands. Then there is Janet with her big meeting today & tomorrow. All bets are that she will leave interest rates alone as she has done so many times. But nobody knows & these times are scary for traders.
....0.22 
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