Thursday, July 7, 2016

Higher markets ahead of jobs report

Dow climbed 53, advancers over decliners 5-2 & NAZ added 26.  The MLP index rebounded 4+ to the 317s & the REIT index lost 3 to the 361s after its recent run to record highs.  Junk bond funds edged higher & Treasuries were weak, but yields remain near record lows.  Oil rose to the high 47s & gold gave up some of its recent gains.

AMJ (Alerian MLP Index tracking fund)


Crude Oil Aug 16.................48.07 Up ....0.64 (1.4%)


Gold Futures,Jul-2016...1,357.80 Down ...7.10  (0.5%)

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Execs of the biggest US investment banks met British Chancellor of the Exchequer George Osborne seeking to maintain London’s status as a premier financial hub after UK voters decided to split from the EU.  The gathering in which Osborne sought to highlight the UK's comparative strengths included Goldman Sachs Group, Morgan Stanley, Bank of America, Standard Chartered Plc, JPMorgan Chase.  The gov & industry shared “a common aim to help London retain its position as the leading international finance center,” according to a joint statement.  “Britain’s decision to leave the EU clearly presents economic challenges, which we are determined to work together to meet.”  The meeting underscored the risk of job losses in the industry, which employs more than 2M in the UK.  JPMorgan (JPM), a Dow stock, may relocate “a few thousand” employees if the country’s divorce settlement with the EU hurts banks, CEO Jamie Dimon said.  87% of US investment banks’ EU staff are located in the UK, which is also home to 78% of the region's capital markets activity.  Post-referendum stresses are starting to show in markets & the economy.  4 more UK property funds froze withdrawals yesterday as investors continued to dump real estate holdings, lifting the total of suspended assets to more than £15B ($19.4B).

Dimon Warns of Job Losses as Brexit Property Pain Spreads

Filings for unemployment benefits unexpectedly declined last week to the lowest level since mid-Apr, signaling labor market stability amid a shaky global economy.  Jobless claims dropped 16K to 254K, according to the Labor Dept.  The forecast called for 269K.  Filings can be volatile around holidays.  Hiring managers are holding the line on staffing levels based on a stable US demand outlook even as the UK decision to leave the EU roiled financial markets.  Layoffs are lingering near 4-decade lows, while economists are treating the recent dip in hiring as temporary ahead of the Jun payrolls report tomorrow.  The number of applications last week was the lowest Apr 16, when 248K claims were filed, the fewest since 1973.  Filings have been below 300K, a level that underscores a healthy labor market, for 70 straight weeks.

The 4-week average of claims, a less-volatile measure than the weekly figure, declined to 264K from 267K in the prior week.  The number continuing to receive jobless benefits decreased 44K to 2.12M & the unemployment rate among people eligible for benefits held at 1.6%.

Fewest Americans Since Mid-April File for Unemployment Benefits

German industrial production dropped the most in 21 months in May in a sign that the headwinds from a global economic slowdown & political uncertainty in Europe damped activity.  Production, adjusted for seasonal swings, fell 1.3% from the previous month, when it rose a revised 0.5%, data from the Economy Ministry.  Economists had predicted a 0.1% rise in the typically volatile gauge.  Output fell 0.4% from a year earlier.

The report underscores the challenges facing German manufacturers, with signs of fragility in the global economy now likely to be exacerbated by the UK's decision to quit the EU.  The British vote in Jun could further weaken the German economy, Bundesbank pres Jens Weidmann warned last week.  The decline was led by investment goods, which dropped 3.9%, while consumer goods gained 0.5%.  Construction fell 0.9% from Apr & intermediate goods declined 0.3%.  Output of manufacturing fell 1.8%, while energy gained 3.9%.  The ministry said that the large number of holidays in May could have contributed to weaker output, yet that there are signs production might pick up in the coming months.

German Output in May Unexpectedly Drops in Sign of Slowdown

Traders are largely twiddling their thumbs, waiting for the jobs report.  During a tough week, Dow has managed to work its it way back to just under the magical 18K ceiling.  Tomorrow will be its big test to see if it can break thru (again).

Dow Jones Industrials


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