Thursday, August 18, 2016

Higher markets as oil goes over $47

Dow went up 8, advancers over decliners 5-2 & NAZ gained 11.  The MLP index rose 1+ to the 317s (although it's been flattish for months) & the REIT index was off a fraction in the 364s.  Junk bond funds were about even & Treasuries fluctuated.  Oil extended its wining ways, going up to the 47s (see below), & gold climbed back  to 1350.

AMJ (Alerian MLP Index tracking fund)

Crude Oil Sep 16

Gold Futures,Aug-2016

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Asian stocks outside Japan neared a one-year high after minutes of the Federal Reserve’s last meeting showed officials aren't in any hurry to raise interest rates.  But shares in Tokyo slipped as the ¥ strengthened.  The MSCI Asia Pacific Excluding Japan Index rose 0.6% to 451 in Hong Kong, just shy of the highest closing level since Jul 2015.  Hong Kong's Hang Seng Index climbed 1% after Tencent Holdings & Ping An Insurance posted earnings that beat estimates.  Japan's Topix index fell 1.6% as the ¥ rose to as strong as 99.65 to a $.  Asian stocks have rallied 24% from a Feb low as lackluster data from the world's biggest economies fueled speculation central banks will continue to support them with stimulus & loose monetary policy.  The Fed minutes showed officials saw little risk of a sharp uptick in inflation, helping drive the odds of a rate increase this year back below 50%.  The Hang Seng Index closed at the highest level since Nov 2015.  Hong Kong's benchmark equity index has climbed 26% from its Feb low as fears of a Chinese hard landing receded & the city's property market stabilized amid an improving interest-rate outlook.  The announcement of a long-delayed exchange link with Shenzhen this week & better-than-expected corp profits have given extra vigor to the rally, even as technical indicators flash a warning that the market may be overheating.
South Korea’s Kospi index rose 0.6%.

Oil advanced, extending the longest winning streak in more than a year, as US crude & gasoline inventories declined.   Futures rose almost 2% after gaining 12% over the prior 5 sessions & Brent topped $50 a barrel in London.  US crude supplies fell the most in 5 weeks, while motor-fuel stockpiles slid a 3rd week, Energy Information Administration data show.  OPEC may agree to an output-freeze because its biggest members are pumping flat-out, said Chakib Khelil, the group's former pres.
Oil has risen about 19% since slipping into a bear market earlier this month.  A close at or above $47.42 a barrel would be 20% above the recent low, meeting the common definition of a bull market.  Russian Energy Minister Alexander Novak said that the nation was open to discussing a freeze after Saudi Arabian Energy Minister Khalid Al-Falih said informal talks next month may lead to action to stabilize the market.  US crude stockpiles dropped by 2.5M barrels last week to 521M, the EIA reported.  That compares with the forecast for a 950K-barrel increase.  Gasoline inventories declined 2.7M barrels to 233M.

Fewer Americans than forecast filed applications for unemployment benefits last week, indicating the job market remains healthy.  Jobless claims fell by 4K to 262K, the fewest in a month, according to the Labor Dept.  The forecast called for 265K.  Low dismissals combined with continued healthy hiring will help spur wage increases & boost the outlook for consumer spending, the biggest part of the economy, amid weak investment by companies.  Businesses are holding on to existing employees to meet demand, while some are also facing a shortage of skilled workers.

The figure has been below the 300K level for 76 consecutive weeks, the longest stretch since 1970.  That is typically consistent with an improving job market.  The number of people continuing to receive jobless benefits rose by 15K to 2.175M, the highest level since Apr (though still historically low).  The unemployment rate among people eligible for benefits was 1.6% for a 4th straight week.  The 4-week moving average increased to 265K last week, from 262K.

Jobless Claims in U.S. Decreased More Than Forecast Last Week

Stocks markets keep flying as if there didn't have a care in the world, even though economic statistics are uneven & lackluster.  The rise in oil prices is based on prayers that OPEC will agree to production cuts.  That will require a lot more prayers.  But central banks continue to give away money for free (or near free) which is keeping stock buyers coming.  It's hard not to think there could be a day of reckoning.

Dow Jones Industrials

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