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Friday, August 12, 2016
Markets little changed after mixed retail sales data
Dow was off 15, adevancers over decliners 5-4 & NAZ lost 2. The MLP index rose 3 to the 315s & the REIT index recovered 3+ to 370. Junk bond funds were mixed & Treasuries advanced. Oil & gold went up..
World powers urged Russia & Ukraine to refrain from ratcheting up a
confrontation over Crimea as pres Putin bolstered the
disputed peninsula's military with some of his army's most advanced
air-defense missile systems. The EU said there was no
independent confirmation of claims that Ukrainian agents had killed 2
Russian servicemen in Crimea. Putin pledged a “very serious” response as
he blamed Kiev for pursuing “terror” activities. The EU
called on both sides to refrain from intensifying what has led to the
worst diplomatic standoff between the 2 countries since a 2015 truce
eased hostilities in Ukraine's separatist conflict. Germany said that
Foreign Minister Frank-Walter Steinmeier will meet his Russian
counterpart, Sergei Lavrov, next week in Russia. “We reiterate our
condemnation and non-recognition of the illegal annexation of Crimea,”
European Commission spokesman saidy. “There has been neither concrete evidence provided by Russia
sustaining its claim nor any independent confirmation of the claims made
by Russian authorities.” The
confrontation coincides with a surge in violence in Ukraine's eastern
Donbas region, where gov troops are fighting rebels who Kiev says
are getting cash, weapons & fighters from Russia. The flareup
torpedoed plans to revive 4-way peace talks at the Sep Group of
20 meeting in China & raised warnings of a potential
military conflict before Russia's Sep parliamentary elections.
Sales at US retailers were little changed in Jul as Americans flocked to auto dealers at the expense of other merchants. The
stalling of purchases followed a 0.8% gain in Jun that was
stronger than initially estimated, according to the Commerce Dept. The forecast called
for a 0.4% rise. Excluding cars, sales retreated 0.3%, the most since the start of the year.
Improving
car sales drained enough cash from consumers' accounts to cause demand
at 8 of 12 other major retail categories to fall. While households
have been bolstered by higher stock & home values, stronger wage
growth would go a long way in improving purchasing power. Gasoline
service station receipts dropped 2.7%, while sales weakened at
sporting goods & hobby outlets, department stores, clothing merchants & restaurants. Core sales,
used to calculate GDP which
exclude such categories as auto dealers, gasoline stations & building
materials merchants, were also little changed last month after 0.5% increase in Jun. Purchases at service stations fell 2.7%, the most since Feb. The
data aren’t adjusted for changes in prices, so fluctuating fuel costs
can affect filling-station receipts. Sales of food & beverages at
grocery stores declined 0.6%. At motor vehicle dealers, purchases improved 1.1%, the most since Apr, after a 0.5% advance.
German growth slowed less than predicted in Q2 while
Italian output unexpectedly stagnated, signaling diverging fortunes for2 of the region's biggest economies as they brace for any fallout from
Britain's decision to leave the EU. Germany's GDP product rose a seasonally-adjusted 0.4% in Q2, following an increase of 0.7%, the Federal
Statistics Office, twice the rate
forecast. Italy's economy unexpectedly
stalled after expanding 0.3% in the previous qtr. Analysts
predicted growth of 0.2%.
With
GDP also stagnating in France, which reported initial data last month, & the Greek economy probably back in recession, Germany's role in
keeping the euro-area recovery on track has risen as risks related to
the outcome of Britain's referendum cloud the outlook. The Bundesbank is
counting on record-low unemployment & rising wages to bolster output
over the summer months & has predicted a pickup in Q3.
This is a good day for traders to go to the beach & enjoy the weather. War is brewing in eastern Europe, but few are concerned. The retail sales data was not inspiring while the popular stock averages are essentially at record highs. The disconnect between rising stock prices & lackluster economic data is discouraging.
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