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Monday, November 14, 2016
Trump rally continues while bonds are sold
Dow rose 39, advancers slightly ahead of decliners & NAZ was off 8. The MLP index edged higher in the 296s & the REIT index fell 2+ to the 318s. Junk bond funds remained weak & selling in Treasuries continued, bringing the yield on the 10 year Treasury to 2.26%. Oil sank to the 43s & gold tumbled to the low 1200s.
Chinese pres Xi Jinping told Donald Trump in their first
conversation that cooperation was the only correct choice for ties
between the 2 large economies, with the US pres-elect
promising “one of the strongest relationships.” Xi told Trump by
telephone today that the 2 powers benefited from working together &
needed to coordinate efforts to promote global economic growth & the pair agreed to meet
soon. “China and the U.S. -- as the world’s biggest
developing country and the biggest developed country, and the top two
global economies -- need to and can cooperate on many issues,” Xi said. “At this moment, there is an important opportunity
and massive potential for China-U.S. cooperation so that both sides need
to strengthen coordination.” Trump
believed the conversation “established a clear sense of mutual respect”& predicted the 2 sides would build a strong relationship going
forward, according to Trump's transition team. The exchange follows a campaign in which Trump accused China of victimizing the US, a message that attracted a big following
among voters in traditionally blue-collar states who blame
globalization for job losses. Trump has
promised to label China a currency manipulator, bring trade complaints
against the nation, & impose tariffs if it doesn’t halt what he sees
as unfair trading practices.
Oil sank to a 3-month low as Iran increased output &
US explorers operated the most rigs since Feb, signaling the
persistence of a global supply glut. Brent futures more than 1½% to the lowest since Aug 11. Iran raised production at 3 fields fatser than expected,
while Saudi Arabia said OPEC must agree to trim output to stabilize markets. US drillers
have added more than 130 rigs since May
as higher efficiency allowed explorers to continue expanding oilfield
work.
WTI
for Dec dropped 43¢ (1%) to $42.98 a
barrel. The contract declined 2.8% to $43.41 on Fri, the lowest close since Sep 19. Iran
has expanded output at 3 western fields to 250K barrels a day,
from 65K in 2013, the Oil Ministry said. The
nation told OPEC that it raised total production last month by 210K barrels a day to
3.92M, the biggest increase since sanctions were lifted in
Jan. Saudi Arabia's Energy Minister Khalid Al-Falih met Sat with his Algerian counterpart Noureddine Boutarfa & both are
optimistic a deal to cut output will be put into effect. The 2 ministers
discussed mechanisms to implement the proposed OPEC accord, according to
the Saudi Press Agency.
UK Prime Minister Theresa May must decide if Trump's election presents a problem or opportunity for her plan to leave the EU. It could help her in some ways, for example if Trump signs up to a
free trade deal with the UK or if security concerns on the continent
allow the UK to win some concessions because of its military might.
But EU govs seeking to quell populist forces at home may also
seek to punish Britain in Brexit talks. Trump-skeptics in Europe may
also cool on May if they detect too much warmth toward the new US
administration. The PM also
needs to decide how far to lean given that Trump views NATO less positively & Russia more warmly,
than the UK or EU. There are also differences on topics such as Iran & climate change. The PM will today start feeling her way in public with a speech in which she will ease some her past ant- business rhetoric & tell those who favor economic liberalization & free trade that
they have to listen to those who worry about such forces. Post-Brexit
Britain will lead the way in showing how to address voter anger without
rejecting open commerce, she will say. “We can be the
strongest global advocate for free markets and free trade because we
believe they are the best way to lift people out of poverty. ... We can
also do much more to ensure the prosperity they provide is shared by
all.”
One week ago, the stock market rallied on expectations of a Hillary win. Oddly, after Trump's victory stocks had a more substantial rally with the Dow around 18.9K World leader have to meet & figure out what next steps need to be taken. These are uncharted waters & nobody knows where the sharp price rise will end. However, the end may not be pretty.
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