Wednesday, March 29, 2017

Markets fluctuate after UK begins Brexit talks

Dow gave back 40, advancers barely ahead of decliners & NAZ was up 10.  The MLP index was about even in the 315s & the REIT index fell 1 to 341.  Junk bond funds rose & Treasuries were higher, taking the yield on the 10 year Treasury under 2.4%.  Oil crawled higher in the 48s (more below) & gold drifted lower, but still above 1250.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,M

Gold Apr 17

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Federal Reserve Chair Janet Yellen said challenges remain in the labor market, including concentrations of elevated joblessness in poor and minority communities, as she pushed for better education & training so the economy works for all Americans.  “While the economy overall is recovering and the job market has improved substantially since the recession, pockets of persistently high unemployment, as well as other challenges, remain,” she said in a speech.  Central bankers are gradually removing monetary stimulus as inflation moves back up to their 2% target.  At 4.7% in Feb, the unemployment rate is at their estimate of maximum use of labor resources.  Yellen didn't discuss monetary policy in her remarks to the National Community Reinvestment Coalition.  She mentioned several educational & workforce development programs that could help narrow disparities in minority communities, such as campus-based childcare programs, apprenticeships & technical education.  The unemployment rate for African-Americans stood at 8.1% in Feb, about ½ of its peak rate of 16.8% in  2010 following the financial crisis & recession.  The unemployment rate for Hispanics is 5.6%, compared with a post-recession peak of 13% in 2009.  “Significant job market changes in recent years, brought about by global competition and technological advances -- and the new and shifting skills that these changes demand -- make workforce development more important than ever before,” Yellen said.  “Fortunately, programs such as the ones I have highlighted today can help address these challenges in more targeted ways than the Federal Reserve is equipped to do through monetary policy.”

Crude rose after a pipeline halt reduced output in OPEC member Libya, countering concerns that surplus US stockpiles show little sign of diminishing.  Futures are headed for 2 straight days of gains for the first time in more than a month.  Libya's output was said to fall about 200K barrels a day after a pipeline carrying crude from the Sharara field, its biggest, stopped operating.  US inventories rose 1.9M barrels last week, the American Petroleum Institute was said to report later today & gov data tomorrow is forecast to show supplies rose to a record.  The production drop in Libya, which was pumping 700K barrels a day before the pipeline halt, is at least temporarily easing concern that rising US supply is offsetting the effect of curbs by OPEC & allies.  West Texas Intermediate for May delivery rose 14¢ to $48.51 a barrel after advancing 1.3% to $48.37 yesterday.  Libya’s state-run National Oil was said to declare force majeure on loadings of Sharara crude from the Zawiya oil terminal & on loadings of Wafa field condensate from the Mellitah terminal.  Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control.

What a difference a quarter makes.  The MSCI China Index's 14% jump this year is its strongest start since 2006 & one of its best performances versus world equities since the global financial crisis.  Traders are now willing to pay the most in 6 years for the gauge as the yuan stabilizes & concerns ease over global trade, risks that helped the measure sink 7.1% in the previous 3 months.  With calm returning to the market, even as some Hong Kong-listed stocks endure wild trading, & a steady flow from mainland buyers supporting valuations.  Overseas funds have so far been reluctant, yanking some $2B from exchange-traded funds tracking the shares.  Better-than-expected data & signs that declines in foreign-currency reserves are easing have improved sentiment toward China's economy this year.  Sec of State Rex Tillerson's Beijing visit this month reassured investors that America won’t immediately punish China over its trade practices, a sign that the new administration may soften its tone on foreign policy.  The gains have captivated investors from the mainland, who've sent $14.4B into the Hong Kong stock market thru cross-border trading links as capital controls make H shares one of the few offshore investments permitted by the gov.  With a weak currency driving mainland investors away from yuan-denominated assets, the daily average of net purchases of shares traded in the city via the Shanghai stock link is up 11% from 2016.

China Stocks Have Best Start to Year Since 2006

Stocks are meandering again, looking for direction.  Dow has only a modest loss in Mar, not bad considering the unsettled conditions in DC which is a major driving force for the stock market.  The oil market looks dreary as OPEC is not having the strong influence it has in the past.  Gold is a little lower recently, but remains near multi month highs.  Its buyers are worried about the risk of any overbought stock market & question what the chaos in DC will do for stocks.

Dow Jones Industrials

stock chart  

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