Monday, April 24, 2017

Markets soar after French election

Dow jumped up 211, advancers over decliners 5-2 & NAZ surged 67.  The MLP index was fractionally higher in the 318s & the REIT index lost 4 to 350 (off a recent high).  Junk bond funds rose & Treasuries retreated.  Oil slid lower in the 49s & gold sank 17 to 1271 as stocks were purchased.

AMJ (Alerian MLP Index tracking fund)

Crude Oil Jun 17

Gold Futures,Jun-2017

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With European stocks poised for their best day in nearly 2 years, optimism over the first round of French presidential elections spread to the US as stocks jumped more than 1% at the opening bell.  French voters sent independent centrist Emmanuel Macron to a May 7 runoff election facing far-right leader Marine Le Pen, the first time in 6 decades no candidate from an establishment French political party was to be represented in the final round.  Pollsters have pegged Macron to secure the presidency, a call that sent global stocks & risk assets higher as traditional safe havens, gold & gov debt, came under pressure.  Back in the US, investors also remained focused on Q1 earnings season which kicks into high gear this week with more than 190 S&P 500 companies set to report their results, including the tech heavyweights.

Stocks Surge on Optimism Over French Election

With a deadline looming this week to avert a US gov shutdown, Congress returns to work as Pres Trump leans on Dems to include funding for his promised border wall with Mexico in spending legislation.  The pres took to Twitter yesterday to warn Dems that ObamaCare could soon lose essential funding without Dem support for a congressional spending plan to keep the gov running.  Should talks fail, the gov would shut down at 12:01AM on Sat.  Federal gov funding is set to expire.  A spending resolution would need 60 votes to clear the 100-member Senate, where Reps hold 52 seats.  Trump is seeking his first big legislative victory.

U.S. Congress Returns as Trump Pressures Democrats Ahead of Funding Deadline

German business sentiment rose to the strongest level in almost 6 years in a sign that the momentum in Europe's largest economy is set to continue.  The Ifo institute's business climate index increased to 112.9 in Apr from a revised 112.4 in Mar.  That compares with an estimate of 112.4.  The economy expanded at the fastest pace in 5 years in 2016 & reports since then have underlined expectations for a continued robust performance.  The nation's strength is key to the euro area's recovery as the ECB, which meets to set policy on Thurs, edges toward a decision on when to unwind its extraordinary stimulus.  Ifo's measure of current economic conditions in Germany improved to 121.1 from a revised 119.5 & a gauge of expectations fell to 105.2 from 105.7.  The Bundesbank said in its monthly report that sentiment in German manufacturing is “extraordinarily optimistic.”  Still, a report on Fri showed private-sector output decelerated more than expected in Apr amid a softer expansion in the service sector.

German Business Confidence Climbs to Highest Since July 2011

A selloff in Chinese stocks deepened, with the benchmark gauge slumping the most in 4 months, amid concern authorities will step up measures to crack down on leveraged trading.  The Shanghai Composite Index fell 1.4% at the close, the biggest one-day loss since Dec 12.  Industrial companies & material producers led losses.  The ChiNext small-cap gauge slipped 1.6% 1809, its lowest closing level since Sep 2015.  Authorities are taking advantage of a strengthening economy to reduce financial-system risk by tightening the screws on leverage.  The banking regulator said late Fri it will strengthen a crackdown on irregularities in the financial sector, echoing comments by the securities watchdog just days earlier, while the top insurance official is being investigated on suspicion of “severe” disciplinary violations.  The Shanghai Composite has slumped almost 5% since closing at a 15-month high on Apr 11 (the biggest loss among global gauges).  The declines dented optimism in Hong Kong, where the Hang Seng Index rose 0.4%, paring an earlier gain of 0.7% that had come amid global risk appetite on bets that pro-growth centrist Emmanuel Macron will be France's next president.  The Hang Seng China Enterprises Index climbed 0.6% at the close, trimming an advance of 1.1%.  China is likely to take more deleveraging measures.  The banking regulator has ordered local units to assess cross-guaranteed loans.

China Stocks Sink Most in Four Months Amid Leverage Crackdown

Today's rally probably does not have legs to run.  Congress has to deal with a gov shutdown &, as said previously, this will not be decided until the last minute if not later.  That's how politics works.  Then there is reworking Obamacare which may take more than 1 week to resolve.  Earnings continue to be iffy.  REITs are off today, a sector that has done well in recent months.  They have problems with store closings & the forecast of higher interest rates.  The Dow is still 400 below its record high while NAZ reached a new record. 

Dow Jones Industrials


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