Monday, November 13, 2017

Markets fluctuate on tax plan doubts

Dow rose 17, decliners over advancers 5-4 & NAZ added 6.  The MLP index dropped 4+ to the 262s & the REIT index added 1+ to the 363s (near its record highs).  Junk bond funds drifted lower & Treasuries were even.  Oil was flat in the 56s & gold climbed 4 to 1278.

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Stocks had their first gain (barely) in 3 days, while Treasuries & the $ edged higher as investors await clues on monetary policy & tax reform.  The S&P 500 pushed higher as makers of consumer products climbed, while rate-sensitive shares advanced as 10-year Treasury yields slipped.  The greenback advanced against most peers ahead of inflation figures & speeches by central-bank heads later in the week.  The £ dropped amid renewed political pressure on UK Prime Minister Theresa May.  It looks like a busy week for investors.  US inflation & growth numbers that could influence the Federal Reserve's decision on future rate hikes are on the docket.  American tax legislation may also play into market thinking after pessimism over the likelihood of successful reforms helped drag global equities down from this month's record high last week.

U.S. Stocks, Treasuries Advance With Greenback: Markets Wrap

Pres Trump just added complications to the Rep tax-reform debate.  The pres called for major changes to the tax plans currently working their way thru Congress.  In a tweet sent while he was in Asia, Trump said he is "proud" of lawmakers for getting "close" to approving a tax bill but added that he wants to see more tweaks.  He urged Reps to repeal the ObamaCare provision requiring most Americans to buy insurance or pay a penalty.  By doing so, the GOP could then chop the top individual income tax rate to 35% with "all the rest going to middle income cuts," the pres contended.  Trump's tweet adds confusion to an already complicated & contentious process to overhaul the tax system.  Lawmakers aim to balance raising revenue to pay for major tax cuts without losing GOP votes & endangering the bill.  Scrapping the individual mandate would save the gov $338B over 10 years, the Congressional Budget Office estimated this month, giving the GOP more room to chop rates.  However, any proposal to do so will prove politically contentious, partly because the CBO projects 13M more Americans would be uninsured by 2027.  Average health insurance premiums are also expected to rise without the individual mandate.  The House Ways & Means Committee already decided not to put the individual mandate repeal into its tax plan.  The panel approved a tax bill last week & House Reps want the full chamber to pass it this week.

Trump calls for major last-minute changes to GOP tax plans

United Arab Emerates Minister for Energy Suhail al-Mazroui said that he expected OPEC & non-OPEC countries to extend global supply cuts at a closely-watched meeting at the end of the month.  Al-Mazroui said: "My prediction is OPEC will continue to do what it takes to rebalance the market."   He added that while he had not heard any OPEC members discussing the possibility of not extending the deal, the time & duration of an extension was still to be decided.  OPEC members are reportedly forming a consensus around extending by 9 months their production cutting deal with other crude exporters.  That would prolong the agreement among OPEC, Russia & other oil-producing nations to keep 1.8M barrels a day off the market thru the whole of next year.  The exporters reached the deal last Dec & have already extended the agreement once thru Mar 2018.  The price of oil collapsed from near $120 a barrel in Jun 2014 due to weak demand, a strong $ & booming US shale production.  OPEC's reluctance to cut output was also seen as a key reason behind the fall.  But, the oil cartel soon moved to curb production, along with other oil producing nations, in late 2016.  At a separate energy industry conference earlier, al-Mazroui said the current OPEC-led supply cuts helped to remove nearly 180M barrels from storage in less than a year.  He also insisted whatever decision on future policy was taken at the cartel's upcoming meeting, the UAE would be committed to it.

Oil prices steady near two-year highs as geopolitics offset US supply

Saudi Aramco's plan to take a portion of its business public next year will go ahead as scheduled in 2018, Oman's oil minister said.  At an energy industry conference in Abu Dhabi, Oman's Mohammed bin Hamad al-Rumhi was pressed for a definitive answer regarding his expectations over Saudi Aramco's potential IPO next year.  He replied: "If CNBC says yes, then I say yes."  The IPO for the world's largest energy company is expected to take place in H2-2018.  However, recent reports have suggested Saudi Aramco could move to delay its IPO into 2019 or even shelve the exercise altogether in favor of selling private shares to sovereign wealth funds.  Saudi Aramco's CEO Amin Nasser said last month that the oil giant plans to list its shares on the Saudi domestic stock market, the Tadawul, & one or more foreign exchange in H2-2018.

Saudi Aramco IPO to take place in 2018, Gulf oil minister says

Little was decided in the stock market because of uncertainty over tax reform.  Until that is resolved, which is likely to be many weeks, choppy markets will continue.  At least the popular averages remain near record highs.

Dow Jones Industrials


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