Friday, August 31, 2018

Markets struggle as Canada trade talks stall

Dow fell 23 (ending under 26K), advancers ahead of decliners about 5-4 & NAZ went up 21 to a new record.  The MLP index gave back 1+ to the 279s & the REIT index was of 1+ to the 361s.  Junk bond funds were slightly lower & Treasuries inched higher in price.  Oil dipped below 70 (more below) & gold was steady at 1205.

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Pres Trump is expected to sign an exec order today that could affect how you save for retirement.  The White House said the measure, which directs the Treasury & Labor Dept to consider issuing regulations or guidelines, will look at updating the rules on required minimum distributions for retirement plans, in an effort to allow retirees to stash away more money in their accounts for a longer period of time.  Under current law, retirees are required to begin withdrawing funds from their retirement accounts when they turn 70.5.  Trump is also asking the administration to look into ways to make work-based retirement programs more affordable for small businesses, in order to increase the number of those businesses that offer options.  One potential measure, for example, would be to allow small businesses to band together to offer joint plans.  According to the administration, only 53% of businesses with fewer than 100 employees offer workplace retirement plans, compared with nearly 90% of businesses with more than 100 workers that do so.  In addition to reducing costs as a pathway for more small businesses to offer plans, the order directs the agencies to look at ways to reduce bureaucratic barriers.  The pres is expected to sign the order shortly.  Retirement has been a focal point for Trump this week: yesterday, he took to Twitter to comment on the stock market & how continued over performance could lead to a bump in retirement account balances.  The administration has said it wants to help more Americans save: As of May, more than 20% of Americans had no cash stashed away for retirement.  The administration hopes it can help change that with its 2nd round of tax legislation, which Republican leaders have said they have begun working on.

Trump seeks to update retirement rules, help Americans save more

Canada's top trade negotiator Chrystia Freeland said today that the country's delegation & American officials had not reached consensus on a new North American Free Trade Agreement as they reached a key deadline.  Heading into another round of talks a short time ago, the Canadian minister of Foreign Affairs said the 2 sides continued to negotiate.  After leaving talks with US officials a few hours ago, she said "we're not there yet" on an agreement.  Her comments came after a report that Trump privately said he would not make any compromises in trade talks with Canada.  In remarks to reporters that the pres wanted to be off the record, Trump said that he would not publicly state his positions because "it's going to be so insulting they're not going to be able to make a deal."  Trump later confirmed his comments, saying "At least Canada knows where I stand!"  Pres Trump has sought to revise the 3-nation trade agreement, which he says has punished American workers since it went into effect more than 20 years ago.  The pres has used tariffs on Canadian & Mexican goods to bring the countries to the negotiating table & wants them to drop their own barriers on certain products.  The US has focused in particular on Canada's agricultural policy, which Trump contends has unfairly curbed sales of US dairy products there.  He also aims to boost American farmers in Midwestern states who helped to propel him to the White House.  Many of those farmers have taken a hit from the effects of the White House's mounting trade conflicts with China, Canada, Mexico & the EU.  Earlier today, the Office of the US Trade Representative said that talks are "ongoing" & "there have been no concessions by Canada on agriculture."

Oil prices slipped lower but remained near $70 a barrel as impending US sanctions on Iran & falling Venezuelan output offset concerns over the impact of a global trade war.  Benchmark Brent crude oil was down 35¢ a barrel at $77.42  & US light crude ended the session down 45¢ lower at $69.80.  Despite the losses, both Brent & US light crude jumped up about 2% this week after strong gains in the last 2 sessions.  US light crude gained 1.5%  in Aug, while Brent was on track for a rise of 4.3% & some analysts say the uptrend in crude prices will continue.  Oil markets are tightening with a recent surplus draining, trade figures show. The volume of unsold crude stored in the Atlantic basin has dwindled from around 30 cargoes to just a handful in recent weeks.  Investors are worried that, with Venezuelan supply falling sharply, Iranian crude supply will be cut sharply ahead of the imposition on US sanctions on Tehran in Nov.  Pres Trump threatened to withdraw from the World Trade Organization, his latest salvo in a deepening dispute between the US & its major trading partners.  Economists are worried that rising trade barriers between the world's major economies will drag on global growth&, by extension, erode energy demand.

Oil holds near $70 as Iran sanctions offset trade war worries

Stocks had a good month with the Dow advancing more than 500.  Trade deals are important & one was completed with Mexico.  But that leaves Canada, the EU & China which need more work.  Sep has the reputation for being the toughest month for stocks.  The stock market is overbought & the bulls may have their work cut out to extend the current rally in Sep.

Dow Jones Industrials

Markets mark time going into a long weekend

Dow crawled up 3, advancers & decliners were about equal & NAZ remained hot, rising 23 to yet another record.  The MLP index dropped 1+ to 279 & the REIT index fell 2 to 362.  Junk bond funds did little & Treasuries rose.  Oil slid back pennies to 70 & gold added 5 to 1210.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil69.94
-0.31   -0.4%

GC=FGold 1,208.50
 +3.50  +0.3%

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Stocks opened mostly lower as trade talks between the US & Canada went down to the wire with an end-of-day deadline looming & Pres Trump signaled a tougher stand on trade issues with the EU & China.  The blue-chip Dow a little lower as did the S&P 500.  Tech-heavy NAZ bucked the trend, rising slightly.  Trump said that he is ready to slap more tariffs on China & dismissed reports that EU negotiators were ready to drop their tariffs on US vehicles to zero.  Yesterday, following a report that Pres Trump wants to move ahead with plans to impose tariffs on $200B in Chinese goods, shares closed lower.  The Dow  dropped 137 (0.5%) to 25,986 & the S&P 500 was down 12, closing at 2901.  The NAZ fell 21 (0.3%) to 8088.

US stocks struggle for direction amid trade tensions, M&A news

Coca-Cola (KO), a Dow stock & Dividend Aristocrat, agreed to buy coffee chain Costa for $5.1B including debt to extend its push into healthier drinks & enter the booming global coffee market.  The purchase from Britain's Whitbread of Costa's almost 4K outlets thrusts the world's biggest soda company into one of the few bright spots in the sluggish packaged food & drinks sector.  Paying about €1B ($1.3B), more than some had expected, KO will use its distribution network to supercharge Costa's expansion.  Beyond coffee shops, CEO James Quincey, himself a Briton who is familiar with the Costa brand, said Costa would provide an important growth platform ranging from beans to bottled drinks in what is one of the world's fastest-growing drink categories, growing 6%.  "Coca-Cola doesn't have a broad, global portfolio in this growing category," Quincey said, highlighting Costa's retail footprint, roastery, supply chain & Costa Express vending system, which the company plans to expand.  "This is very consistent in our strategy, diversifying the total beverage portfolio," Quincey said.  "Clearly coffee is an area where we didn't have a play."  Quincey's coffee strategy is focused on global expansion, primarily in Europe & Asia.  "There's a lot of coffee stores in the U.S.," he added.  "There's more room for growth in Europe and Asia."  He continues, saying that the company may open more stores in Asia, through franchise or partners.  "This is a coffee strategy, not a retail strategy or a food strategy," he said.  The stock lost 13¢.
If you would like to learn more about KO, click on this link:

Coca-Cola takes a plunge into coffee with a $5.1 billion Costa deal

The EU will respond in kind if Pres Trump reneges on his pledge not to impose car tariffs, European Commission Pres Juncker said as trade tensions between Europe & the US rose again.  Juncker said that the EU would not let anyone determine its trade policies.  If DC decided to imposed tariffs on vehicles after all, he said, "then we will also do that."  Trump rejected yesterday an EU oiffer to eliminate tariffs on cars & said the EU's trade policies are "almost as bad as China."  Juncker said he had negotiated a "ceasefire agreement" on trade with Trump in Jul & while such deals were often jeopardised, they were generally respected.  Chancellor Angela Merkel is due to meet Juncker on Tues.  The trade issue is also likely to be addressed when Merkel meets French Pres Macron in France later today.  The EU remains at odds with the US over the US blocking of the appointment of judges at the World Trade Organization, over tariffs set for reasons of national security & over DC's tough stance towards China.

EU pledges to boost auto tariffs if Trump reneges on agreement

Consumer sentiment in the US was opposite of expectations in the final reading of Aug, rising slightly rather than further weakening as expected.  The Univ of Mich monthly survey of consumers hit 96.2 in the final reading of Aug, better than the drop to 95.5 expected.  Sentiment among consumers fell to 97.9 in Jul, from 98.2 in Jun, as a result of fears over the impact of tariffs on the domestic economy.  "Although there was a small uptick in late August, consumer sentiment remained at its lowest level since January," Richard Curtin, chief economist for the survey, said.  "These results stand in sharp contrast to the recent very favorable report on growth in the national economy."  Curtin said consumers have "luckily" not yet interpreted the current inflation rate "as a significant source of erosion in their living standards or as a cause to reduce their buying plans."  Consumers view future income & job stability as the main reasons for their positive views on spending, Curtin added.  The index has slumped since Mar when it reached its highest level since 2004 with a reading of 101.4.  The survey considers 500 consumers' outlook on economic prospects, accounting for sentiment on personal finances, inflation, unemployment, gov policies & interest rates.

Consumer sentiment edges up in August but remains near lowest level since January

Even though there is plenty of excitement in DC, stocks are doing little.  Traders, the ones who have aren't on holiday, are watching the trade negotiations which should drag into next week.  Meanwhile the Dow is about 600 below its record reached in Jan while other averages are at record levels because macro data shows a healthy economy & there is high confidence from consumers & execs..

Dow Jones Industrials