Thursday, August 30, 2018

Markets drop after report says Trump backs new tariffs on Chinese trade

Dow sank 137 (going below 26K), decliners over advancers 2-1 & NAZ dropped 21.  The MLP index lost 1+ to 281 & the REIT index fluctuated.  Junk bond funds inched higher & Treasuries rose in price.  Oil climbed to over 70 (more below) & gold pulled back 5 to 1206.

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Although EU officials have said they are supportive of lowering tariffs on automobiles to zero if the US reciprocates, Pres Trump believes this is not a stand-alone issue or trade deal, according to a senior diplomatic official.  After months of back-&-forth, retaliatory tariffs between the US & the European bloc, Trump wants to see all tariffs removed on all industries, including agriculture, steel aluminum & medical equipment.  "We are willing to bring down even our car tariffs to zero, all tariffs to zero, if the U.S. does the same," European Trade Commissioner Cecilia Malmstrom told members of the European Parliament today.  But according to Politico, Malmstrom has said that agriculture would not be included in this deal, &, because of this, the White House is not celebrating the comments made today by Malmstrom.  US Ambassador to Germany Richard Grenell began a successful push in Germany to get their auto industry on board with lowering tariffs.  At the time, one of the outstanding questions was whether other major European auto players would join the call for zero tariffs.  But the Italians & the French are now supportive of lowering the tax.

Trump believes EU trade deal needs to go beyond zero tariffs on autos: Official

Canada's top trade negotiator says she's "encouraged" by urgent discussions that are intended to overhaul the North American Free Trade Agreement.  Leaving a morning session with US Trade Rep Robert Lighthizer, Foreign Affairs Minister Chrystia Freeland told reporters, "We continue to be encouraged by the constructive atmosphere that I think both countries are bringing to the table."  On Mon, the US & Mexico reached an agreement to replace NAFTA, a 24-year-old pact involving those 2 countries & Canada.  But the new deal excluded Canada.  Freeland hurried to DC to try to repair the damage.  She's seeking to forge a 3-country deal by tomorrow, starting a 90-day countdown that would let Mexican Pres Enrique Pena Nieto sign the pact before leaving office Dec 1.  "We're working very intensively," Freeland said.

Canadian envoy says she is 'encouraged' by NAFTA talks

Stocks accelerated losses in the PM following a report that Trump wants to move ahead with $200B in China tariffs.  Sources said that Trump  told aides he wants to move ahead with a plan to impose tariffs on $200B in Chinese imports as soon as the public-comment period concludes next week.  Meanwhile, roday Canadian & US officials were meeting to renegotiate a NAFTA deal, after the US & Mexico announced a preliminary trade deal between the 2 nations on Mon.  Tomorrow is seen as a deadline for the 3 countries to come to some agreement.  Earlier today Trump touted the strength of the stock market, tweeting that more good news is coming.  Yesterday, shares rose on unexpectedly robust economic news: The gov said that Q2 GDP was revised to 4.2% versus the initial 4.1% estimate.  Analysts had expected no change.  Tech-heavy NAZ & the broader S&P 500 index closed at record highs, for the 4th day in a row.

US stocks take a dive on Trump tariff threat against China

Campbell Soup (CPB) reported better-than-expected quarterly profit, but sales fell short of expectations.  The company also announced plans to shed 2 intl units & its fresh foods business.  Reported results versus the forecasts are shown:
  • Adjusted EPS of 25¢ versus 24¢ expected
  • Revenue of $2.22B versus $2.24B expected.
"Fiscal 2018 was a challenging year for Campbell," interim CEO Keith McLoughlin said.  "These results and our outlook for fiscal 2019 reinforce the need for the significant actions we announced this morning as part of our comprehensive, Board-led strategy and portfolio review. We believe these actions will put us on a path to create sustainable shareholder value."  McLoughlin stepped in after the company released what execs called "unacceptable" earnings in May & announced the departure of then-CEO Denise Morrison.  The company is unwinding her efforts to branch into healthier & more fresh foods to refocus on the product lines it knows well — snacks, meals & beverages.  CPB continues to face slowing, & in some segments declining, sales.  Its businesses like soup, V8 juices & SpaghettiOs remain out of sync with how today's young consumers eat.  Older consumers, too, are increasingly paying attention to the food they are eating.  In addition, cost pressures from rising shipping expenses & price-sensitive retailers are mounting.  The soup company last qtr lowered its expectations for this year's adjusted earnings before interest & tax, anticipating a drop of 9-11%.  Previously, it predicted a 5-7% fall.  The company's weak financial position has drawn attention from activist investors who are pressuring the 149-year-old soup maker to sell.  The stock fell 82¢.
If you would like to learn more about CPB, click on this link:

Campbell Soup beats Wall Street earnings estimates, misses on revenue

Oil prices rose, extending gains on growing evidence of disruptions to crude supply from Iran & Venezuela & after a fall in US crude inventories.  Brent has risen by almost 10% over the past 2 weeks on widespread perceptions that the global oil market is tightening & could run short in the next few months as US sanctions restrict crude exports from Iran.  Benchmark Brent crude oil was up 56¢ a barrel at $77.70 & US light crude ended the session up 74¢ (1.1%) at $70.25, the highest closing price in 6 weeks.  Iranian crude exports will likely drop to just over 2M barrels per day (bpd) in Aug, versus a peak of 3.1M bpd in Apr, as importers bow to American pressure to cut orders.  OPEC, in which Iran is the 3rd-biggest producer, will discuss in Dec whether it can compensate for a sudden drop in Iranian supply after sanctions start in Nov, the head of Iraq's state oil marketer SOMO said on yesterday.  Crude exports from crisis-struck OPEC member Venezuela have also fallen sharply, halving in recent years to around 1M bpd.  Official US oil inventory data yesterday also helped the bullish trend.  US commercial crude inventories fell 2.6M barrels in the latest week, to 406M barrels, more than forecast, the Energy Information Administration said.  US production was flat from the previous week's record of 11M bpd.  The market pared gains slightly in morning trade after information provider Genscape said inventories at the delivery hub at Cushing, Oklahoma had risen 101K barrels since Aug 24.  The Intl Energy Agency (IEA) has warned of a tightening market towards the end of the year, due to a combination of falling supply in countries such as Iran & Venezuela, & strong demand especially in Asia.  "Definitely there are some worries that oil markets can tighten towards the end of this year," IEA Exec Director Fatih Birol said yesterday.

US crude rises 1.1% to 6-week high, settling at $70.25, on supply concerns

Nothing like the threat of higher tariffs, especially on Chinese trade, along with uncertainty on Canada trade to dampen a rise in the stock market.  For what it's worth Amazon (AMZN) finished above $2K.  Once again, this is supposed to be a quiet time in the stock market.  However plenty of excitement keeps coming from DC & tomorrow could be a busy day for the stock market.

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