Friday, August 31, 2018

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

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