Monday, August 20, 2018

Markets rise on hopes for China-US trade talks

Dow rose 91, advancers over decliner about 2-1 & NAZ was off 11.  The MLP index added 1+ to the 288s & the REIT index jumped up 3+ to the 363s (closing on its recent record highs).  Junk bond funds did little & Treasuries were flattish.  Oil climbed to the 66s & gold recovered 9 to 1193 (still very depressed).

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil65.99
+0.08 +0.1%

GC=FGold  1,192.40
+8.20  +0.7%

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Stocks were slightly higher & the major US stock indices were hovering near records as investors held on to optimism that the US & China will reach a deal to avoid an all-out trade war.  This optimism came last week after both the US & China acknowledged that the 2 sides would meet in Aug to discuss trade.  The Dow rose sharply last week to trade at its highest level since Feb.  The S&P 500 is just off of its record high & so is the NAZ, even though the tech-heavy index ended the week fractionally lower.  With earnings season pretty much over, geopolitics will be in the spotlight.  Even though there is some optimism that China & the US are to meet, the 2 countries are scheduled to impose retaliatory tariffs of 25% on $16B worth of imports.  Traders will also watch the latest developments in Turkey.  S&P Global Ratings & Moody's downgraded the country's debt following its economic turmoil & plunging currency.

Stocks cautiously higher, but near records

PepsiCo (PEP), a Dividend Aristocrat, will buy SodaStream (SODA), an Israeli company that sells products for making in-home carbonated beverages, in an all-cash deal worth approximately $3.2B.  The deal marks one of the final strategic moves of outgoing CEO Indra Noyi, who has led the cola giant away from sugary drinks.  SODA, which has production facilities in 13 nations, sells its home-carbonation products in 80K retail stores in 45 countries.  The company's countertop products let customers use tap water to make flavored carbonated drinks.  "SodaStream is highly complementary and incremental to our business, adding to our growing water portfolio, while catalyzing our ability to offer personalized in-home beverage solutions around the world," said Ramon Laguarta, PEP CEO-elect. The deal calls on PEP to pay $144 per share in cash for all outstanding shares of SODA.  PEP stock was up a dime.
If you would like to learn more about PEP, click on this link:

PepsiCo paying $3.2B in cash for SodaStream International

Trump economic advisor Kevin Hassett said that Canada is going to want in on the trade deal that US negotiators are on the verge of crafting with Mexico.  "We're even closer" to reaching a trade deal with Mexico after Mexican negotiators were in Washington for most of last week, the chairman of the Council of Economic Advisors said.  Canada has not been part of the most recent talks to rework the 24-year-old North American Free Trade Agreement, which were expected to continue this week.  "I think what's going to happen after we close the Mexico deal is that Canada is going to look at it and see some stuff they like and maybe some stuff they want to modify," Hassett said.  "But it's going to make it a lot easier to make a deal with Canada because we got a deal with Mexico."  On Fri, Mexico's economic minister said outstanding bilateral issues with the US could be resolved midweek, adding that Canada could then rejoin negotiations.  Strained relations between the US & Canada took a nosedive after the Jun Group of 7 summit in Quebec, which led to name-calling & accusations by Pres Trump & a sharp rebuttal by Canadian Prime Minister Justin Trudeau.  US Trade Representative Robert Lighthizer on Thurs had expressed hope for a breakthrough with Mexico soon.  However, Trump, alongside Lighthizer, said he was in "no rush" to conclude talks on NAFTA, which started about a year ago & has missed deadline after deadline.

Trump economic advisor: Trade deal with Mexico is 'even closer,' getting Canada on board is next

Speculation is rife that Germany could be ready to offer Turkey financial aid when Pres Recep Erdogan visits the country next month, but analysts say it's unlikely that Ankara would ask for help.  Andrea Nahles, the leader of the Social Democratic Party (SPD), a junior partner in Chancellor Angela Merkel's conservative coalition gov, said at the weekend that German aid for Turkey, which is experiencing an economic crisis, was a possibility.  "A situation might arise where Germany needs to help Turkey, regardless of political tensions with President Recep Tayyip Erdogan," Nahles said yesterday, adding that, "Turkey is a NATO partner who we cannot ignore."  However, Berlin appeared to seek to distance itself from Nahles' comments today, with a gov spokesman saying the question of financial assistance for Turkey is "not relevant at the moment" & that it is up to Turkey whether it wants to ask the IMF for help.  Whether Turkey, which is experiencing currency volatility amid a public spat with the US, would ask anyone for help is another matter, experts believe.  Turkey's dispute with the US centers heavily over the country's detention of American pastor Andrew Brunson & Pres Trump has not ruled out economic sanctions if Ankara does not free him.

Germany is unlikely to give a financial lifeline to Turkey, analysts say 

While stocks are attracting buyers, tech stocks, which have been the darlings for investors this year, are being left behind.  Besides being vastly overbought, uncertainties about Tesla (TSLA), down another 3 today & almost 100 in the last couple of weeks, are unnerving investors.  Optimism about trade talks are less important than signed agreements.  Overall, the bulls are feeling good as the the last 2 weeks of Aug begin (typically a sluggish time for the stock market).

Dow Jones Industrials

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