Monday, August 13, 2018

Markets struggle for gains with concerns about Turkey

Dow added 28, advancers  barely ahead of decliners & NAZ gained 46.  The MLP index dropped 3+ to the 287s following recent strength & the REIT index lost 3 to the 353s.  Junk bond funds fluctuated & Treasuries were sold, taking the yield o n the 10 year Treasury up 3 basis points to 2.89%.  Oil slid lower in the 67s & gold sank 13 to 1206.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil67.24

GC=FGold  1,207.70

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Stocks were flattish as the economic problems in Turkey dented investors' appetite for risk.  Turkey's lira plunged 10 % overnight, before pulling back from that record low after the central bank pledged to provide liquidity & cut lira & foreign currency reserve requirements for Turkish banks.  Turkey's economy is in a rough spot, with soaring inflation & a plunging currency.  There are some concerns of contagion in the eurozone & other emerging markets while economists say the US is relatively sheltered.  Meanwhile, the relationship between Turkey & the US remains strained.  There has been a standoff with the US over a detained American pastor that Turkey, a NATO ally, has put on trial for espionage & terror-related charges linked to a failed coup attempt in the country 2 years ago.  DC has demanded the pastor's release & imposed financial sanctions.  As previously reported, Pres Trump tweeted about the situation with Turkey, announcing further tariffs & noting that relations between the US & amp; Turkey are "not good."  Trump authorized doubling the tariffs on steel &aluminum.  Stateside, earnings season is winding down with only a few companies reporting this week.  The positive earnings have been a catalyst for stocks with Q2 earnings season getting a favorable review.  Commodities were mostly, including gold.  Normally, when investor appetites for risk decreases their demand for gold increases as gold is a safe-haven investment.  However, right now an appreciating $ is putting gold & other commodities under pressure.  Many commodities such as gold are priced in $, therefore when the $'s value increases it dents demand from holders of intl currencies.

US stocks little changed as investors eye developments in Turkey

Days after Pres Trump touted trade negotiations with Mexico, White House Council of Economic Advisers Chairman Kevin Hassett said negotiators from the US & Mexico are “very, very close” to a deal on the North American Free Trade Agreement.  “The team has been working overtime, late nights, going through what I would almost characterize as the final details,” he said.  While Hassett stayed tight-lipped on details, Trump tweeted on Fri that a deal with the US' 3rd-largest trading partner, after China & Canada, is “coming along nicely” & any deal must take care of autoworkers & farmers.  “You should stay tuned because right now it’s closer than it’s been since I’ve been here,” Hassett,  who was appointed as Trump's chief economist in early 2017, added.

US putting ‘final details’ into Mexico trade deal, Trump economic adviser says

A vessel carrying US soybeans was unloading its cargo worth at least $23M at the Chinese port of Dalian today, becoming one of the first shipments to incur hefty new import duties as the trade row deepens between Beijing & the US.  The docking of the vessel after 5 weeks anchored off China's coast ended long-running speculation over the fate of the cargo, which had captured public attention.  China's state grains stockpiler Sinograin confirmed it will pay the additional 25% import tariff on its 70K ton cargo of the oilseed.  That equates to about $6M.  Comments on the country's website showed early public support for the cargo had started to wane amid concerns that the public is footing the bill for the prolonged trade war.  "Isn't Sinograin state-owned? Who is this tariff hurting? Eventually it is us paying the tariffs and it's us being sanctioned!" said one user.  The penalties were in retaliation for moves by DC as part of a dispute between the world's 2 largest economies.  Last week, DC said it would start collecting tariffs on another $16B worth of Chinese imports from Aug 23, as it tries to pressure China to negotiate trade concessions.  Beijing has said it will retaliate in kind.  Soybeans, which are used to make cooking oil & animal feed, are the top US agricultural export to China, with the trade worth $12.7B in 2017.

China unloads US soybean cargo amid public worries about cost of trade war

The Turkish lira retraced some losses after touching a new record low in Asia's trading following a recent geopolitics-triggered free fall in the currency.  Today, the llire last traded around 6.90 against the greenback.  It had earlier dropped to a fresh all-time low of 7.24, before paring some losses after moves were taken to assuage market nerves frayed by the currency's recent weakness.  The retracement in losses came after the Turkish central bank moved to improve liquidity during Asia late trading.  Among the moves announced today were a slashing of lira required reserves held by banks by 250 basis points for all maturities.  Before that, Finance Minister Berat Albayrak had said yesterday that the gov had a plan in place following the fall in the lira.  Albayrak said Turkish institutions will take "necessary steps" beginning Mon, but few specifics had been provided on what those steps included.  The lira briefly plunged 20% against the $ on Fri, finishing the session lower by 16% after US Pres Trump said he had approved metals tariffs on Turkey to be doubled.  The weakness in the lira came against the backdrop of the Turkish economy facing major challenges, but it has come under pressure most recently after US-Turkey talks over the detention of a US pastor in Turkey appeared to make no major progress.

Turkish lira collapse continues, hits new record low as central bank takes steps to ease pain

Q2 earnings brought out stock buyers in Jul.  Now intl developments will get more attention, with Turkey adding to uncertainties.  The Dow is back to a 3 week low & the weeks going into the holiday could be very choppy for stocks.

Dow Jones Industrials

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