Thursday, September 20, 2018

Markets advance with the Dow closing at a new record high

Dow soared 251 closing near the highs, advancers of decliners 2-1 & NAZ went up 79 (going over 8K again).  The MLP index was fractionally higher to the 278s & the REIT index lost 4 to the 354s.  Junk bond funds barely budged & Treasuries were about even with the 10 year Treasury holding at 3.08%.  Oil finished a little below 71 as Trump pressured producers for lower rices & gold rose 3 to 1212.

AMJ (Alerian MLP Index tracking fund)

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Beijing is looking to cut tariff rates on imports from some of its major trading partners as early as Oct, according to leakers.  The move is part of an effort to lift economic growth by boosting imports & opening its economy.  However, whether US imports would be affected by the reduction remains to be seen, at a time when the tariff war between the 2 countries gets more intense.  World Trade Organization rules stipulate that a reduction in tariffs must be applied equally, but Beijing can also pick & choose which products to reduce tariffs on.  On Mon, the US & China are scheduled to impose a new round of tariffs on some of each other’s imports.  The Trump administration announced a new round of 10% tariffs on $200B worth of Chinese goods, while China responded with a retaliatory tax on $60B worth of US goods.  The pair of powerhouse economies have already imposed tariffs on $50B worth of each other's imports.  While the new round of 10% tariffs does not amount to much more than a slap on the wrist for the Chinese economy, National Economic Director Larry Kudlow said earlier this week.  He said the Chinese stock market “has had a very rough time” & “their economy is suffering quite a bit.”  The country's benchmark stock index, the Shanghai Composite, is down 17% this year.  Kudlow added that the tariffs are part of Trump’s “grand strategy of negotiating,” & he did not see any reason to think the administration's trade policies would damage the US economy.

China cutting import tariffs amid US trade war: Report

Pres Trump tweeted that OPEC needs to keep crude prices lower because of the military protection the US provides for the region.  "The OPEC monopoly must get prices down now," Trump said in the message.  Futures prices for West Texas Intermediate crude, the US benchmark, dipped slightly following the tweet before recovering & then retreating once again to trade roughly flat.  Yesterday, WTI climbed back above $70 a barrel.  The price of oil is up 7% in the last month & nearly 18% for 2018.  The cartel, which includes Saudi Arabia & Iran, will meet this weekend with non-OPEC producers such as Russia to discuss production levels.  That will be the last meeting before the Nov US midterm elections.  Trump has called on OPEC to take action to lower oil prices several times this year.  The 15-member cartel, along with the Russia-led producers, has capped output since Jan 2017 in order to end a prolonged & punishing oil price downturn that bankrupted hundreds of US energy companies & heaped financial pressure on crude exporters.  The rebound gained steam earlier this year after production problems in countries like Venezuela & Libya caused the group to cut more deeply than they intended.  The Trump administration also boosted prices by restoring sanctions on Iran, OPEC's 3rd biggest producer & saying it aims to by Nov.  OPEC & Russia's alliance of roughly 2 dozen producers agreed in Jun to slightly raise output & restore some of the barrels they took off the market, in part to compensate for the loss of the Iranian supplies.

Trump: 'OPEC monopoly must get prices down'

Oil prices eased, slowing an upward surge that had pushed the market toward 4-year highs, after US Pres Trump called on OPEC to "get prices down now!"  Brent crude oil was down 50¢ at $78.90 a barrel & US light crude was down 9¢ at $71.03 a barrel after rising nearly 2% yesterday.  Global benchmark Brent has been trading just below $80 a barrel, near its highest in almost 4 years, on expectations that US sanctions against Iran, OPEC's 3rd biggest producer, will reduce global supply.  The Organization of the Petroleum Exporting Countries & other producers, including Russia, meet on Sun in Algeria to discuss how to allocate supply increases to offset the loss of Iranian barrels.  The meeting is unlikely to agree to an official rise in crude output, although pressure is mounting to prevent a spike in prices.  Trump weighed into the debate via Twitter, saying "The OPEC monopoly must get prices down now!"  "We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember."  US sanctions on Iran's oil exports come into force on Nov 4.  Many buyers have already scaled back Iranian purchases & it was unclear how easily other producers, such as Saudi Arabia, Iraq & Russia, can compensate for lost supply.

Oil prices ease as Trump tweets warning at OPEC

Speaking of intl trade, British Prime Minister Theresa May has said her Brexit plan is the "only serious and credible" proposal on the table, minutes after EU chief Donald Tusk said May's plan will not work.  May says her Chequers plan will guarantee the frictionless movement of goods across borders & ensure there is no return to a hard frontier between Ireland & Northern Ireland.  The plan calls for Britain to remain in the EU's single market for goods, but not services.  The EU says that amounts to cherry-picking benefits of membership & that is unacceptable.  May said Britain would make new proposals soon to solve the Irish border problem.  She added "there are key issues we need to resolve" but "I believe that there is a willingness to do a deal."  Britain is due to leave the EU in 6 months.  EU Council Pres Donald Tusk says that key parts of the British proposals to leave the EU "will not work."  Tusk said after a 2-day summit partly centering on the British divorce talks with the EU that some of the suggestions from Prime Minister Theresa May would undermine the union of the 27 remaining members.  May has been looking to keep trade in goods in the single market of the EU after Britain leaves but not for services.  The EU has said that the single market cannot be cherry-picked like that.  He said of the Chequers proposals that "the suggested framework for cooperation will not work, not least because it risks undermining the single market."

The Latest: May says hers is only serious plan on table

Buyers took stocks higher at the opening & never looked back.  Ups & downs with trade wars, including Britian's exit from the EU, are being ignored.  The US has an advantage in its trade war with China.  Its exports to China are a much smaller part of the overall economy compared with Chinese exports which are a larger part of its economy.  Money managers around the globe see America as a good place to invest money.  The Dow is up 500 already this week.  However higher interest rates are working their way into the system & that is getting little attention.

Dow Jones Industrials

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