Friday, December 14, 2018

Markets decline on worries about global growth in 2019

Dow sank 253, decliners over advancers about 2-1 & NAZ lost 50.  The MLP index added 1 to the 246s & the REIT index went up 2 to 352.  Junk bond funds slid lower & Treasuries crawled higher.  Oil fell 1 to the 51s (more below) & gold dropped 8 to 1239.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil52.06

GC=FGold   1,238.60

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Stocks opened lower as data coming out of China indicated the world's 2nd-largest economy continues to show weakness.  Investors were shunning equities after data showed China's Nov retail sales grew at the weakest pace since 2003 & industrial output rose the least in nearly 3 years as domestic demand softened further.  The weak reports heightened concerns about the impact a protracted trade battle between the US & China will have.  China's Shanghai Composite closed down 1.5% & Hong Kong's Hang Seng dropped 1.6%.  Japan's Nikkei finished the session down 2%. In Europe, stocks were down as well.  London's FTSE fell 0.7%, Germany's DAX declined 0.8% & France's CAC dropped 1%.  Yesterday, US stocks swung between losses & gains with the NAZ Composite & S&P 500 ended the session lower, while the Dow managed to hang onto gains.  Investors shifted into safer sectors such as utilities & consumer staples, while rotating out of materials & consumer discretionary names, both more dependent on US economic growth which some speculate may be slowing.

US stocks down on worries about the global economy

The Commerce Dept reports retail sales rose a seasonally adjusted 0.2% in Nov, matching expectations, as households bought furniture, electronics & a range of other goods.  Excluding the volatile auto component, sales rose 0.2%, also meeting expectations.  Nov sales were up 4.2% from a year earlier, indicating the holiday-shopping season got off to a better start than in 2017.  Oct's retail sales were revise higher to 1.1% from 0.7%.  Cheaper gasoline undercut sales at service stations.  Gasoline prices have dropped about 40¢ per gallon since Oct, according to the US Energy Information Administration.  Oil prices have fallen by a 3rd since the start of Oct amid concerns about oversupply & a slowing global economy.

November retail sales rose moderately

National Security Advisor John Bolton is sounding the alarm on China & Russia's massive investment encroaching on the African continent.  “The predatory practices pursued by China and Russia stunt economic growth in Africa, threaten the financial independence of African nations, inhibit opportunities for U.S. investment, interfere with U.S. military operations and pose a significant threat to U.S. national security interests,” Bolton said yesterday in a speech unveiling the Trump Administration's Africa strategy at the conservative Heritage Foundation.  Under Bolton's new “Prosper Africa” strategy, the US will take on those threats by reinforcing economic ties with Africa.  “I think this is a positive in that we have a great opportunity in Africa to expand traded investment,” former US trade representative Michael Froman said.  Bolton said China & Russia are rapidly implanting their financial & political imprint in Africa to gain a competitive advantage over the US.  From 2016-2017, China's foreign direct investment toward Africa totaled $6.4B.  Russia is pushing its own arms & energy on the continent by extracting natural resources from the region for its own benefit, according to Bolton.  Froman suggests for the US to invest in “building capacity” in Africa to establish a better relationship with the continent's govs.  “We are not just there to take extractive resources out of the continent. We can be there to invest in human capital and human resources in the continent and therefore have greater influence there as well,” he added.

China, Russia ties with Africa may pose a new trade war threat for the US

Oil prices slipped after China reported slower economic growth, pointing to lower fuel demand in the world's biggest oil importer, although market sentiment was supported by supply cuts agreed last week by major crude producers.  Benchmark Brent crude was down 30¢ at $61.15 per barrel, on course for a decline this week of around 1%.  US light crude was 25¢ lower at $52.33.  China, the world's #2 economy, today reported some of its slowest growth in retail sales & industrial output in years, highlighting the risks of the country's trade dispute with the US.  Chinese oil refinery throughput in Nov fell from Oct, suggesting an easing in oil demand, though runs were 2.9% above levels a year earlier.  Concerned by mounting oversupply, OPEC & other oil producers including Russia agreed last week to reduce output 1.2M barrels per day (bpd) (more than 1% of global demand).  The International Energy Agency said yesterday that it expected a deficit in oil supply to emerge by Q2 of next year, provided OPEC members & other key producers stuck closely to last week's deal to cut output.  As part of the agreement, de facto OPEC leader Saudi Arabia plans to reduce its output to 10.2M bpd in Jan.  The IEA kept its 2019 forecast for global oil demand growth at 1.4M bpd, unchanged from its projection last month, & said it expected growth of 1.3M bpd this year.

Oil prices drop amid China economy worries, but output cuts support

Stocks continue stumbling, looking for direction.  A slowdown in growth for the Chinese economy is weighing on the stock market.  Of course there are also concerns about the future growth of US economy.  After a good start this week, the Dow is down 50 currently.  In the absence of other news, stocks should have a dismal day.

Dow Jones Industrials

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