Monday, January 14, 2019

Markets slip lower on weak China economic data

Dow dropped 104, decliners over advancers 4-3 & NAZ lost 48.  The MLP index fell 1+ to 244 & the REIT index inched up to 340.  Junk bond funds were about even & Treasuries crawled higher.  Oil slid back in the 51s & gold added 1 to 1290.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil51.19
 -0.40 -0.8%

GC=FGold   1,292.50

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Stocks opened the new trading week down as China's exports unexpectedly declined by the most in 2 years in Dec, while the country posted its biggest trade surplus with the US on record in 2018, which could turn up the heat on Beijing in its bitter trade dispute.  All 3 major indices fell with the Dow down triple digits.  In the US, bank earnings season kicked off with results from Citigroup.  China data hit markets in Asia particularly hard.  Hong Kong's Hang Seng closed down 1.4% & the Shanghai Composite ended the session down 0.7%.  Japan's Nikkei was closed for a holiday.  European markets are reacting much the same way.  London's FTSE traded 0.9% lower, Germany's DAX is off 0.5% & France's CAC is down 0.6%. US stocks closed slightly lower Fri, ending a 5-session winning streak that had pulled 2 key equity averages out of correction territory.  Despite the negative closing, all 3 major stock averages ended the week higher: The Dow Jones Industrial Average up 2.4%, the S&P 500 up 2.5% & the NAZ up 3.5%.

Stocks fall as China data raises growth concerns

Citigroup (C) reported an adjusted Q4 EPS of $1.61, a big change from a year ago when a loss of $18.9B was reported due to a large write-down related to changes in the US tax code.  EPS topped the estimate for $1.55.  Revenue fell 2% to $17.1B, which fell short of the estimate for $17.55B.  Profit grew thanks to a lower overall tax rate & a 4% drop in expenses from a year earlier, to $9.9B.  "We made solid progress throughout 2018 towards our longer-term financial targets, ending the year with an RoTCE of 10.9% and an efficiency ratio of 57%. Our institutional and consumer franchises each grew revenue on a full year basis and we continued to invest in our people and technology in order to better serve our clients," said CEO Michael Corbat.  "During the year, we also grew loans and deposits, improved ROA, and carefully managed both our expenses and balance sheet. We also returned more than $18 billion of capital to common shareholders."  Global consumer banking revenue at $8.4B was flat year-over-year, led by 1% growth in North America.  Revenue in the bank's credit-card business was up 1% from a year ago, to $5.1B.  The stock went up 1.81 (3%).
If you would like to learn more about Citi, click on this link:

Citigroup reports a surprising 4Q revenue miss

Despite Pres Trump launching a high-stakes trade war against Beijing last year, China announced that its 2018 trade surplus with DC was its largest in more than a decade.  China's surplus with the US grew 17% from a year ago to hit $323B in 2018, according to gov data.  It was the highest on record dating back to 2006.  The deficit that the US has with China is likely even bigger than these figures indicate since China calculates the numbers using different methods, sometimes excluding goods that end up in the US via other countries.  Exports to the US rose 11.3% on-year in 2018, while imports from the US to China rose a meager 0.7% over the same period.  China's overall trade surplus for 2018 was $352B, the gov said.  Exports in the whole of 2018 rose 9.9% from 2017 while imports grew 15.8% over the same period, official $-denominated data showed.  While the surplus with the US may have risen, last year's overall Chinese trade surplus was the lowest since 2013, even though export growth was the highest since 2011.  China's General Administration of Customs said that the biggest worry in trade this year is external uncertainty & protectionism, forecasting the country's trade growth may slow in 2019.  Asia's largest economy is still growing steadily in 2019, but it faces external headwinds.  Economic data from China are being closely watched for signs of damage inflicted by the trade war.  While official data indicated China’s economy held up for much of last year, as production metrics & export orders fall as the country's trade dispute with the its largest trading partner, drags on.  China's overall Dec exports unexpectedly fell 4.4% from a year earlier, the biggest monthly drop in 2 years.  Imports also unexpectedly contracted in Dec, falling 7.6%, marking the biggest decline since Jul 2016.  That left the country with a trade surplus of $57B for the month, compared with expectations for a surplus of $51.5, up from $44.7B in Nov.  The forecast called for Dec shipments from the world's largest exporter to have risen 3.0%, slowing from 5.4% in Nov.  Import growth had been expected to pick up slightly to 5.0%, after cooling to 3.0% in the previous month.  China's Dec trade surplus with the US fell to $29.9B from $35.5B in Nov.  Beyond the tariffs battle with the US, China's economy has been facing its own domestic headwinds.  Even before Trump kicked off the latest escalation in trade tensions, Beijing was already trying to manage a slowdown in its economy after decades of breakneck growth.

US trade deficit with China grows to a record and it's likely even worse than the data shows

At 24 days in duration, the current partial gov shutdown has become the longest one on record, based on figures that go back more than 40 years.  On Sat, it exceeded the mark set by a 21-day closure during the Clinton administration that began in Dec 1995.  The record was broken as the end of the workweek brought no major signs of a bipartisan spending deal that would reopen shuttered agencies.   Analysts have noted that the impact of the current shutdown is somewhat limited, as it’s affecting agencies that represent about 25% of total gov spending.

This looks like just another gloomy day stocks.  Between the Chinese data & gov shutdown, there is little reason for the bulls to return.  The Dow is currently up 550 in Dec while gold is also strong.

Dow Jones Industrials

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