Dow went down 313 (near early lows), decliners over advancers better than 5-2 & NAZ gave back 132. The MLP index fell 2+ to the 224s & the REIT index was steady in the 409s, rebounding from lows in the AM. Junk bond funds did little & Treasuries rose in price. Oil remained lower in the 52s & gold added 6 to 1510 (more below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Top White House economic advisor Larry Kudlow says “delisting” Chinese companies from US exchanges “is not on the table” however there is a new push to scrutinize some of these listings. “What we are looking at is investor protection, U.S. investor protections…” Kudlow said. “There have been complaints by the stock exchanges about this, the SEC has heard complaints so we’ve opened up a study group to take a look at it,” he said noting that the probe is in its infancy. There are about 156 Chinese companies listed on US exchanges combined, as of Feb 2019, carrying a total market cap of $1.2T, as tracked by the US-China Economic Security Review Commission. These companies range in size from behemoths such as online retailer Alibaba (BABA) to smaller China Automotive Systems (CAAS). Additionally, some of these companies are 30% state-owned including PetroChina (PTR) & China Telecom (CHA) to name a few. Last month, the Hudson Insitute pointed out that some of these companies, due to state control, are unaudited. "China says our large companies' internal affairs are state secrets, we are not going to let you audit them. This is really shocking to the average investor that so many Chinese companies are on Wall Street unaudited." It has been reported that US negotiators are considering restricting gov pension fund investments in China but haven't made a final decision. The next round of talks between the US & China are set to kick off on Thurs in DC with USTR Robert Lighthizer & Treasury Secretary Steve Mnuchin. Kudlow indicated that the US is optimistic heading into the discussions. “We are open to whatever they may bring,” he said during an interview. But the Pres has said it has “gotta be the right deal” he stressed.
Federal Reserve Chair Jerome Powell said the central bank is prepared to expand the size of its balance sheet, a response to a spike in short-term funding costs. "This volatility can impede the effective implementation of monetary policy, and we are addressing it," Powell said during a speech. "Indeed, my colleagues and I will soon announce measures to add to the supply of reserves over time." In 2017, the Fed began to shrink its $4.5T holdings of bonds & other assets, known as its balance sheet, which was expanded during the financial crisis & used to pump banks with money bought as bonds. With an unprecedented number of holdings, the Fed was able to push down long-interest interest rates. The central bank generally maintains the size of its portfolio by reinvesting the proceeds from its assets; in order to shrink it, they began to gradually taper that process. They believed it could shrink the portfolio to $1.5-3T & indicated the process could take several years.
Chinese Ministry of Commerce said it “strongly urges” the US to stay clear from the country's domestic issue, after the White House blacklisted a slew of Chinese companies due to alleged human rights violations against Muslim minorities in China's far-western region of Xinjiang. “We strongly urge the U.S. to immediately stop making irresponsible remarks on the issue of Xinjiang, stop interfering with the wrong actions of China’s internal affairs, and remove relevant Chinese entities from the list of entities as soon as possible,” a spokesperson from the Ministry of Commerce said. “China will also take all necessary measures to resolutely safeguard China’s own interests,” the spokesperson said. The comment came after the tensions between the US & China rose ahead of the highly-anticipated trade talks this week. The US banned 28 Chinese companies from doing business with American companies without being granted a US gov license due to human rights issues. Markets were bracing for a stiff retaliation as Chinese Foreign Ministry spokesman Geng Shuang said earlier “stay tuned” for China to fight back. Reports from China also said Chinese delegation may cut short their planned stay in DC & depart on Fri, dimming hopes for a trade deal. The tempered optimism sparked a sell-off in the markets with the Dow tanking as much as 300 points. Hu Xijin, editor-in-chief of the Global Times followed by markets for insight on the trade war, said today China now has “low expectation for real breakthrough.” Global Times is a tabloid under the People's Daily, which is the official newspaper of the Communist Party of China.
China ‘strongly urges’ US to remove sanctions and stop accusing it of human rights violations
Prices had climbed in earlier dealings, on doubts about a near-term resolution between the world's largest economies, which weighed on assets perceived as risky & fed appetite for haven assets, including bullion. Dec gold fell by 50¢ to settle at $1503 an ounce, after shedding 0.6% yesterday. The move lower in gold by the settlement came as the ICE US $ Index climbed 0.2% to 99.171, back to their highest levels since Apr 2017. A stronger $ tends to pressure dollar-denominated gold prices. Safe-haven assets had found support after the US expanded its list of blacklisted Chinese firms to 28 entities ahead of US-China trade talks this week, increasing doubts that a comprehensive Sino-American trade agreement can be sketched out as delegates meet this week. Vice Premier Liu He is set to visit DC on Oct.10-11 ahead of an increase in tariffs on some $250 B worth of Chinese imports to 30% from 25%. Both sides have tempered hopes that negotiations will be fruitful, with news reports suggesting Chinese officials want to take certain issues like state subsidies off the table. On the data front, a reading of US producer prices for Sep fell by 0.3%. That was the steepest decline since the first month of the year & the data point to low inflation ahead, which gives the Federal Reserve room to cut interest rates to try to guard the economy from damage related to the ongoing trade war with China.
Gold prices give up gains to finish lower for a third session in a row
Powell spoke today, &, as usual, his comments get a lot of attention. The Fed is thinking of buying Treasury notes/bonds again. Among other things, bond purchases push down interest rates, similar to a rate cut. More important is the floundering US-China trade talks. Encouraging words don't mean much if there is no action. Comments about the Chinese officials going home earlier isn't what's supposed to happen when a deal is in the offing. The NBA-China dispute should not be all that important, but it is. When human rights & basketball teams are brought into the meetings, a final deal looks to be further away. A final deal looks far away which brought selling in the last hour of trading.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Top White House economic advisor Larry Kudlow says “delisting” Chinese companies from US exchanges “is not on the table” however there is a new push to scrutinize some of these listings. “What we are looking at is investor protection, U.S. investor protections…” Kudlow said. “There have been complaints by the stock exchanges about this, the SEC has heard complaints so we’ve opened up a study group to take a look at it,” he said noting that the probe is in its infancy. There are about 156 Chinese companies listed on US exchanges combined, as of Feb 2019, carrying a total market cap of $1.2T, as tracked by the US-China Economic Security Review Commission. These companies range in size from behemoths such as online retailer Alibaba (BABA) to smaller China Automotive Systems (CAAS). Additionally, some of these companies are 30% state-owned including PetroChina (PTR) & China Telecom (CHA) to name a few. Last month, the Hudson Insitute pointed out that some of these companies, due to state control, are unaudited. "China says our large companies' internal affairs are state secrets, we are not going to let you audit them. This is really shocking to the average investor that so many Chinese companies are on Wall Street unaudited." It has been reported that US negotiators are considering restricting gov pension fund investments in China but haven't made a final decision. The next round of talks between the US & China are set to kick off on Thurs in DC with USTR Robert Lighthizer & Treasury Secretary Steve Mnuchin. Kudlow indicated that the US is optimistic heading into the discussions. “We are open to whatever they may bring,” he said during an interview. But the Pres has said it has “gotta be the right deal” he stressed.
Kudlow hints the US could rattle China's biggest companies with a simple move
Federal Reserve Chair Jerome Powell said the central bank is prepared to expand the size of its balance sheet, a response to a spike in short-term funding costs. "This volatility can impede the effective implementation of monetary policy, and we are addressing it," Powell said during a speech. "Indeed, my colleagues and I will soon announce measures to add to the supply of reserves over time." In 2017, the Fed began to shrink its $4.5T holdings of bonds & other assets, known as its balance sheet, which was expanded during the financial crisis & used to pump banks with money bought as bonds. With an unprecedented number of holdings, the Fed was able to push down long-interest interest rates. The central bank generally maintains the size of its portfolio by reinvesting the proceeds from its assets; in order to shrink it, they began to gradually taper that process. They believed it could shrink the portfolio to $1.5-3T & indicated the process could take several years.
Jerome Powell says Fed will start increasing its balance sheet 'soon'
Chinese Ministry of Commerce said it “strongly urges” the US to stay clear from the country's domestic issue, after the White House blacklisted a slew of Chinese companies due to alleged human rights violations against Muslim minorities in China's far-western region of Xinjiang. “We strongly urge the U.S. to immediately stop making irresponsible remarks on the issue of Xinjiang, stop interfering with the wrong actions of China’s internal affairs, and remove relevant Chinese entities from the list of entities as soon as possible,” a spokesperson from the Ministry of Commerce said. “China will also take all necessary measures to resolutely safeguard China’s own interests,” the spokesperson said. The comment came after the tensions between the US & China rose ahead of the highly-anticipated trade talks this week. The US banned 28 Chinese companies from doing business with American companies without being granted a US gov license due to human rights issues. Markets were bracing for a stiff retaliation as Chinese Foreign Ministry spokesman Geng Shuang said earlier “stay tuned” for China to fight back. Reports from China also said Chinese delegation may cut short their planned stay in DC & depart on Fri, dimming hopes for a trade deal. The tempered optimism sparked a sell-off in the markets with the Dow tanking as much as 300 points. Hu Xijin, editor-in-chief of the Global Times followed by markets for insight on the trade war, said today China now has “low expectation for real breakthrough.” Global Times is a tabloid under the People's Daily, which is the official newspaper of the Communist Party of China.
China ‘strongly urges’ US to remove sanctions and stop accusing it of human rights violations
Prices had climbed in earlier dealings, on doubts about a near-term resolution between the world's largest economies, which weighed on assets perceived as risky & fed appetite for haven assets, including bullion. Dec gold fell by 50¢ to settle at $1503 an ounce, after shedding 0.6% yesterday. The move lower in gold by the settlement came as the ICE US $ Index climbed 0.2% to 99.171, back to their highest levels since Apr 2017. A stronger $ tends to pressure dollar-denominated gold prices. Safe-haven assets had found support after the US expanded its list of blacklisted Chinese firms to 28 entities ahead of US-China trade talks this week, increasing doubts that a comprehensive Sino-American trade agreement can be sketched out as delegates meet this week. Vice Premier Liu He is set to visit DC on Oct.10-11 ahead of an increase in tariffs on some $250 B worth of Chinese imports to 30% from 25%. Both sides have tempered hopes that negotiations will be fruitful, with news reports suggesting Chinese officials want to take certain issues like state subsidies off the table. On the data front, a reading of US producer prices for Sep fell by 0.3%. That was the steepest decline since the first month of the year & the data point to low inflation ahead, which gives the Federal Reserve room to cut interest rates to try to guard the economy from damage related to the ongoing trade war with China.
Gold prices give up gains to finish lower for a third session in a row
Powell spoke today, &, as usual, his comments get a lot of attention. The Fed is thinking of buying Treasury notes/bonds again. Among other things, bond purchases push down interest rates, similar to a rate cut. More important is the floundering US-China trade talks. Encouraging words don't mean much if there is no action. Comments about the Chinese officials going home earlier isn't what's supposed to happen when a deal is in the offing. The NBA-China dispute should not be all that important, but it is. When human rights & basketball teams are brought into the meetings, a final deal looks to be further away. A final deal looks far away which brought selling in the last hour of trading.
Dow Jones Industrials
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