Friday, November 8, 2019

Markets edge lower on uncertainty about the US lowing Dec tariffs

Dow gave back 40, advancers slightly ahead of decliners & NAZ went up 10.  The MLP index dropped 1+ to the 208s (another multi year low) amp; the REIT index was flat in the 398s after recent selling.  Junk bond funds inched higher & Treasuries were being purchased.  Oil was off almost 1 to the 56s & gold was steady at a depressed 1465.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil55.86

GC=FGold   1,466.501+0.10+0.0%

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Stocks fell across the board as traders digest the uncertainty surrounding the details of a potential trader deal between the US & China.  Pres Trump said the Chinese want him to roll back tariffs & that they want to make a deal more than the US.  Despite reports, earlier that China & the US have agreed to roll back tariffs on each others’ goods as part of the first phase of a trade deal, White House trade adviser Peter Navarro said that if Pres Trump didn't say it, don't believe it.  "There is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal," Navarro said & the only person who can make that decision is President Donald J. Trump and it's as simple as that."  Navarro added that the US may be willing to postpone the tariffs that are scheduled to hit $156B of Chinese goods.  All of that comes after Chinese Ministry of Finance spokesperson Gao Feng said yesterday that the US & China agreed to "remove the additional tariffs imposed in phases as progress is made on the agreement."  Gold was down 0.3% to $1462 an ounce & West Texas Intermediate crude oil was lower by 1.8% at $56.15 a barrel.  Treasuries were little changed with the yield on the 10-year note at 1.936%.  In Europe, London's FTSE was down 0.5% to pace the decline.  In Asia, the Shanghai Composite lost 0.5% while Hong Kong's Hang Seng tumbled 0.7% & Tokyo's Nikkei advanced 0.3%.

Stocks hold near record highs as trade uncertainty swirls

With unemployment near record lows & Federal Reserve models predicting a steady economy over the next 6-12 months, Atlanta Fed Pres Raphael Bostic says the economy “is in a really good place.”  Federal Reserve estimates suggest Q4 economic growth will be 1.5-1.75%, getting the US to a 2019 annual GDP growth of around 2-2.1%, Bostic said.  “We’re settling into a phase where we’re going to be at our long-run steady-state level of GDP growth,” Bostic added.  This comes as the economy continues to slow down from its 2018 growth. Bostic, however, does not expect the slowdown to exceed the Fed's projections.  “In my view, where we are for policy right now, is we should be taking a wait and see attitude just to see how the economy responds to the stimulus [and] the accommodations that we’ve introduced into the marketplace,” Bostic said.  He acknowledged that there is has been talk of risks in the economy, but noted that their outcomes are still unknown.  In Aug, yields on 2-year & 10-year treasury bonds inverted, sparking fears of recession within the following 24 months.  Since that point, however, the yield spread has widened to 25 basis points.  In the weeks following the inversion, the probability of recession increased to 40%, according to the NY Federal Reserve.  Yesterday this probability decreased to 29%.  “Next year, it’s very hard to say what our policy position should be. We have to wait and see what happens,” Bostic said.  If the economy is “much hotter” than the Fed’s current expectations and fast spikes in inflation occur, Bostic said, he would be comfortable with rate hikes in the new year.  However, there is nothing to suggest this would happen.  “I’m really much more concerned about the trajectory of inflation and if it looks like it’s going to start spiraling away from out two percent target, that’s when I would get concerned,” Bostic added.  Conversely, if economic growth is slower than the Fed's predicted long-run average, then, he argued, the central bank should seriously consider accommodations.  “This last one was difficult. I would have been more comfortable with a hold—continue to wait and see,” Bostic said when asked about the FOMC's most recent interest rates cut.  He added though, that he does not believe the Fed is currently not “super-accommodative,” to a point where their policy would cause economic overheating.  “So I'm comfortable with where we are,” he added.

US economy in 'really good place' in 2020, Atlanta Fed chief says

China's exports & imports fell further in Oct, according to customs data.  Exports fell 0.9% in $ terms, but that was better than the 3.9% drop that was expected.  Exports to the US improved, but were still down 11% year over year.  They had dropped 22% in Sep.  Meanwhile, imports fell 6.4% as China increased its purchases of US agricultural goods.  The forecast called for an 8.9% fall.  China's trade surplus grew to $42.81B, ahead of the $39.65B that was expected & the $40.83B that economists were anticipating.  The US & China have been engaged in a 16-month trade battle that has seen the world's 2 economic superpowers slap tariffs on hundreds of Bs of $s of each other's goods.  Pres Trump & Chinese Pres Xi Jinping were hoping to ink a partial trade agreement at the Asia Pacific Economic Cooperation summit in Santiago, Chile later this month, but the conference was canceled due to unrest in the country.  The 2 sides continue to work toward finding a time & place to put something in writing.

China exports slide under US tariff chokehold

The US is willing to postpone new tariffs on Chinese products as a “goodwill gesture” to move trade negotiations to a 2nd or 3rd phase, according to White House trade adviser Peter Navarro.  “The reality is what is on the table is there are tariffs coming in December,” Navarro said.  The US is scheduled to slap tariffs on about $156B  of Chinese goods, including cell phones, laptop computers & toys.  “We would be willing, I think, again it’s up to the president, to postpone those tariffs … but not roll back any existing tariffs. There’s the fine distinction here,” he added.  Navarro said yesterday that there was “no agreement” to remove existing tariffs as a condition of a phase one deal.  Chinese Ministry of Finance spokesperson Gao Feng said yesterday that the US & China agreed to "remove the additional tariffs imposed in phases as progress is made on the agreement."  Pres Trump & Chinese President Xi Jinping were hoping to sign a phase one deal at the Asia Pacific Economic Cooperation summit in Santiago, Chile later this month, but the conference was canceled due to unrest in the country.  There is still hope the 2 sides can find a time to sign a deal.  Navarro says phase one would only accomplish about 2 of the 7 goals done that the US is hoping to achieve in a comprehensive deal.

US may be willing to postpone Dec. 15 tariffs: White House trade adviser Navarro

Stocks are meandering after a recent really of about 3K in the Dow.  That's to be understood given how complicated the trade negotiations are.  However the popular averages are hovering near records & the economic data is relatively strong making the bulls feel a lot better than the bears.

Dow Jones Industrials

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