Dow rose 83, advancers over decliners 2-1 & NAZ & added 95. The MLP index gained 1+ to the 225s & the REIT index jumped up 4 to the 407s. Junk bond funds were little changed & Treasuries remained weak while stocks were being purchased. Oil slid back 1 to the 58s & gold fell 9 to 1550 (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)
China will not be listed as a currency manipulator when the Treasury Dept releases an update to its Foreign Exchange Report ahead of the signing of the phase one trade deal, according to sources. A formal announcement could come as early as today or before Wed when the phase one deal is set to be signed. China's removal from the list is a "want" from Beijing before the deal is signed. Being included on the list impacts China's ability to grow its economy, possibly limiting growth. Last month, the US & China agreed to a partial trade deal that calls for Beijing to purchase up to $200B of American products over the next 2 years, in addition to protecting against intellectual property theft & technology transfer. Beijing also agreed to end the manipulation of its currency, the yuan. In return, the US agreed to reduce tariffs on Chinese goods, but will still levy duties against $380B of those products. The Treasury Dept designated China as a currency manipulator on Aug 5, after the yuan fell to a more than 10-year low against the $. At the time, the Treasury Dept pointed to Beijing’s “long history of facilitating an undervalued currency through protracted, large-scale intervention in the foreign exchange market” as the reason for the designation. Beijing manipulated its currency, the yuan, throughout the 1980s & 1990s in order to keep labor and production costs low as it opened up its economy. The offshore yuan has weakened against the $.
US budget deficit topped $1 trillion in 2019 for the first time in seven years
The federal gov ran a budget deficit of $13.3B in Dec, a drop of just 2% from a year earlier, the Treasury Dept reported. This was also slightly below the $15B deficit estimated last week by the Congressional Budget Office. Spending for the month was $349.1B while the gov brought in $335.8B. Outlays rose for defense programs & veterans affairs. These were partially offset by reductions in spending on education & homeland security. For the fiscal year thru Dec, the deficit is up 12% to $356.6B. The CBO has forecast a budget deficit above $1B in fiscal 2020, the first time in 8 years. The deficit for fiscal 2019 came in just under $1T at $984B. Economists are not accustomed to the gov running large budget deficits at the same time the economy is growing at a moderate pace & the unemployment rate is at historic lows. There is concern for how much fiscal policy can respond in the next economic downturn.
Despite the benign environment, the Federal Reserve is actually in uncharted territory & should be alert to potential risks to the outlook, said Boston Fed Pres Eric Rosengren. “Private forecasters and [Federal Open Market Committee] participants anticipate a good outcome for the economy in 2020 and beyond, with low inflation and strong labor markets. However, as with any forecast, there are risk scenarios that are not captured in the most likely outcome for the economy,” Rosengren said. At the moment, Fed interest-rate policy is “accommodative” or pushing for faster growth even though the unemployment rate is at historically low levels. “Central bankers do not have much historical experience” with this environment, Rosengren added. Rosegren said he was focused on risks of higher inflation & financial stability problems. The Boston Fed pres was a voter last year & opposed the 3 Fed rate cuts.
Gold prices marked their lowest finish since the first full trading day of the year, finding little haven-related interest as appetite for riskier assets lifts global equities, the $ strengthened against the ¥, & bond yields climbed. Gold for Feb delivery fell $9 (0.6%) to settle at $1550 an ounce. That was the lowest finish for a most-active contract since Jan 2. The $ versus the ¥ rose 0.4% to trade at 109.918 after hitting its highest level against the Japanese currency since late May. A stronger $ is often seen as a negative for gold & other commodities priced in the unit, making them more expensive to users of other currencies. In addition, the ¥ is also seen as arguably the biggest beneficiary of haven flows during bouts of geopolitical uncertainty.
Gold logs lowest finish since the start of the year as risk-on sentiment prevails
Oil futures fell for a 5th session in a row, with the US benchmark at logging its lowest finish in almost 6 weeks as the immediate risk of a bigger US-Iran conflict continued to fade, easing worries about potential global supply disruptions. West Texas Intermediate (WTI) crude for Feb delivery fell 96¢ (1.6%) to settle at $58.08 a barrel. That was the lowest finish for a front-month contract since Dec 3. Prices also tallied a 5th straight session decline, the longest losing streak since the 8-session fall that ran to Oct 3. Mar Brent crude lost 78¢ (1.2%) to $64.20 a barrel, with prices down a 5th session & at the lowest settlement since Dec 12. WTI, the US benchmark, fell 6.4% last week, its biggest percentage loss since Jul, while Brent, the global benchmark, slumped 5.3%, for its biggest drop since Aug. Oil fell despite antigov demonstrations in Iran over the weekend that followed the Iranian gov's admission that it unintentionally shot down a Ukrainian airliner last week, killing all 176 aboard, after initially denying responsibility. Trump, in a tweet, addressed Iran’s leaders, saying, “DO NOT KILL YOUR PROTESTERS.”
Markets are moving ahead once again as investors are waiting for the US-China part 1 trade deal to be signed on Wed. Earnings reports are coming & traders are hoping for the best. The Volatility Index (VIX) is at a mild 12½ where it has rested during the stock market rally in recent years. In other words, investors are feeling good about buying stocks.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
China will not be listed as a currency manipulator when the Treasury Dept releases an update to its Foreign Exchange Report ahead of the signing of the phase one trade deal, according to sources. A formal announcement could come as early as today or before Wed when the phase one deal is set to be signed. China's removal from the list is a "want" from Beijing before the deal is signed. Being included on the list impacts China's ability to grow its economy, possibly limiting growth. Last month, the US & China agreed to a partial trade deal that calls for Beijing to purchase up to $200B of American products over the next 2 years, in addition to protecting against intellectual property theft & technology transfer. Beijing also agreed to end the manipulation of its currency, the yuan. In return, the US agreed to reduce tariffs on Chinese goods, but will still levy duties against $380B of those products. The Treasury Dept designated China as a currency manipulator on Aug 5, after the yuan fell to a more than 10-year low against the $. At the time, the Treasury Dept pointed to Beijing’s “long history of facilitating an undervalued currency through protracted, large-scale intervention in the foreign exchange market” as the reason for the designation. Beijing manipulated its currency, the yuan, throughout the 1980s & 1990s in order to keep labor and production costs low as it opened up its economy. The offshore yuan has weakened against the $.
US takes major step to de-escalate China trade war
The US fiscal deficit topped $1T in
2019, the first time it has passed that level in a calendar year since
2012, according to Treasury Dept figures. The
budget shortfall hit $1.02T for the Jan-Dec period,
a 17.1% increase from 2018, which itself had seen a 28.2% jump from the
previous year. Rising corp tax revenue helped lower the pace of increase in the spending gap. For
the fiscal year, which began in Oct, the shortfall is already at
$356.6B, an 11.7% increase from a year ago. If that pace
continues it would also lead to a fiscal deficit for 2019-20 of more
than $1T. Thru Dec, receipts have totaled $806.5B while outlays have come to $1.16T. Pres Trump had vowed that his stimulus policies, including massive
corp tax cut & aggressive deregulation, would help stem the red
ink coming from DC, but it has only increased. As deficits have
swelled, so has the national debt, which is now at $23.2T.
US budget deficit topped $1 trillion in 2019 for the first time in seven years
The federal gov ran a budget deficit of $13.3B in Dec, a drop of just 2% from a year earlier, the Treasury Dept reported. This was also slightly below the $15B deficit estimated last week by the Congressional Budget Office. Spending for the month was $349.1B while the gov brought in $335.8B. Outlays rose for defense programs & veterans affairs. These were partially offset by reductions in spending on education & homeland security. For the fiscal year thru Dec, the deficit is up 12% to $356.6B. The CBO has forecast a budget deficit above $1B in fiscal 2020, the first time in 8 years. The deficit for fiscal 2019 came in just under $1T at $984B. Economists are not accustomed to the gov running large budget deficits at the same time the economy is growing at a moderate pace & the unemployment rate is at historic lows. There is concern for how much fiscal policy can respond in the next economic downturn.
U.S. budget deficit narrows slightly in December
Despite the benign environment, the Federal Reserve is actually in uncharted territory & should be alert to potential risks to the outlook, said Boston Fed Pres Eric Rosengren. “Private forecasters and [Federal Open Market Committee] participants anticipate a good outcome for the economy in 2020 and beyond, with low inflation and strong labor markets. However, as with any forecast, there are risk scenarios that are not captured in the most likely outcome for the economy,” Rosengren said. At the moment, Fed interest-rate policy is “accommodative” or pushing for faster growth even though the unemployment rate is at historically low levels. “Central bankers do not have much historical experience” with this environment, Rosengren added. Rosegren said he was focused on risks of higher inflation & financial stability problems. The Boston Fed pres was a voter last year & opposed the 3 Fed rate cuts.
A Fed in uncharted territory should be on lookout for risks, including inflation, Rosengren says
Gold prices marked their lowest finish since the first full trading day of the year, finding little haven-related interest as appetite for riskier assets lifts global equities, the $ strengthened against the ¥, & bond yields climbed. Gold for Feb delivery fell $9 (0.6%) to settle at $1550 an ounce. That was the lowest finish for a most-active contract since Jan 2. The $ versus the ¥ rose 0.4% to trade at 109.918 after hitting its highest level against the Japanese currency since late May. A stronger $ is often seen as a negative for gold & other commodities priced in the unit, making them more expensive to users of other currencies. In addition, the ¥ is also seen as arguably the biggest beneficiary of haven flows during bouts of geopolitical uncertainty.
Gold logs lowest finish since the start of the year as risk-on sentiment prevails
Oil futures fell for a 5th session in a row, with the US benchmark at logging its lowest finish in almost 6 weeks as the immediate risk of a bigger US-Iran conflict continued to fade, easing worries about potential global supply disruptions. West Texas Intermediate (WTI) crude for Feb delivery fell 96¢ (1.6%) to settle at $58.08 a barrel. That was the lowest finish for a front-month contract since Dec 3. Prices also tallied a 5th straight session decline, the longest losing streak since the 8-session fall that ran to Oct 3. Mar Brent crude lost 78¢ (1.2%) to $64.20 a barrel, with prices down a 5th session & at the lowest settlement since Dec 12. WTI, the US benchmark, fell 6.4% last week, its biggest percentage loss since Jul, while Brent, the global benchmark, slumped 5.3%, for its biggest drop since Aug. Oil fell despite antigov demonstrations in Iran over the weekend that followed the Iranian gov's admission that it unintentionally shot down a Ukrainian airliner last week, killing all 176 aboard, after initially denying responsibility. Trump, in a tweet, addressed Iran’s leaders, saying, “DO NOT KILL YOUR PROTESTERS.”
Oil prices fall for a fifth straight session
Markets are moving ahead once again as investors are waiting for the US-China part 1 trade deal to be signed on Wed. Earnings reports are coming & traders are hoping for the best. The Volatility Index (VIX) is at a mild 12½ where it has rested during the stock market rally in recent years. In other words, investors are feeling good about buying stocks.
Dow Jones Industrials
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