Higher markets on rising optimism over international trade

Dow went up 146, advancers over decliners 2-1 & NAZ rose 46.  The MLP index added 1+ to the 199s & the REIT index gained 2 to the 402s.  Junk bond funds fluctuated & Treasuries were sold heavily.  Oil surged 2+ to the 58s & gold dropped 3 to 1480 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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Oil gained more than 4%, as a larger-than-expected drop in US inventories & hopes of deeper production cuts from OPEC lifted prices.  West Texas Intermediate (WTI) crude futures gained $2.33 (4.2%) settling at $58.43 a barrel.  It was WTI's 3rd straight day of gains & its best day since Sep.  Brent crude futures gained $2.31 (3.8%) to reach $63.14.  A surprise drop in stockpiles was among the factors pushing oil higher.  US inventories decreased 4.9M barrels last week, the Energy Information Administration said.  That was more than 3 times the 1.4M decrease expected.  Data from the American Petroleum Institute released showed a drop of 3.7M barrels, compared to estimates of a 1.7M barrel decrease.  Oil also got a boost from talk of deeper production cuts.  OPEC's biannual meeting kicks tomorrow in Vienna where the 14-member group will discuss the next phase of their oil production policy.  On Fri, OPEC & allies, known as OPEC+ which includes Russia, will meet.  OPEC+ has cut output by 1.2M barrels per day since the beginning of the year.  The current deal runs thru Mar 2020.

Oil jumps more than 4% on eve of OPEC meeting after larger-than-expected drop in US inventories

Gold futures finished lower, pulling back from a near one-month settlement high a day earlier, after a report that trade talks between Beijing & DC are progressing dulled some haven demand for the metal.  Just a day earlier, Pres Trump suggested that he could delay a partial resolution until after the 2020 presidential elections.  A report today said that a Sino-American trade pact was close to coming to fruition & that details on a partial roll back of import duties was being discussed, despite recent rhetoric that suggested that the tensions between the parties was becoming inflamed.  Gold for Feb delivery lost $4 (0.3%) to settle at $1480 an ounce, after jumping 1% yesterday to the highest settlement for a most-active contract since Nov 6.  The fresh reports come after Trump yesterday said it might be preferable to hold off on completing a long-awaited U.S.-China trade deal until after the Nov 2020 presidential race.  Still, the uncertainty surrounding a trade deal, even in the face of today's optimism, has tempered the enthusiasm for gold bears.

Gold settles lower as report indicates progress in U.S.-China talks

Americans consume about 15B quarts annually of popcorn -- widely seen as a healthy snack -- while 1.5B pounds of not-so-healthy potato chips get chomped on every year.  So snack giant PepsiCo (PEP), a Dividend Aristocrat, has decided to get healthier with popcorn.  The maker of Lays'potato chips & Doritos is buying BFY brands, the company behind PopCorners, which combines chips with popcorn.  BFY, which stands for "Better For You", was purchased from the private investment firm Permira Funds.  Paul Nardone, the CEO of BFY, said on the deal that "with the fastest growing brand among better-for-you salty snacks, we look forward to leveraging PEP's world-class resources & distribution platform."  PopCorners are made using proprietary heat compression technology that cooks the corn while shaping it before it moves to conveyor belts for seasoning for such flavors as "white cheddar" & "kettlecorn."  In addition to PopCorners, Pepsi is also acquiring Flourish Veggie Crisps & Flex Protein Crisps.  The push toward healthier snacks has been on for more than 2 years at PEP.  Last year it acquired Health Warrior, a maker of plant-based protein bars, powders & other snacks.  The company also paid $3.2B for carbonated beverage machine maker SodaStream.  It fits into the company's Beyond the Bottle initiative, which has a goal to offer "consumers a range of great-tasting beverages while making (Pepsi) packaging more sustainable and fueling our future growth."  Plus placing a bet that the demand for unsweetened bubbly water drinks will grow is likely a sound wager.  The stock rose 1.84.
If you would like to learn more about PEP, click on this link:
club.ino.com/trend/analysis/stock/PEP?a_aid=CD3289&a_bid=6ae5b6f7

Pepsi buys popular chip snack in push for healthier food

Treasury Secretary Steve Mnuchin warned one of the globe's largest economic organizations of the consequences new intl taxes could have on American business & voiced opposition to the recent introduction of digital services taxes.  In a letter to the Organization for Economic Cooperation & Development, Mnuchin said the US objects to digital services taxes because they “have a discriminatory impact on U.S.-based businesses.”  “We have serious concerns regarding potential mandatory departures from arm’s-length transfer pricing and taxable nexus standards — longstanding pillars of the international tax system upon which the U.S. taxpayers rely,”  Mnuchin continued. “We urge all countries to suspend digital services tax initiatives, in order to allow to OECD to successfully reach a multilateral agreement,” he added in the letter to OECD Secretary-General Jose Angel Gurria.  Yesterday, Pres Trump exchanged barbs with French Pres Emmanuel Macron for the country's new digital-services tax, which was signed into law in Jul.  The French tax imposes a 3% tax on revenues tech companies generate in France, including targeted advertising & digital marketplaces.  In response, the White House said it could impose duties of up to 100% on $2.4B in imports of Champagne, cheese & other French luxury goods.  “Look, I’m not in love with those companies — Facebook (FB) and Google (GOOG) and all of them, Twitter (TWTR). Though I guess I do well with Twitter,” Trump said yesterday from NATO.  “But they’re our companies, they’re American companies. I want to tax those companies. They’re not going to be taxed by France.”  “I’m not going to let people take advantage of American companies. Because if anyone’s going to take advantage of the American companies it’s going to be us,” he added.

Treasury Secretary Mnuchin warns of new global taxes, opposes digital services duty

The status of intl trade negotiations continues to be unclear.  Nobody understands where the US-China trade deal stands.  The USMCA may have problems after Mexico talked about reservations it has with the deal & EU relations are muddy.  But the bulls are keeping values for stock averages essentially at record highs.

Dow Jones Industrials

Markets advance on renewed hopes for a China trade deal

Dow bounced back 177, advancers over decliners better than 3-1 &  NAZ gained 49.  The MLP index was fractionally higher to the 198s & the REIT index went up 1+ to the 403s.  Junk bond funds inched higher & Treasuries were sold while stocks were purchased.  Oil shot up 2 o the 58s & gold fell 5 to 1478 (but remains close to 1500).

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

58.17

+2.07

+3.7%

GC=F

Gold

1,478.60

-5.80

-0.4%

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Job growth stumbled in Nov, with private payrolls increasing by a mere 67K jobs, according to the latest ADP National Employment Report.  The count sharply missed the 140K jobs that was expeced, casting a shadow over what's been a relatively healthy labor market.  “The job market is losing its shine," Mark Zandi, Moody's chief economist, said.  "Manufacturers, commodity producers and retailers are shedding jobs. Job openings are declining, and if job growth slows any further, unemployment will increase."  Nov's number was a steep decline from the 121K jobs added in Oct, which was revised slightly lower than the 125K initially reported.  Despite the end of the nearly 6-week General Motors (GM) strike, the goods-producing sector lost 18K jobs -- an even 6K loss across the manufacturing, construction & natural resources/mining sectors.  Small businesses also had a rough month, creating just 11K jobs, as firms with fewer than 19 employees lost 15K workers.  Most hiring took place in the services-producing sector, with 85K jobs created.  However, trade & transportation saw a 15K loss, while information services also declined 8K.  The bulk of job creation in the sector stemmed from professional & business services, which added 28K & education & health services, which saw a gain of 39K.  Large companies accounted for the bulk of the job creation:  Firms with 50-499 employees created 29K jobs, while those that employ more than 500 people added 27K positions.  "The slowdown has been more significant than I would have thought," Zandi added.  "I do think that goes to the trade war. The trade war is doing damage to the economy."  He estimated that overall, the dispute between the US & China has resulted in the loss of 400K jobs from the economy & has reduced overall GDP by almost 0.5%.  The data precedes the release of a more closely watched update from the Labor Dept on Fri.  In Oct, the US added a stronger-than-expected 128K positions.

Private sector posts big miss on hiring in November

The US & China are moving full speed ahead with their efforts to secure a partial trade deal before tariffs are set to rise on Chinese goods on Dec 15 & stock futures rallied ahead of the opening bell.  Pres Trump's comments, which downplayed the possibility of a trade deal being reached in the next couple of weeks, were “off the cuff” & should not be taken as a sign that talks are at an impasse, according to people familiar with the matter.  US negotiators still expect a phase one deal to be reached before the tariff increase.  The 2 sides are still in talks over the number of tariffs that will be rolled back as part of an agreement.  Beijing has called on the US to roll back all of the more than $350B of tariffs placed on its goods as part of a deal.  Trump has said he has no intention of doing so.  Markets were roiled yesterday, posting their biggest drop in 2 months, after Trump said a phase one deal may not happen until after the 2020 election.  “In some ways, I like the idea of waiting until after the election for the China deal, but they want to make a deal now and we’ll see whether the deal’s gonna be right – it’s gotta be right,” Trump told reporters in London, adding that he has “no deadline” to complete an agreement.  Chinese negotiators are hoping to avoid the wrath of more tariffs on Dec 15, when the US is expected to raise levies on $156B of Chinese goods.  The tariffs have been a burden on the Chinese economy, which is also struggling under the weight of growing debt levels.  China's economy grew at a 6% rate in Q3, the weakest since record keeping began in 1993.  Trade talks are not expected to be impacted by 2 measures recently initiated by Congress.  Yesterday, the House of Representatives passed a bill that would impose sanctions on Chinese officials who were responsible for human rights abuses against Muslim minorities.  In response, China has threatened to place sanctions on US companies.  Last week, Trump signed a bill that would require the US placing sanctions on Chinese officials linked to human rights abuses in Hong Kong.  “The China trade deal is dependent on one thing: 'Do I want to make it?'” Trump said yesterday.  “Cause we’re doing very well with China right now, and we can do even better with the flick of a pen.”

US, China expected to narrowly miss massive trade war escalation

Mexico's gov & business leaders are voicing opposition to a key demand of Dem lawmakers in a renegotiated North American trade pact, jeopardizing the deal's passage this year.  Congressional Dems, blaming Mexico for not living up to labor promises in the current North American Free Trade Agreement, have asked the Trump administration to beef up labor rules in its new version of the deal, known as the US-Mesico-Canada Argreement (USMCA).  The pact was signed by the US, Mexico & Canada in 2018, but it awaits US & Canadian legislative approval.  House Dems asked Trade Representative Robert Lighthizer last year for changes to allow DC to challenge Mexican labor practices that would involve cross-border inspections at Mexican factories.  House Speaker Nancy Pelosi & other Dems have been working with US labor unions & Lighthizer on a revised version of the pact.  Lighthizer is seeking Mexico's approval of the changes.  But Mexico's business community rejects the idea.  The Trump administration is worried that Mexico won't accept the Dem proposal that would give the US gov the ability to unilaterally launch labor cases that result in the dispatch of inspectors to Mexican facilities, with only limited opportunity for bilateral consultations, says a person familiar with the matter.  Pres Andrés Manuel López Obrador said yesterday that Mexico opposes such workplace inspections, but would agree to labor dispute panels under the trade agreement.  He also recalled that Mexico changed its labor laws to meet new provisions of the USMCA & has allocated funds in next year's budget to ensure enforcement of the new labor laws.  "We said no. That is, inspectors no," López Obrador said.  "But yes to resolving disputes through the creation of what are called panels involving specialists proposed by the countries under equal conditions."  The Mexican gov's trade negotiator, undersecretary for North America Jesús Seade, traveled to DC yesterday for further meetings.  "We want the treaty to be approved and we don't want more time to pass because of the effects of the [U.S.] electoral process," López Obrador said.  "I hope it can be resolved."  Mexico's biggest business chamber, the CCE, said Mon that it finds some US proposals on labor matters to be "extreme in nature and completely unacceptable," putting at risk supply chains & the competitiveness of Mexico & its partners in the region.  "It would seem that some U.S. actors are putting the agreement at risk," the CCE said.

USMCA in jeopardy after Mexico rejects 'extreme' demand from Democrats

Optimism on the US-China trade deal has returned, based on emotions which are volatile.  In the meantime USMCA now has a dark cloud in DC hanging over an inability to get US approval.  The first jobs report for Nov is another negative report traders have to assess.  But the bulls have been able to keep the Dow near its record highs last week.

Dow Jones Industrials

Markets cut losses in late day trading

Dow dropped 280 (off earlier lows), decliners over advancers 3-2 & NAZ lost 47.  The MLP index fell 1+ to a depressed 197+ & the REIT index added 2+ to 402.  Junk bond funds fluctuated & Treasuries were purchased heavily (more below).  Oil crawled higher to the 56s & gold remained in demand, advancing 14 to 1483 (more below).

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VP Mike Pence said Pres Trump uses the strong US economy as leverage in trade talks during an interview.  He made the comments as Trump meets with EU world leaders at the 2019 NATO Summit in London.  "The president has also been willing to use the power of this economy and access to this economy and tariffs to leverage changes in our trading relationships with nations around the world," Pence said.  "I think it's that combination that’s working for American workers, and it's working for the American economy, and as we go forward with negotiations -- whether it be with France, whether it be with Japan, or our ongoing negotiations with China -- the American people can be confident that this president is going to continue to be willing to use access to this economy and use tariffs to put American jobs and American workers first," he continued.  The pres touted economic success during talks with world leaders at the NATO summit & took a dig at France's economy while meeting with French Pres Emmanuel Macron, saying the country is "not doing well economically at all."  Later, he said during a NATO press conference that Dow's 400 points slide was "peanuts."  "If the stock market goes up or down -- I don’t watch the stock market. I watch jobs.  Jobs are what I watch," he said, adding that yesterday's market drop was "peanuts" & the US has "picked up record numbers, so that’s OK."  The Dow's slide came after the pres said a trade deal with China might have to wait until after the 2020 election.

Pence reveals Trump uses 'power' of economy as trade leverage

The US has a "very unfair" trade relationship with the EU, Pres Trump said during a NATO summit in London.  The US's trade deficit with the EU reached nearly $169B in 2018 & has reached more than $133B so far in 2019, according to data from the US Census Bureau.  "I came into a position where the European Union was making anywhere from $100-$150 billion a year in deficits to the United States. They were making it and we were losing it, and so we had to do something that is fair," Trump said during a meeting with French Pres Emmanuel Macron at the summit.  "We're losing tremendous amounts of money. As you know, the EU is very strong on barriers. ... Some of our products can't come in, including agricultural products. ... And yet, the EU sells openly to the U.S. and generally untaxed or taxed at a low level. So, these are problems that we're talking about. These are problems we're working out."  The pres added that France's digital tax -- which would place a 3% tax on American tech companies like Apple (AAPL), Google (GOOG), Facebook (FB) & Amazon (AMZN) in France -- is the "least" of the 2 countries' problems.  Trump said EU countries are taking advantage of the US "very brilliantly," adding, "It's not right. I've exposed it. A lot of people didn't know it. We're doing this about it ... because the U.S. can't continue to lose the kind of money that they've lost over the last -- literally since the formation of the EU."  "We have a very unfair trade situation where the U.S. loses a lot of money for many years with the EU. Billions and billions of dollars. To be specific, over $150 billion a year," he concluded.  The US contributes nearly 22% of NATO's annual $2.5B budget split between 28 partner countries, which Trump plans to cut to 16%.  His comments came after he reacted to Macron's an interview in Nov which in he said the US's actions in Syria are contributing to the "brain death" of NATO.  Trump called these comments "very, very nasty."

US has 'very unfair' trade relationship with EU: Trump

The yield on benchmark Treasury note jumped the most since Aug after Pres Trump said he might wait till next year to complete a trade deal with China.  The rate on the 10-year Treasury note, which moves inversely to price, dropped 14 basis points to around 1.70%, its biggest decline in 4 months.  The yield on the 30-year Treasury bond fell about 12 basis points to 2.16%.  Trump today indicated he might delay a trade agreement between the world's biggest economies until after the 2020 elections.  “In some ways, I like the idea of waiting until after the election for the China deal, but they want to make a deal now and we will see whether or not the deal is going to be right,” Trump said.  When asked if he had a deal deadline, he added: “I have no deadline, no ... In some ways, I think it is better to wait until after the election if you want to know the truth.”  The US & China agreed to work up a phase 1 trade deal in early Oct after both sides slapped tariffs on Bs of $s' worth of each other's goods.  Market participants had hoped they would reach a limited agreement before the new tariffs on Chinese goods kick in on Dec 15.  The pres also threatened to impose steel &d aluminum tariffs on imports from Brazil & Argentina, saying it was necessary because the 2 countries had been “presiding over a massive devaluation of their currencies.”  However, in recent months, both countries have been seeking to strengthen their respective currencies against the $.

10-year Treasury yield drops the most in 4 months as Trump’s cautious trade talk boosts safety trade

The holiday shopping season has begun in earnest, with nearly 190M consumers shopping between Thanksgiving & Cyber Monday, the National Retail Federation (NRF) said.  The retail trade group said that’s up 14% from the same period a year ago.  On average, those shoppers spent $361, up 16% from last year.  In Oct, the NRF released its initial forecast, predicting that holiday retail sales in Nov-Dec would grow 3.8-4.2% from a year ago.  The retail group did not revise its forecast today.  Last year, holiday sales, excluding automobile dealers, gasoline stations & restaurants, totaled $701B after tariffs, market volatility & other factors took a toll on sales.  The NRF, which has lobbied against tariffs, said the trade war did not hurt spending over the holiday weekend, but it estimates consumers have paid $40B due to increased prices stemming from tariffs already in place.  Pres Trump has threatened to impose tariffs on more Chinese goods Dec 15 if a deal is not reached.  Half of consumers shopped at department stores 49% bought goods online, the NRF said.  Clothing, toys & electronics were among the most popular products.  On Cyber Monday alone shoppers spent a record $9.4B online, according to data released by Adobe Analytics.  But as consumers shop more online, brick-&-mortar retailers may be having a more difficult holiday season.  Shoppertrak data found that sales for brick-&-mortar stores dropped 6.2% on Black Friday.  Still, the NRF found that more than 124M consumers shopped in stores during the holiday weekend.  Consumers are also starting their shopping earlier than the typical holiday season.  More than ½ had already started buying gifts by the beginning of Nov, according to the NRF.  By the end of the holiday weekend, 86% of consumers had begun their holiday shopping, up from 77% a year ago.  Thanksgiving fell on Nov 28 this year, the latest since 2013.

Holiday season off to a solid start as 190 million people shop Thanksgiving weekend

Black Friday brick-&-mortar retail sales fell by 6.2% compared to last year as consumers eschewed in-person shopping for online purchasing, according to preliminary data from ShopperTrak.  The pullback corresponds with a jump in Black Friday spending online, which hit $7,4B, the largest online Black Friday total ever, according to Adobe Analytics.  “There is no longer one way to shop on Thanksgiving Day and Black Friday,” said Brian Field, senior director of global retail consulting for ShopperTrak.  “Black Friday continues to remain the busiest shopping day of the year by a long shot.”  The drop in Black Friday physical shopping mirrors a year-long share pullback in departments stores which are down more than 25% this year.  Meanwhile, Amazon, (AMZN) has gained about 20% this year.  Brick-&-mortar sales on Thanksgiving Day rose 2.3% from a year ago, resulting in a combined 3% decline for the 2-day period, according to the ShopperTrak data.  8 of the 10 predicted busiest shopping days of the year are still to come as the Dec holidays arrive, according to ShopperTrak.  Dec 2, also known as Cyber Monday, is on track to break records as the biggest online sales day ever, at $9.4B, based on Adobe estimates.

Black Friday shopping at brick-and-mortar stores dropped by 6% as consumers spent record

Gold futures marked their highest finish in nearly a month, finding haven-related buying interest after Pres Trump said it might be preferable to hold off on completing a long-awaited US-China trade deal until after the 2020 presidential election.  Trump's comments come ahead of a Dec 15 deadline for the imposition of fresh import tariffs on China.  Gold for Feb delivery rose $15.20 (1%) to settle at $1484. an ounce.  That was the highest settlement for a most-active contract since Nov 6.  The yellow metal & other traditional havens, including Treasuries, saw a surge in buying interest as global equities & the US stock market turned south in the wake of Trump's remarks.  Trump, speaking at a London news conference where he is attending a NATO meeting, said he had “no deadline” when it comes to concluding the long-running US-China trade talks.  “In some ways, I think it’s better to wait until after the election if you want to know the truth. But I’m not going to say that, I just think that,” Trump said.

Gold ends at a nearly 1-month high as Trump suggests China trade deal could wait till after 2020 election

This was another wild day for investors, bringing back memories of last Dec.  Late day buying trimmed losses, but this was not a pretty day in the stock market.  Worries have increased about the future for a trade deal with China.  Holiday retail sales look like they will be good, but short of great.  However, the yearly chart below shows the Dow remains close to its record highs reached last month.

Dow Jones Industrials