This week was mostly watching global markets rise and fall in tandem to crude oil prices. This was especially the case in the United States. Record high inventories, the result of a world output exceeding demand by over 1 million barrels a day, should of kept prices moving downward or at least stable. Instead prices fluctuated wildly, on rumors and pronouncements on possible production cuts.
Instability in the energy markets have brought WTI (West Texas Intermediate) American priced oil, back above $32.00 USD (United States Dollar) a barrel. International priced Brent has bumped up above $35.00 USD. Crude prices had dropped as much as 10% in January.
The Eccles Building in Washington, D.C., which serves as the Federal Reserve System’s headquarters
The United States economy was seen as one of the bright spots in a slowing global economy. January has now exposed the overall weakness in American growth. It has now slowed to well under 1%. Further increase of interest rates by the United States Central Bank (Fed) looks increasingly unlikely moving forward.
The United States S&P had the worst results for January since 2009, in the midst of the Great Recession. There was a total loss of 5.1% for the index in January alone. At the end of January the Dow dropped below 16,000, for the first time since September 29th.
Floor of the New York Stock Exchange.
On the New York Stock Exchange as January ended, 6 companies were experiencing all time highs. 689 firms were witnessing 52 week lows for their share prices. On the American NASDAQ, for the first month of 2016, 7 companies saw their share prices hit new highs with 480 hitting new lows.
Retail sales in the United States, fell in December. This is particularly bad news because two thirds of all economic activity in the country is related to consumer spending.
Donald Trump, a leading candidate for U.S. Presidential Election this year.
The election cycle began in the United States this week. A declining domestic economy, will complicate efforts by the Democratic Party to maintain the presidency. Barack Obama will leave office in January of 2017, after the November elections of 2016 determine the winner of his seat.
Precious metals on the other hand saw substantial gains for 2016. Gold prices increased 5.3% in January and silver went up 3.5%. The increases continued apace, for the first week in February. Gold surged an additional 3% this week alone. It is largely the result of a declining U.S. dollar and fading expectations of any more interest rate hikes.
Chinese President Xi Jinping
Chinese official factory activity slipped to a 3 year low in January. It marked the 6th consecutive month of contraction. This has been in spite of interest rate cuts and a reduction on bank reserve requirements over the last year. Chinese financial authorities continue to add liquidity to the markets.
The government of China is expected to announce a new growth target of between 6.5% to 7% for 2016. GDP (Gross Domestic Product) was reported at 6.9% in 2015. It was the lowest rate in 25 years. Many analysts are assuming the real rate of growth is quite a bit lower.
Argentina is moving forward in debt negotiations this week. Their hand is strengthened somewhat, by the securing of a new $5 billion USD loan from banks in New York. However, the process will be long and difficult in the attempt to end the decade old stalemate between creditors and the new government of Argentina, since the 2001 sovereign default.
Situation map of the outbreak as of January 22, 2016.
The debt situation is further complicated by a U.S. court decision that stated, international creditors had the right to be paid in full. Argentina has already agreed to pay $1.35 billion USD to a group of Italian investors.
The outbreak of the Zika virus in Latin America, gained new emphasis with the World Health Organization (WHO) making it a health emergency earlier this week. Once evidence of the disease had spread to the United States, it is now looking like a world wide concern.
The United States and Europe have a reached a deal over data sharing. It potentially reduces the risk against companies by consumers concerned about privacy.
The manufacturing and services industries in the Euro-zone cut prices at the fastest pace in almost a year last month. It puts increasing pressure on the ECB (European Central Bank) to expand the program of quantitative easing in March.
Auto production in the United Kingdom hits a 10 year high. A record level of exports boosted production to almost 1.6 million units. Although deliveries are lower for China, they are counter balanced by higher deliverers to Europe and the United States.
The Trans-Pacific Partnership (TPP) was signed in New Zealand this week by representatives of the 12 participating nations. It is only the first step in bringing the massive trade pact into effect. The next phase is the 2 year ratification period.
Passage of the final text of TPP will be difficult for the divided American government. A vote in the legislature is likely to occur after the 2016 elections.
The Reserve Bank in Australia is predicting growth of 2.5% to 3.5% in 2016. Inflation should be moderate around 2% to 3%. This is despite lower growth expectations with their major trading partner China. This scenario might be overly optimistic, given the present global situation.
In corporate news Alphabet (Google) overtook Apple, as the most valuable public company in the world by market capitalization. Google is now at $559 billion USD and Apple comes in second at $534.7 billion USD. Google saw an increase of 18% in revenues for the last quarter, reaching $21 billion USD. Both are American based companies.
In the largest Chinese corporate takeover in history, ChemChina is offering to buy Syngenta in a deal worth more than $43 billion USD. The Swiss based company engages in efforts to improve crop yields and food quality.
The Investment Newsletter had 5 target fills to report this week, and 4 early stock targets.
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