The big new for the week was the agreement among a number of the non-OPEC (Organization of the Petroleum Exporting Nations) nations to reduce their oil output by 588,000 barrels a day. This was in addition to the 1.2 million cut agreed upon by the 13 member nation OPEC.
The other major market event for the week, was the decision by the United States Federal Reserve (Fed) to raise interest rates this week by 0.25%. It is only the second increase since 2006. The last one was in December of 2015, when there was a similar hike of 0.25%.
The Fed (central bank in the United States) is projecting 3 rate hikes in 2017.
The rally in the global equity markets continued this week, surpassing a 16 month high. All four main indices in the United States were at or near new lifetime highs this week.
The United States Dollar (USD) is continuing to climb in value among the major world currencies. It reached a 14 year high this week. The Euro is now at $1.05. Financial analysts continue to expect parity between the two currencies in 2017.
United States based multinationals are currently holding $2.4 trillion USD in profits overseas. These funds are kept abroad to avoid high domestic American taxation rates.
Global equity funds experienced the 9th largest inflow of capital ever for a total of $21 billion USD. The flight from bonds has continued for 7 consecutive months, as the Trump Rally continues.
International Commodity News
Crude oil prices climbed over 10% last week on the OPEC output agreement. Oil remains close $52 USD in the United States and above $55 USD in Asia and Europe.
International oil is edging closer to a new 17 month high as producers shows more signs that they will adhere to OPEC deal to reduce output.
The IEA (International Energy Agency) has announced that the next few weeks are crucial to determine whether the cuts agreed to by OPEC and a number of non-OPEC nations, are actually going to be effective.
Another ongoing event is the ongoing drop in precious metals, over the last couple of months. The underlining cause for this has been the rising valuation of the American dollar and the money now going back into equities.
Gold had been slowly dropping in price, since reaching a high of $1,370.80 USD last August. It reached its lowest price level since February this week.
Gold has been dropping in price for 6 consecutive weeks. The present downward trend is being caused by a rate increase in the United States and greater investor enthusiasm, for future economic policies of incoming President Trump.
Last week gold was being sold for $1,163.90 USD, this week the price fell further to $1,135.60 USD an additional decline of 2.49%. A total decline of 20.71%, since the summer. On Thursday, the precious metals market saw gold drop 2.9% to $1,129.80 USD, the biggest one day drop since November.
Gold prices are still up +8.5% in 2016.
The price for silver has dropped from $19.43 USD from over 2 months ago, to $16.17 USD reported today. This indicates a decline of 20.16%. for the period. The decline in price from last week is 5.26%.
Silver is still up over 10% for the year.
The 10 year Treasury yields are at their highest rates this year at 2.56%.
U.S. bond yields are at 14 year records, as investors calculate that inflation and interest rates are heading higher.
All 4 market exchanges in the United States (U.S.) rose this week. The Dow Jones Industrial Averages is now between 19,800 and 19,900 from 18,000 five weeks ago. The Dow, the Standard & Poor 500,the NASDAQ and the Russell 2000 composites are all near new life time high this week.
The highs on Friday were 19,923.17 for the Dow, 2,268.05 for the S&P 500, the NASDAQ was at 5,474.58 and the Russell 2000 Index for firms with smaller capitalization was at 1,379.03.
For the week, the Dow is up 0.38%, the S&P 500 is down 0.04%, the NASDAQ is up 0.15% and the Russell 2000 is down 1.75%.
Year to date, the major indexes have advanced the following. The Dow Jones Industrial Averages is up about 13%, the Standard & Poor 500 has increased near 12%, the tech heavy NASDAQ has advanced over 10%.
U.S. mortgages rates are at their highest levels in more than 2 years.
Home construction fell more than expected in November, from a 9 year high. This descending trend is likely to leave to a further downward trend in economic growth for the 4th quarter.
Retail sales in the United States barely rose in November. This was mostly due to a drop off in purchases of motor vehicles. Further indication, that domestic growth in quarter 4 will be lower.
The first United States offshore wind farm began operations this week, off the coast of Rhode Island. General Electric and Deepwater Wind had partnered, to construct a total of 5 massive turbines to generate electricity.
Entrepreneur investor Carl Icahn is warning that the rally in the American stock markets since the election of Donald Trump have gone too far as the Dow approaches 20,000.
A governmental task force is studying recommendations on how to legalize marijuana inside Canada. This will be a further boon to investors in cannabis.
The European Commission this week cleared the way for Danone based in France, to acquire the American based organic foods giant WhiteWave for $10.4 billion USD.
European stocks climbed to an 11 month high this week. This as the result of a number of mergers and acquisitions in Europe. There is renewed confidence in Europe as the rally in the American dollar slows.
The new Prime Minister of Italy Paolo Gentiloni and his new government, have won their first votes in Parliament.
Sovereign debt is being downgraded from stable to negative by Moody’s, amid the growing financial crisis within the Italian banking system.
Inflation in the United Kingdom rose to 1.2% last month. This was above the expected 1.1% and is the fastest rate since October of 2014.
The United Kingdom Chancellor Hammond is now backing a longer period for the Brexit. This may push the final date of departure from the European Union beyond 2019.
The IMF (International Monetary Fund) is rejecting claims that it is seeking more financial austerity from Greece. It remains uncertain, if the agency will participate in the next round of the 86 billion Euro bailout of Greece.
The IMF continues to voice concerns that Greece is pursuing policies that are contradictory to growth and that the overall level of Greek debt is unsustainable.
In related news, the Greek legislature passed a 2017 national austerity budget that, Prime Minister Tsipras claims will allow the country to exit from 10 years of financial crisis.
Russian President Putin is in Japan this week, to discuss a territorial dispute that dates back to World War II and a number of other issues. It is the first time a leader of the G-7 has committed to meeting with Putin, since the annexation of Crimea and involvement in eastern Ukraine beginning in 2014.
The Mexican peso has lost 10% of its valuation in relation to the American dollar, since the election victory of Donald Trump.
Analysts are raising expectations for inflation in Mexico, over the next 2 years. This coincides with the forecast for lower economic growth.
Mexico and China have pledged to strengthen ties, as Donald Trump becomes the next American President.
President Temer of Brazil is fighting for his political survival amidst allegations of corruption. It is complicating his new push for additional reforms, to help the stalled Brazilian economy.
The Senate in Brazil has given approval on a proposed constitutional amendment, that will tie public spending to the previous years inflation.
Venezuela is pulling the largest bill in circulation. The 100 bolivar valued at $0.02 USD, has become practically worthless. The government is intending to introduce higher note denominations, as domestic inflation skyrockets.
The battle for the Syrian city of Aleppo is beginning to wind down after years of bloodshed. Government forces loyal to President Assad, have been gaining steadily against insurgents.
The incoming Trump Administration has announced it will be moving the American embassy in Israel from Tel Aviv to Jerusalem.
Presidents Putin of Russia and Erdogan of Turkey are attempting to organize a new round of Syrian peace talks. These will be held without input from the United States or the United Nations.
Japan overtakes China, as the largest holder of United States Treasuries.
Japanese holdings of American debt declined by $4.5 billion USD in October. This leaves a total of $1.131 trillion USD.
The Japanese yen is down 11% since the election of Trump, becoming the worst performing major currency globally.
Optimism has returned to Japanese firms for the first time in 18 months. The weakened Japanese yen has led to a rebound in exports.
In Hong Kong, the Chief Executive CY Leung will not seek re-election in March. A total of 5 contenders have entered the race to succeed him.
Prime Minister John Key of New Zealand resigned his post in a surprise move this week. Bill English will now become the 39th Prime Minister of the island nation, as a result.
Chinese yuan fell this week to its weakest level in 8 years.
China’s holdings of United States Treasuries is at a 6 year low. The government has decided to use foreign exchange reserves to provide support for the yuan. The level of American debt declined by $41.3 billion USD in October, leaving a balance of $1.15 trillion. This is the lowest level since July of 2010.
Chinese foreign exchange reserves have been dropping for 5 consecutive months.
China’s navy seized an unmanned, underwater United States navy vessel in international waters. The incident occurred in the South China Sea.
The United States is challenging China’s use of tariff rate quotas for corn, rice and wheat at the WTO (World Trade Organization). The Americans claim China is violating the rules, thereby costing American farmers billions of dollars in lost sales.
Chinese officials insist they have the right to install military hardware on the artificial islands that are being created by their government in the South China Sea. These include anti-aircraft and anti-missile systems.
A United States admiral has stated, that the American military is ready to confront the overreaching claims, that China is making in the South China Sea.
American West Texas Intermediate (WTI) last Friday was listed for $51.45 USD, This week oil is selling for $51.90 USD, a negligible difference.
International Brent last Friday went for $54.26 USD. It was an increase of 13.71% from the previous week. This week oil is being sold for $55.21 USD, an increase of 1.75%.
U.S. weekly oil inventories were up by 4.68 million barrels, instead of an expected draw down of 1.5 million barrels.
American priced and Brent crude oil are both up about +40% in 2016.
The Investment Newsletter had 2 target fills to report this week, and 0 early stock target fills.
Sears ($SHLD) Bought short on 10/20/16 for $11.99. Medium Term Target Fill at $10.42 on 12/14/16, a 15.07% return for investors.
Nintendo ($NTDOY) bought short on 10/20/16 for $31.99. Medium Term Target Fill at $27.81 on 12/16/16, a 15.03% return for investors.