The big investment news for the week was the end in the upward movement for the indices in the United States. The latest surge caused by the election of Donald Trump has now leveled off and is on a slight reversal. Markets in Asia and Europe had also been at or near new highs. Growth in these exchanges are slowing as well.
The other news was the steady uptick in the price of crude on most exchanges. This was in response to investor expected lower inventories, as the agreed upon cuts negotiated by OPEC (Organization of the Petroleum Exporting Nations) and other major oil producers take effect on January 01, 2017.
The American stock market has seen the addition of near $1.6 trillion USD (United States Dollar) since the election of Mr. Trump. Subsequently, the Dow Jones Industrials (Dow) has climbed near 8% and the S&P 500 around 5%. The Russell 2000 has surged 23% since the Trump victory.
Investors have poured money into equities on the belief that the President-elect Trump will push for a major deregulation of business, alongside a massive infrastructure spending program. There are also proposed major tax cuts on both individuals and corporations.
Globally investors continue to be worried about the health of European banks.
The American dollar continues its climb upward, except for a small reversal near the end of the week, in relation to the Euro. Valuation has surged against the major world currencies and is on track for a 4th consecutive year of advances. It reached a 14 year high already earlier this month.
World stocks are up nearly 6% this year, despite investor concerns over slowing growth in China and the weakening Chinese yuan.
Equities in emerging markets rebounded in 2016, after 3 years in negative territory.
International Commodity News
The agreement among a number of the non-OPEC nations to reduce their oil output by 588,000 barrels a day in addition to the 1.2 million cut agreed upon by the 13 member nation OPEC, is explains the recent rise in oil prices. This is all in anticipation by investors of lower overall crude supplies after January 01.
Crude oil prices have climbed over 12% in the last two weeks, on the OPEC output agreement. Oil is ending this week below $54 USD in the United States and below $56 USD in Asia and Europe.
International oil is still near a 17 month high, as producers increasingly signal that they will adhere to OPEC managed deal to reduce output. Oil is experiencing its biggest gain in price since 2009.
Another event is the price reversal in precious metals this week, after a slide in prices that took place over the last couple of months.
Gold had been slowly dropping in price, since reaching a high of $1,370.80 USD last August. It reached its lowest price level last week since February.
Gold had been dropping in price for 7 consecutive weeks. The downward trend was being caused by a rate increase in the United States and greater investor enthusiasm, for future economic policies of incoming President Trump. It was the longest downward streak for gold prices in 12 years.
Last week gold was being sold for $1,133.20 USD, this week the price increased to $1,151.90 USD a gain of 1.65%. The total decline since the summer is still near 20%.
Gold prices are still up about +10% in 2016.
The price for silver has dropped from $19.43 USD from 3 months ago, to $15.78 USD reported last week. This equates to a drop of 21.80% for the period, putting it in correction territory. This week is is listed for $15.99,indicating an increase of 1.33%.
Silver is still up over 8% for the year.
President Obama has enacted diplomatic sanctions this week on Russia. The action was the result of the alleged Russian interference in the United States 2016 presidential election.
U.S. bond yields remain near 14 year records, as investors calculate that inflation and interest rates will be heading higher in 2017.
The 10 year U.S. Treasury yield is at 2.48% from 2.54% last week.
All 4 market exchanges in the United States (U.S.) dropped this week. The Dow Jones Industrial Averages has now dipped below 19,800 from near 20,000 last week. This is still ahead of near 18,000 just seven weeks ago. The Dow, the Standard & Poor 500,the NASDAQ and the Russell 2000 composites are all still near their life time highs.
The highs on Friday were 19,852.11 for the Dow, 2,253.58 for the S&P 500, the tech heavy NASDAQ was at 5,441.90 and the Russell 2000 Index for firms with smaller capitalization, was at 1,364.98.
From last week, the Dow is down 0.39%, the S&P 500 is down -0.42%, the NASDAQ is down -0.36% and the Russell 2000 is down -0.35%.
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 11%, the tech heavy NASDAQ has advanced near 10%.
United States managed mutual funds experienced a $21.6 billion USD withdrawal over the past week.
A federal appeals court finds in-house courts at the Security and Exchanges Commission to be unconstitutional. This is a major setback for the agency in its enforcement efforts.
Consumer confidence in the United States is at the highest level since 2001. It is partly due to better economic data and the election of business tycoon Donald Trump.
Banking shares in Italy stabilized last week, after the government received parliamentary approval to shore up the Italian banks, with a loan of 20 billion Euros. The first bailout was the world’s oldest bank and the third largest in Italy, Monte dei Paschi.
Monte dei Paschi will issue 15 billion Euros in new debt next year in an effort to restore liquidity and investor confidence. The bank is underfunded by the equivalent of $9.26 billion USD.
German Chancellor Angela Merkel will give her traditional New Year speech this weekend. There is more significance attached to the event this year due to the huge influx of migrants and the subsequent rise of right wing political influence. Increasing rates of crime and terrorism attributed to the newcomers, puts the German leader under increasing pressure.
Prime Minister Theresa May’s government has now criticized United States Secretary of State John Kerry, for stating that the present government in Israel is the most right wing in the nations history. The United Kingdom Prime Minister is aligning her government closer to incoming administration of Donald Trump. It is another sign, that the Obama era is coming to a close.
The British pound which hit 31 year lows after the Brexit vote, is closing 2016 16% lower against the American dollar. This can be recorded as the biggest yearly fall since 2008.
Bank loans to Euro-zone firms climbed 2.2% last month, the fastest pace since the end of the global financial crisis of 2008 and 2009.
Euro-zone household lending rose last month by 1.9%, the highest rate since 2011.
Germany is considered a measure that would allow fines on social media up to 500,000 Euros daily for not deleting what is considered fake news. This could end up being a major expense for companies like American based Facebook.
Russia has been slow to react beyond verbal recriminations against new sanctions enacted by the American President Obama. President Putin is likely to instead wait for policies changes that will be made by President-elect Trump.
The United Nations Security Council passed a resolution, that demands an end to the building of settlements by Israel in the occupied territories.
Diplomatic tensions are rising between Israel and the United States. Prime Minister Netanyahu is hopeful of a policy change, once President Trump is inaugurated in the latter part of January.
Israel pulling back approval of hundreds of new homes, in East Jerusalem amid the controversy.
The cease fire declared in Syria this week after 6 years of war, brokered by Russia and Turkey remains fragile.
According to Russia the further easing of arms restrictions by the United States in backing Syrian rebels, will threaten Russian forces on duty in the country.
Russia is trying to gain further diplomatic support for talks in Kazakhstan next month, aimed at bringing the civil war to an end.
Prime Minister Modi of India is still defending his decision to withdraw the higher denomination bank notes from circulation. The country is plagued with a shortage of cash and a major deadline to deal with that issue passed this week, with the problem continuing.
Indian Finance Minister reaffirms the need for competitive tax rates, to assist the country in economic growth.
Taiwan President Tsai Ing-wen intends to pass through the United States, on her way to Latin America. China is insisting that she be dis-invited, insisting that it violates present American one China policy.
Philippines President Duterte accused American embassy personnel of being spies, in response to media reports about an alleged plot to destabilize his government.
In South Korea many members of the Saenuri Party have left including a number in the legislature. The cause of the departure is the impeachment of President Park Geun-hye. Presidential elections will be held in 2017.
Consumer prices for Japan are down for 9 consecutive months. The rate dipped an additional 0.4% last month from a year ago. The country is still struggling to escape deflation.
The Chinese yuan will be posting its biggest annual loss against the American dollar since 1994.
China’s outbound direct investment in 2016, was the equivalent of $161.19 billion USD. Foreign direct investment into China, totaled $112.96 billion USD.
New York City edges out Hong Kong in the global ranking for IPOs (Initial Public Offering) in 2016. The former tallied $24.6 billion USD the latter $24.5 billion USD.
President Xi Jinping is remaining cautious about the 6.5% domestic growth objective. Rising debt and an uncertain global economic environment may hinder reaching the goal.
The oil giant of Brazil Petrobras, is witnessing a surge in asset sales, for a total value of $13.6 billion USD over the 2015-2016 period. Although a hefty sum, it still misses the $15.1 billion divestiture target.
In Venezuela government officials have reaffirmed the commitment to cut domestic oil production by 95,000 barrels a day beginning in January. This will allow the country to meet its obligation with OPEC.
Australia and New Zealand
BP bought the fuel business of Woolworths in Australia for $1.3 billion USD. The purchase adds 527 gas stations and 16 developmental sites to BP inventory.
American West Texas Intermediate (WTI) last Friday was listed for $53.03 USD, this week oil is selling for $53.53 USD, an increase of 0.94% in addition to the 2.18% from the previous week. The overall price is up 8.8% this month alone.
International Brent last Friday went for $55.16 USD. This week oil is being sold for $56.66 USD, an increase of 2.72%.
U.S. weekly oil inventories were up by 4.2 million barrels.
American priced and Brent crude oil are both up about +45% in 2016.
The Investment Newsletter had 0 target fills to report this week, and 0 early stock target fills.