Weekly Market Review & Target Fills October Week 2

The major news for the week, is the downward movement in global equity markets including in the United States. The descending trend is being caused by a number of factors which include the speculation that the United States will raise interest rates by 0.25% in late December.

A second factor was despite the repeated agreements to freeze or reduce crude production within OPEC (Organization of the Petroleum Exporting Countries) output is continuing to rise. September saw an increase in oil production, up 220,000 barrels a day from the month before. Total production was recorded at 33.39 million barrels a day.

OPEC crude output is now at the highest level in eight years.

This forced the oil cartel to raise the 2017 forecast in overall crude supplies. The surplus in petroleum will likely continue, despite the commitment to cut output to 32.5 million barrels a day.

The third factor is the economy in China. Trade data in the world’s second largest economy, indicates a drop in USD (United States Dollar) terms in exports by 10% last month. Imports fell a corresponding 1.9% for the same period.

The Chinese trade surplus was down to $42 billion USD.

Meanwhile the Chinese yuan is touching six year lows against the American dollar (USD).

Crude prices continue to hover near $50 USD on the major exchanges in Europe and the United States as a result of the OPEC meeting in Istanbul, Turkey. Russia also attended the conference. The purpose of the gathering was to discuss how to implement the deal on output cuts agreed to in Algiers earlier.

Crude prices rose by 12% in August, 10.5% in September and 7.4% so far this month. Prices reached one year highs both in Europe and in the United States earlier this week.

This is due to the discussion of cutting production by an additional 1% on top of the 750,000 barrels a day already agreed to. It is important to remember, that there has not been any purposeful real reductions in output yet.

Final levels of crude production for individual countries,will be worked at the upcoming meeting in Vienna, Austria scheduled to take place in late November. If successful this will be the first time the cartel has been able to agree to output cuts since the financial crisis.

Another ongoing event is the drop in precious metals over the last few weeks. Gold had been slowly dipping in price, since reaching a high of $1,370.80 USD in August. A major set back took place last week. The price dropped from $1256.90 from $1326.00, a decrease of $69.10 USD (5.50%) It was a drop of 9.06% from the recent high.

This week gold is listed for $1253.90 USD. Gold prices in 2016, are still up near +20% in 2016.

The price for silver decreased to $17.53 from $19.43 USD over the past two weeks, a $1.90 dip which is a 10.84% decline for the period. This week silver is still selling for $17.53 USD.

The drop in equities in world markets, that began last week on a global scale somewhat continued this week. There is still investor anxiety in response to the negative fortunes of Germany’s largest financial institution Deutsche Bank as well as numerous banks in Italy and Spain

Deutsche Bank has let the United States Department of Justice (DOJ) know it would now accept a fine of $9.5 billion USD, for its part in the selling of toxic mortgage backed securities. The DOJ had first wanted $14 billion USD. The original offer from the bank was only $5.4 billion USD.

International News Central bankers and financial officials from around the world met in Washington capital of the United States for the annual fall meetings of the World Bank and the IMF (International Monetary Fund). The main topic was how to achieve sustainable economic growth. The solution according to these officials is more structural reforms, additional fiscal and monetary stimulus.

United States All three market exchanges in the United States (U.S.) saw losses reversing gains from earlier in the week. The Dow Jones Industrial Averages dipped under 18,000 yesterday, but recovered to around 18,150 today. The Standard & Poor 500 & the NASDAQ composite both has similar results.

The upward movement Friday, was due to the better than expected third quarter reports from the U.S. financial sector and banking sector.

Year to date, the major indexes have advanced the following. The Dow Jones Industrial Averages is up near 4.0%, the Standard & Poor 500 has climbed about 5.1% and the tech heavy NASDAQ has advanced near 5.1%.

The final estimate of GDP (Gross Domestic Product) for the 2^nd quarter in the United States is 1.4% annual rate instead of the lower 1.3% level that was expected.

GDP projection for the 3^rd quarter has been lowered by the Fed from 2.4% to 2.2%.

Europe Industrial production in the 19 nation Euro-zone increased 1.6% in August, when only 1.1% had been expected. Year to year industrial growth was up 1.8%.

The German economy continues to improve, with a rebound in exports for the month of August. There was a rise of 5.4%, the largest increase since 2010.

Consumer prices were up 0.5% in France last month compared to a year ago. The indicator was still down 0.2% from August.

The IMF will not be part of the present bailout program for Greece. Officials from the fund insist the financial targets being set for Greece are unrealistic and unworkable, without major debt relief.

Business investment in Europe is stagnating. It was 22.1% in the first quarter and 22.2% in the second quarter. Expectations are that there will be little improvement, for the July through September period.

The British pound sterling had a flash drop of near 9% last Friday. It fell to as low as $1.1491 against USD, the lowest point since 1985. This week there was a slight recovery with valuation above $1.215 USD.

The pound is under pressure as it has been estimated that a separation from the European Union may cost up to the equivalent of $24.37 billion USD. The upcoming Brexit has numerous financial and legal liabilities that are remain unresolved.

Latin America Colombia is extending the cease-fire with the FARC rebel group. President Santos is intent on reaching an agreement to end the insurgency, despite the recent voter rejection of the previous deal.

Middle East The United States launched cruise missile strikes on radar sites in areas of Yemen. It was in retaliation for a failed attack on a U.S. naval ship.

Egypt was given $2 billion USD from Saudi Arabia. The aid provided will assist the country in receiving a $12 billion USD loan from the IMF. Egypt is reeling from a growing budget deficit and a currency under increasing pressure.

Negotiations between Russia and the United States over the Syrian conflict will continue in Switzerland.

Asia The service sector in China is creating jobs at the fastest rate in seven months.

However, Chinese trade data plunged 10% in USD in September. Imports dropped 1.9%. This provided China with a trade surplus of $42 billion USD.

The Chinese yuan is now at its lowest level vs. the American dollar in 2016. This was after lower than expected drops in Chinese foreign exchange reserves. They have dipped by $18.79 billion last month, to $3.17 trillion. It is the largest monthly drop since last May.

Producer prices in China rose for the first time in five years at 0.1%. Industrial deflation has been halted for the time being.

The Bank of Japan may well postpone the date for achieving 2% inflation to 2018.

The King of Thailand died this week at the age of 88. A reign of 70 years has now drawn to a close. The country is dealing with a succession of an unpopular heir and military rule. The king had provided social cohesion and stability to Thais society for decades.

Business News The product safety issues at Samsung has resulted in a cut in the operating guidance for the third quarter by 33% ($4.66 billion USD). The total cost to the company for the Galaxy 7 fiasco could reach $4 billion USD.

American based Verizon may decide to forgo the purchase of Yahoos core business. The previous deal that was negotiated for $4.83 billion USD, is now on hold.

The CEO of Wells Fargo was forced to resign this week. John Stumpf had lost credibility in the ongoing banking scandal at the bank.

American West Texas Intermediate (WTI) has increased from $49.76 USD last week to $50.11 USD today. International Brent during the same period went from $51.87 last week to $5.78 USD today.

American priced and Brent crude oil is now up more than +30% in 2016.