The big news in the market this week is the downward movement in the major United States (U.S.) exchanges. Thursday saw the end of a 6 month winning streak in the Dow Jones Industrial Averages (Dow) and a 5 month streak for the Standard and Poor (S&P 500).
Still, the 3 major U.S. exchanges remain in positive territory for 2016. The Dow is up +5.6%,the S&P 500 +6.2% and the technology heavy NASDAQ +4.1%.
Investors continue to wait on the U.S. Federal Reserve Bank (Fed), to determine if interest rates will be rising this year. Analysts are debating if some improving economic conditions will provide further support for a rate hike. The mediocre jobs report on Friday morning, makes that increasingly unlikely.
The U.S. jobs report for August Friday morning came in at 151 thousand, when 180 thousand had been expected. It is the 71st consecutive month of job growth, a modern record.
U.S. unemployment remained at 4.9%, when 4.8% had been expected. Labor participation is unchanged at 62.8% a 40 year low.
United States Treasuries are headed for their largest monthly loss since June 2015.
The U.S. banking industry recorded its most profitable business quarter on record. This was despite increasing regulatory burden and poor share performance overall.
The United States east coast is being impacted by Hurricane Hermine. It has already put a dent in the $89 billion USD tourist industry in Florida. The state has been put on emergency status, as the storm works it ways northeast leaving massive flood damage in its wake.
The price for crude oil was heading down on Thursday. American West Texas Intermediate (WTI) had declined from $48.27 USD (United States Dollar) a week ago, to $43.48 USD. This is a drop of 11.02% in a week. Similarly, International Brent during the same period went from $50.74 USD to $45.74 USD. That indicates a 10.93% decrease in the price.
On Friday morning, WTI rebounded somewhat with an increase of 2.78% reaching $44.36 USD. International Brent gained 2.79% at $46.72 USD.
Crude prices are now lower due to a stronger American dollar and abundant global supply.
The next major move on oil, will arrive with the OPEC (Organization of Petroleum Exporting Countries) meeting later this month.
Pressure for a stabilization in crude prices may come from Iraq, which is now in support of some kind of production freeze. Also events in Venezuela may further cut output of crude, as the country spirals out of control.
Saudi Arabia has stated it will not further flood the oil market, before the September meeting of OPEC.
Russia is now pushing for an oil output freeze in coordination with OPEC, but is willing to provide an exemption for Iran.
The price per barrel of crude had dropped from $52 USD in June to a low $39.51 USD in early August.
In Canada, the Quarter 2 result for GDP (Gross Domestic Product) were dismal with a contraction of -1.6%. Expectations were for a -1.5% drop. The GDP has now been lowered to $1.36 trillion USD. This is the result of the huge wildfire that swept the oil shale region, leading to a shutdown in output. Lower energy prices overall have also impacted the economy. In addition, a lower valued Canadian dollar has failed to revive manufacturing.
The United States and other countries involved in the nuclear accord with Iran allowed the latter to evade some restrictions. This enabled the country to get an earlier relief from international economic sanctions.
In Europe, consumer price inflation in the Euro-zone remained at 0.2%. It signifies an utter failure of the stimulus measures that were passed, more than 2 years ago. Unemployment remains stubbornly high at 10.01%.
In the United Kingdom, manufacturing saw a remarkable rebound last month, as the economy recovered from the Brexit shock that occurred in June. Consumer demand has remained strong. As a result, the British pound is recovering its former valuation.
German Economic Minister Sigmar Gabriel, has stated that free trade talks between the U.S. and the European Union (EU) have failed. The Trans-Atlantic Trade and Investment Partnership (TTIP) is unlikely to advance any further this year, with the approaching end of the Obama Administration.
He stated further that Turkey is unlikely to join the EU in the near future.
In France, the Trade Minister is pushing to end TTIP talks, because he claims there is no political support for the treaty at this point. The European Commission and the U.S. Trade Representative disagree with this assessment.
In Spain, acting Prime Minister Mariano Rajoy asked the Spanish Parliament to back him for another term, to end an 8 month impasse. However, since he has only secured 170 seats out of the 350 seats, he remains 6 votes short of a majority. The effort went down into defeat, when the Socialists refused to support the motion.
The country is now facing the prospect of a third election in less than a year. As investment is now falling, the political instability could well derail the economy recovery there.
The European Commission states that multinationals like Apple that are shifting profits to tax havens, are breaking general EU rules that prohibit state aid.
In Africa, South Africa is dealing with political scandal. Finance Minister Pravin Gordhan is being indicted for graft. A controversial business family linked to President Zuma, is selling all its assets within the country.
The events in South Africa places added pressure on an economy perilously close to recession. The sovereign debt is now just one notch above junk status.
South America In Brazil, the Senate began the impeachment trial of suspended President Dilma Rousseff. She has been accused of violating budget laws, ahead of her re-election in 2014. Later in the week, she was removed from office on a vote of 61 out of 81. The former president says she will appeal the conviction. She has called for her supporters to oppose the conservative agenda of the new government.
The markets in Brazil have rallied somewhat on the prospect that more right leaning Vice President Michel Temer will become the permanent replacement, for the left leaning Ms. Rousseff. Of course, he will be facing the worst Brazilian economic downturn since the Great Depression and a huge budget deficit.
In Colombia, it has been announced that the government and the Marxist insurgency FARC (Revolutionary Armed Forces of Colombia) have reached a peace deal, after 52 years of conflict and casualties near 220,000. The agreement will be put up for a public referendum in October, which is expected to be approved. The ending of hostilities, could add up to 1% GDP to the domestic economy.
In Venezuela, hundreds of thousands are now protesting the government inaction on economic reform. Violent gangs are also roaming the country. The army is increasingly in charge for maintaining public order.
The Venezuelan government is dealing with a country in a 3rd year of recession. Triple digit inflation, massive shortages, and a collapsing financial sector is causing chaos. The currency is becoming worthless and public debt is exploding.
In Asia, Turkey is moving its military forces further into northern Syria. They are seizing territory, that has been in the hands of both Kurdish militants and the Islamic State.
Saudi Arabia is presiding over a run down on national reserves. Net foreign assets of the central bank were equivalent to $555 billion USD in July. It was an additional decline of $6 billion, from the month before. The government is now regularly withdrawing funds to cover budget deficits.
The Saudis are in this position due to lower global oil prices and high expenditures. Assets are now at their lowest level since the beginning of 2012, after a high $737 billion USD in August of 2014. Assets have already declined 16% from a year ago.
There is a great deal of interest from Asian investors, in the debt now being issued by Saudi Arabia. Low to negative interest rates in the developed world, are making emerging markets more attractive to foreign investors. The money going there has now reached a record pace.
In Japan, Typhoon Lionrock leads to the cancellation of more than a 100 flights and thousands were evacuated in the northeast part of the country.
Japan is proposing greater cooperation with the energy sector in Russia. It may include a nearly $10 billion investment in the Russian state owned oil giant Rosneft.
In South Korea, the collapse of the notable transportation line Hanjin Shipping, is creating problems with the world supply chain. Manufactures are being forced to find alternatives, now that the 7th largest shipping line globally is bankrupt. The government is planning a financial rescue in order to avert company asset seizures.
Further indications that the economy in China is slowing down, twin surveys of manufacturing indicate stagnation. That is neither expansion nor contraction.
Elections in Hong Kong on Sunday, will choose candidates for the city legislature. First vote, since the landmark 2014 pro-democracy street protests.
Business News The news for the week, was the announcement that EU antitrust regulators are insisting that Ireland as a member nation, needs to collect a total of $14.5 billion USD in back taxes from the American company Apple.
EU officials insist that the practice being employed by Apple in routing profits through Ireland, amounts to providing illegal state aid. Both the company and the Irish government are appealing the decision.
Candy maker giant Mondelez has ended efforts to merge with American based Hershey. The latter was demanding too high a price to be acquired.
Samsung Electronics lost more than $7 billion USD in valuation, after it delayed shipments of its new Galaxy Note 7. The suspension was due to reports that the batteries in the devices could explode during charging.
SpaceX owned by Tesla, had a rocket explode during a routine test in Florida. Although there were no injuries, a more than $200 million USD valued satellite owned by Facebook, was destroyed during the blast. The satellite was designed to provide internet access, to hundreds of thousands of people in sub-Saharan Africa.
Gold has been declining of late, after reaching a high of $1,370.80 last month. The price is now listed at $1324.10, a decrease of $14.60 USD from last week. Gold is still up over 20% in 2016. In contrast, the price for silver increased to $19.26 USD, a +$0.47 rise for the week.
Upcoming news World leaders from the largest 20 economies will meet this weekend in China. The emphasis will be on how to reignite global growth, a more open financial system, and a further coordination of monetary policy.
The Investment Newsletter had 1 target fill to report this week, and 0 early stock target fills.
Tesla was bought on 07/25/16 for $221.99. Short Term Target Fill at 201.81, a 10% return.