Weekly Market Review & Target Fills September Week 3

The big news was the decline in the equity markets that began earlier in the week on a global scale. This was a continuation of the sell off that began last Friday. It is due to fears of tightening monetary policies or a lack of further monetary stimulus as central banks run out of ammunition.

All three market exchanges in the United States (U.S.) suffered their biggest losses since the Brexit vote in June. The Dow Jones Industrial Averages actually briefly dipped below 18,000 again. There was a partial rally on Thursday, as it seemed traders felt there was little to no chance of a rise in interest rates by the Federal Reserve Bank.

The lackluster U.S. August retail sales, lack of inflation in producer prices and weaker than expected industrial production, is likely to forestall a hike in interest rates until at least December.

The decision by the European Central Bank (ECB) not to change interest rates at this time,despite the slow rate of economic growth. The bank kept the deposit rate at -0.4% and the main refinancing rate at 0.00% weighed heavily on European indices.

International News The Obama Administration is making a final push to secure passage of the Trans-Pacific Partnership trade agreement, before the end of the their term. They will need Republicans in the Congress to support the treaty, in order to get it ratified.

The United States government is moving towards lifting the economic sanctions on Myanmar. The Southeast Asian nation is moving forward with economic and political reforms.

World Bank President Jim Yong Kim is heading for another 5 year term, since no other candidates emerged during a reduced time for the nomination process. The United States would like the president to remain in office.

Europe European Commission President Juncker warns the European Union (EU) is facing an existential threat, but still insists that the decision of the United Kingdom to leave (Brexit), does not mean the disintegration of the bloc.

The European Commission states that if the United Kingdom does not permit the free movement of people, they cannot expect to have easy access to the EU internal market.

EU leaders gathered this week in Bratislava, to work on a unified response to the Brexit decision.

The central bank of Switzerland maintains a deposit rate of -0.75% as part of its expansive monetary policy. It will ease the upward pressure on the Swiss franc for the present.

The rift between the European Union (EU) and the International Monetary Fund (IMF) remains at odds how to best address the issue of Greek debt and the loans to be given to the crisis ridden nation.

Greece will tell creditors that it will be unable to comply with labor reforms demanded by the IMF, in order to receive the 3^rd bailout equal to $3.15 billion USD (United States Dollar). The total aid package is worth 86 billion Euros, the equivalent of $96.64 billion USD.

Gross Domestic Product (GDP) for the Euro-zone was just 0.3% in the second quarter. This was lower than the 0.5% that was posted in Quarter 1. Furthermore, recent data shows little likelihood of more growth for the second half of 2016.

Inflation in the United Kingdom held steady last month despite a big increase in raw material costs after the Brexit vote in June. The British sales sector remains resilient after the rebound in July.

The Bank of England decided to keep interest rates steady this week. The reduction to 0.25% last month, brings the level to the lowest rate in the 322 year history of the bank. The bank will maintain the bond-buying target at 435 billion pounds ($575.45 billion USD) and move forward with the new plan to buy more than 10 billion pounds ($13.23 billion USD) worth of corporate bonds.

In the United Kingdom the government has given permission for construction of the $23.81 billion USD Hinkley Point nuclear power plant. The joint project to be built and financed by both China and France, is expected to meet 7% of the electrical demand of the country.

The IMF has approved another $1 billion USD for Ukraine after a year delay. It is part of the $17.5 billion USD bailout program. The loan is $700 million USD less than was expected, because of the slow reform process inside Ukraine. It unlocks further aid from elsewhere, including a $1 billion USD loan guarantee from the United States and $670 million USD from the EU.

The central bank in Russia has cut its main interest rate by 50 base points to 10%. The decision was made as inflation begins to ebb inside the country and is reaching the bank target of 4%. The Russian economy has been hit by a plunge in oil prices and sanctions imposed after the annexation of Crimea.

Previously, the ensuing capital flight and their precipitous drop in the value of the Russian ruble, caused a huge rise in inflation beginning in 2014.

Latin America In Brazil, prosecutors have charged former President Lula da Silva with being the top boss of a vast corruption scheme at the state oil company Petrobas. Political kickbacks have caused losses equal to $12.6 billion in losses. He is implicated in receiving personally, $1.11 million in bribes. His lawyers say the criminal indictment is being made, to prevent Lula from running in the 2018 Brazilian presidential election.

Middle East In a negotiated deal between Russia and the United States, a cessation of hostilities was arranged in Syria. The death toll since the beginning of the conflict is listed at 430,000 and 11 million people have been driven from their homes. This has lead to a major refugee crisis in the Middle East and in Europe.

The deal remains uncertain, as the United States military and the Russian military accuse each other of not living up to the terms of the agreement.

Asia Last week North Korea conducted its 5^th and most powerful nuclear test. The government claimed the country is now able to mount a warhead on a ballistic missile quite easily. This week the country remains defiant, against any new sanctions or actions in trying to prevent them from becoming a major nuclear power.

The tacit approval of China, allows the Koreans to proceed in their increasingly belligerent policy. The United States is insisting China could do far more in containing their bellicose neighbor.

In the Philippines, President Duterte is calling for the withdrawal of special forces from the United States from islands in the south. He insists their presence will complicate new offensives against Islamist militants.

In Japan, core machinery orders increased 4.9% in July from the previous month. It was the 2^nd straight month of expansion. Yet the rest of the economy is beset with lower factory output, exports and even household spending.

In related news, the Bank of Japan will make negative interest rates the main focus of future monetary policy, in an attempt to reinvigorate the domestic economy. It is an acknowledgment that the massive asset buying program known as quantitative easing, is rapidly reaching its limits.

The Chinese economy is experiencing a slight rebound due to higher government spending, and the continued growth in the credit and real estate markets. Industrial output rose 6.3%, retail sales were up 10.6% and fixed asset investment was unchanged 8.1%. These results for August, were all higher than expected.

Business News The new Apple iPhone 7 and 7 Plus went on sale at stores and retail locations in 29 nations today, with prices starting at $649. Shares price increases for the company exceed 11% this week alone. It will be the best week for the company since October of 2011.

Monsanto accepted the latest offer by German based Bayer . At $128.00 a share, the total value of the deal is worth over $66 billion USD. If allowed to proceed by regulators, this will be the largest all cash purchase on record. It will also put 25% of all seeds and pesticides globally, under the control of the new combined company.

More than $22 billion in market valuation at Samsung the world’s largest smartphone maker, has evaporated after the massive recall of the Galaxy Note 7s due to faulty batteries.

The personal and computer giant HP is buying the printer business owned by Samsung for $1.05 billion USD. The company will gain 6,000 new employees, thousands of new technology patents and a far larger presence in the Asian market.

German based Deutsche Bank has been asked to pay $14 billion USD by the Department of Justice in the United States. The penalty will end the legal issues arising from the high profile mortgage-securities scandal that came about as a result of the 2008-09 financial crisis. The sum is above what was expected and will be disputed by bank officials. The share price for the bank has taken a hit on the news.

According to the International Energy Agency (IEA) the global demand for oil is slowing faster than expected. The long predicted rebalancing that was to take place in the second half of 2016, will be postponed for investors. A gain of only 1.3 million barrels is now projected, a further reduction of 100,000 barrels per day.

American West Texas Intermediate (WTI) has declined from $46.84 USD a week ago, to $42.93 USD. This is an decrease of 9.11% in a week. Similarly, International Brent during the same period went from $49.12 USD to $45.82 USD. That indicates a 7.20% decrease in the price. Crude prices are now at a five week low.

Gold has been declining of late, after reaching a high of $1,370.80 last month. The price is now listed at $1309.60, a decrease of $25.30 USD from last week. Gold is still up over 20% in 2016. The price for silver also declined to $18.89 USD, a -3.18% drop for the week.