Markets Back to Feeling Uneasy about the Future

Markets Back to Feeling Uneasy about the Future

Markets Back to Feeling Uneasy about the Future

November 28, 2016

U.S. stocks opened lower. In Europe, share prices started the cusp week between November and December on the back foot, falling so far by 2.8% in Greece, 0.8% in Italy, 0.7% in Germany, 0.4% in the U.K., 0.5% in France, and 02% in Switzerland and Spain. Equities also fell 0.8% in Australia, 0.2% in Indonesia and 0.1% in Japan.

Sovereign debt prices rebounded, with 10-year yields dropping 4 basis points in Germany, 3 bps in the U.S. and U.K., 2 bps in Japan, and a basis point in Switzerland and Canada.

Gold is still trading below $1,200 but has risen 0.7% to $1,189.60 per troy ounce.

Great confusion precedes Wednesday’s upcoming OPEC meeting in Vienna. The Saudis are resisting the need to reduce production, while remarks from Iraqi officials remain optimistic about reaching a deal. WTI crude rose 2.1% to $47.04 per barrel.

The dollar, which had performed very well in the wake of the U.S. election, slid today by 0.6% against the loonie, 0.5% versus the yen, 0.3% relative to the New Zealand and Australian monies, and 0.1% vis-a-vis the yuan. The dollar rose 0.2% against sterling, 0.1% versus the Swiss franc and, most interestingly, 2.3% against the Mexican peso.

Several factors account for the more cautious investor mood.

  • As president-elect, Donald Trump remains aggressive in parrying all perceived slights. He denounced calls for a vote recount in some states “sad,” a waste of money and time, and a threat to the need for the country to come together. Moreover, he is attributing the 2.2 million more voters that Clinton got than  he to fraud that enabled millions of ineligible voters to vote.
  • There has been confusion over some key Trump administration appointments, especially at State, and doubts have arisen over whether the Trump fiscal policy changes lift growth and generate more satisfactory inflation.
  • Italy faces a referendum next weekend on constitutional reform. Prime Minister Renzi is likely to resign, preventing several Italian banks from securing needed refinancing, if the reforms are rejected by voters.
  • Investors await an important speech by ECB President Draghi. There is concern that the central bank may not extend quantitative support beyond March to the extent that will be needed.
  • The OECD published a new Outlook that while modestly bumping projected growth higher depicts a global economy still mired in a “low-growth trap.” The report speaks of great uncertainty regarding policy.

Euro area money growth hit an air pocket in October, slowing to 4.4% on year from 5.1% in the prior two months. M1, M2-M1, and M3-M2 each recorded slower expansion. Private lending growth remained weak.

The OECD growth forecasts for next year envisage GDP rising 2.3% in the United States, 1.6% in Euroland, 1.2% in the U.K., 0.9% in Japan, 2.0% in the OECD (a collection of advanced economies), 4.5% in other parts of the world, and 3.3% as a whole. The growth in world trade is expected to slow from 2.6% in 2015 to 1.9% this year.

Italian business sentiment weakened to a reading of 102.0 in November from 102.9 last month. Italian consumer confidence edged down 0.1 point to 107.9.

Swedish retail sales volume rose 0.7% in October after slipping 0.3% in September was was 2.4% greater than in September 2015. Sweden posted an SEK 2.7 billion trade deficit  in October versus a shortfall of SEK 3.1 billion a year earlier. The 3.5% on-year growth of import volume last quarter surpassed a 1.3% increase in exports.

Finnish business sentiment in manufacturing worsened to -4 in November from -2 in October. But consumer confidence improved to a 66-month high.

Irish retail sales volume fell in September by 0.3%, its third straight decline.

Norwegian retail sales volume rose 0.9% in October but was  just 0.7% greater than a year earlier.

The Dallas Fed reports its manufacturing index later today.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Euroland money growth




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Commodities Technical Analysis, November 28th — December 2nd

Commodities Technical Analysis, November 28th — December 2nd

The technical analysis, that includes the indicators’ data and major pivot points for WTI Oil, Gold, Silver and Copper as traded on spot market as of November 27th, 2016:

Crude Oil

Indicators

Moving Averages RSI Parabolic SAR CCI
Neutral Neutral Long Neutral

Crude Oil - Indicators as of Nov 27, 2016

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
41.52 43.69 44.82 46.99 48.12 50.29 51.42

Crude Oil - Floor pivot points as of Nov 27, 2016

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
43.43 44.29 46.73 47.59 50.03

Crude Oil - Woodie's pivot points as of Nov 27, 2016

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
44.13 45.03 45.34 45.64 46.24 46.55 46.85 47.76

Crude Oil - Camarilla pivot points as of Nov 27, 2016

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
45.87 46.65 47.13 47.52 47.91 49.17

Crude Oil - Fibonacci retracement levels as of Nov 27, 2016

Gold

Indicators

Moving Averages RSI Parabolic SAR CCI
Short Neutral Short Short

Gold - Indicators as of Nov 27, 2016

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
1112.57 1141.69 1162.75 1191.87 1212.93 1242.05 1263.11

Gold - Floor pivot points as of Nov 27, 2016

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
1139.68 1158.73 1189.86 1208.91 1240.04

Gold - Woodie's pivot points as of Nov 27, 2016

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
1156.22 1170.02 1174.62 1179.22 1188.42 1193.02 1197.62 1211.42

Gold - Camarilla pivot points as of Nov 27, 2016

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
1170.80 1182.64 1189.97 1195.89 1201.81 1220.98

Gold - Fibonacci retracement levels as of Nov 27, 2016

Silver

Indicators

Moving Averages RSI Parabolic SAR CCI
Short Neutral Short Neutral

Silver - Indicators as of Nov 27, 2016

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
15.38 15.76 16.12 16.50 16.86 17.24 17.60

Silver - Floor pivot points as of Nov 27, 2016

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
15.76 16.12 16.50 16.86 17.24

Silver - Woodie's pivot points as of Nov 27, 2016

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
16.08 16.29 16.35 16.42 16.56 16.63 16.69 16.90

Silver - Camarilla pivot points as of Nov 27, 2016

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
16.13 16.30 16.41 16.50 16.59 16.87

Silver - Fibonacci retracement levels as of Nov 27, 2016

Copper

Indicators

Moving Averages RSI Parabolic SAR CCI
Long Overbought Long Long

Copper - Indicators as of Nov 27, 2016

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
234.56 241.82 254.36 261.62 274.16 281.42 293.96

Copper - Floor pivot points as of Nov 27, 2016

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
243.14 257.01 262.94 276.81 282.74

Copper - Woodie's pivot points as of Nov 27, 2016

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
256.02 261.47 263.28 265.10 268.73 270.54 272.36 277.80

Copper - Camarilla pivot points as of Nov 27, 2016

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
249.07 253.74 256.63 258.97 261.31 268.87

Copper - Fibonacci retracement levels as of Nov 27, 2016

If you have any questions or comments on this commodity technical analysis, please, feel free to reply below.

Five Economic Reasons to be Thankful

Five Economic Reasons to be Thankful

by Bill McBride on 11/24/2016 10:26:00 AM

With a Hat Tip to Neil Irwin (he started doing this a few years ago) … here are five economic reasons to be thankful this Thanksgiving …

1) Low unemployment claims.

The number of new claims for unemployment insurance benefits is at the lowest level in 40 years (with a much smaller population back then).  The four week average of new unemployment has fallen to 251,000, down from 297,000 a year ago, and down from the peak of 660,000 during the great recession.

Click on graph for larger image.

Here is a graph of initial weekly unemployment claims.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 251,000.

The low level of claims suggests relatively few layoffs.

2) Job Openings Near Record Levels.

There were 5.5 million job openings in September. This is close to the record high of 5.8 million in April 2016.

Job Openings and Labor Turnover Survey This graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Job openings (yellow) have been above 5 million for 20 consecutive months.

Note that Quits are up 12% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for “quits”).

More job openings, and rising quits, are positive signs for the labor market.

3) Household Debt burdens are near record lows.

Household debt burdens have declined sharply over the last several years.

The Household debt service ratio was at 13.2% in 2007, and has fallen to under 10% now.

Financial ObligationsThe graph, based on data from the Federal Reserve, shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow).

The overall Debt Service Ratio increased slightly in Q2 2016, and has been moving sideways and is near a record low.  Note: The financial obligation ratio (FOR) was unchanged in Q2 and is also near a record low (not shown).

The DSR for mortgages (blue) are near the low for the last 35 years.  This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.

This data suggests aggregate household cash flow has improved.

4) Gasoline prices are near the lows since the Great Recession.

Gasoline PricesFor consumers, lower gasoline prices are a huge positive.

Here is a 10 year graph from Gasbuddy.com for nationwide gasoline prices.

Gasoline prices are around $2.12 per gallon, slightly higher than last year at Thanksgiving, and near the lowest since the Great Recession.

5) Wages growth is picking up.

Wages CES, Nominal and RealThis graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka “Establishment”) monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in “Average Hourly Earnings” for all private employees.  Nominal wage growth was at 2.8% YoY in October.  This series is noisy, however overall wage growth is trending up – especially over the last year and a half.

There is much more positive economic news – solid auto sales, housing starts increasing, U-3 unemployment rate below 5%, and U-6 rate falling, the recent pickup in GDP – and much more.

There are still problems –  not everyone has participated in the current expansion, wealth and income inequality are record extremes, there is too much student debt, and climate change is posing a real threat to the economy in the future – but there are many economic reasons to be thankful this Thanksgiving.

Happy Thanksgiving to All!

Thanksgiving 2016 Gives Japan Reason to Be Grateful

Thanksgiving 2016 Gives Japan Reason to Be Grateful

Thanksgiving 2016 Gives Japan Reason to Be Grateful

November 24, 2016

The yen, which had been as strong as 101.20 per dollar on November 9, extended its post-U.S. election slide to a low today of 113.54. EUR/YEN strengthened past 119.1.

Japanese share prices have rallied on the more competitive yen, rising another 0.9% overnight. While U.S. and other sovereign debt yields have climbed, the 10-year Japanese JGB is only 0.02%.

In other news,

Revised German GDP data confirmed growth last quarter of 0.2% from the second quarter and 1.7% from a year earlier. Domestic demand provided a half percentage point lift, while net exports exerted a drag on GDP growth.

Spanish GDP expanded 0.7% in the third quarter and 3.2% from a year earlier.

Germany’s business climate index, compiled by the IFO Institute, was unchanged in November, as improved current circumstances balanced a slight worsening of expectations.

Business sentiment

  • Also held the same in France and Belgium during November.
  • Improved in the Czech Republic to the best level since May 2008.
  • Rose in Sweden to a 10-month high.

Turkey’s central bank raised its 1-week repo rate by 50 basis points to 8.0% and its overnight funding rate by 25 basis points to 8.5%. Tightening was needed because the U.S. election had made the global environment for emerging markets even more “challenging and volatile,” depressing the lira. The overnight deposit rate was left unchanged at 7.25%.

The South African Reserve Bank changed its assessment of forecast risks from “balanced” to moderately tilted to the upside in the wake of the U.S. election, but SARB officials left their repo rate unchanged at 7.0%. Officials pledged to be vigilant is watching the outlook for inflation.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Japanese yen




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Two semiconductor names to buy

Two semiconductor names to buy

The latest Zacks Industry Rank Story is about the high tech of the high tech.

The seven-company strong Semiconductor Equipment & Wafer Fabrication industry is red hot. 

It is currently ranked #45 out of 265 Zacks Industries. In recent weeks, there have been 14 positive estimate revisions and just one negative revision, with the average positive revisions coming in at +22%. 

These are not chipmaker companies, per se, but the critical technology suppliers of the quantum breakthroughs behind dynamic semi chip production. In their own way of saying it, they provide the breakthrough that enables the breakthrough.

In comparison, the huge 36-company strong downstream Semiconductor Chip Industry recently ranked #20 out of 265. It has 16 positive revisions and just one negative revision, in recent weeks. The semi chip makers averaged positive revisions of 28%. 

It’s simple: An integrated value chain story. The stronger and faster growing downstream semi chip company revenue and earnings-per-share (EPS) growth gets the better key upstream semi chip equipment revenue and EPS growth gets.  

The 36 Zacks Ranked Chip companies keep this smaller seven-company backend Semi Equipment industry group busy these days. These types of chip technology businesses — and their shares — don’t look like they are going to lose momentum any time soon.  

Applied Materials (AMAT) is based in Santa Clara, Calif. It is the large cap in this sector. In 2015, the company had sales of $9.7 billion, did research and development worth $1.5 billion and held 1,341 patents. 

It has received Intel’s (INTC) Preferred Quality Supplier Award for the last five consecutive years. 

The $31 billion market cap company’s share price is just below $30. The forward price-earnings ratio is 16.81 and price/earnings to growth ratio is 1.07. 

Its estimated 2016 EPS is $1.75 a share.

This stock is a Zacks #2 “Buy” Rank and the Zacks VGM (value-growth-momentum) score is “A.”

Advanced Energy (AEIS) is headquartered in Fort Collins, Colo., and was founded in 1981. 

This stock is a Zacks #1 “Buy” Rank and the Zacks VGM score is “C.” The VGM score is lower here due to a higher valuation.

About the Author

John Blank, Zacks Research