Monday November 28 Daily Market Primer

US stocks coasted to new highs the day after Thanksgiving, even with light trading and a short trading day.  Stocks rose .4%,  putting the Dow and S&P up about 1.5% for the week.  European stocks rose .2% on Friday, and were up .8% for the week.  The Japanese stock market also had a very good week, with the Nikkei up 2.3%.  The S&P is up over 10% for the year, the Barclay’s Aggregate bond index is up 2.3%, and the Barclay’s US High Yield index is up 14.7%.  .  The dollar cooled off on Monday, especially against the Yen.  Stock markets are mostly dropping in Asia and Europe on Monday.

Skepticism about the OPEC deal ruled the oil market, and prices fell 4% on Friday, but they are doing a little better this morning on reports of “optimism” for a deal from the Saudi oil minister.  OPEC countries are under pressure to make a deal that would include Russia due to budget problems at home.  We should know if they can pull it off this week.

	LAST	CHANGE	% CHANGE
DJIA	19,152.14	68.96	0.36%
Nasdaq	5,398.92	18.24	0.34%
S&P 500	2,213.35	8.63	0.39%
Russell 2000	1,347.20	5.11	0.38%
Global Dow	2,463.99	-2.75	-0.11%
Stoxx Europe 600	340.73	-1.72	-0.46%
Nikkei 225	18,356.89	-24.33	-0.46%
UK: FTSE 100	6,809.00	-31.75	-0.46%
CBOE Volatility	13.27	0.93	7.54%
Australia: S&P/ASX 200	5,464.40	-43.40	-0.79%
China: Shanghai Composite	3,277.00	15.06	0.46%
Hong Kong: Hang Seng	22,830.57	107.12	0.47%
India: S&P BSE Sensex	26,350.17	33.83	0.13%
France: CAC 40	4,521.71	-28.56	-0.63%
Germany: DAX	10,616.48	-82.79	-0.77%
Italy: FTSE MIB	16,361.73	-153.38	-0.93%
Spain: IBEX 35	8,653.00	-21.40	-0.25%
U.S. 3 Month	0.495	0/32
U.S. 2 Year	1.119	0/32
U.S. 5 Year	1.804	5/32
U.S. 10 Year	2.318	11/32
U.S. 30 Year	2.983	15/32
Germany 2 Year	-0.76	1/32
Germany 10 Year	0.19	16/32
Crude Oil	46.42	0.36	0.78%
Brent Crude	47.61	0.37	0.78%
Natural Gas	3.29	0.088	2.75%
S&P GSCI	367.68	2.54	0.70%
E-mini S&P 500	2205.5	-5.75	-0.26%

Barron’s ran the second article their “Saving America” series, and this one argues for corporate tax reform http://bit.ly/CutCorpTax. You may remember that I included the first one about issuing very long term government debt while interest rates are low last Monday, here it is again http://bit.ly/TameFedDebt.  Industrial metal prices continue to rise, proving again that its impossible to time the commodities markets.   Black Friday sales are reportedly down overall, with a strong movement online from brick and mortar stores.   Fidel Castro died over the weekend, giving the incoming Trump administration one more thing to think about.  Here is Mr. Trump’s latest Tweet on the subject as of this morning:

The President Elect was also on Twitter last night, claiming 2 million fraudulent votes were cast in the election.  It’s that time again, and the November jobs report will be out this Friday.

Here’s the news:

Oil slides

OPEC is finding the devil is in the details as it tries to rescue a deal to cut oil production, which was first agreed to back in September. A barrel of West Texas Intermediate for January delivery was trading at $46.00 at 4:52 a.m. ET, $2 below Friday's open. Khalid Al-Falih, the Saudi oil minister, has raised the possibility of leaving this week's OPEC meeting in Vienna without a deal, as internal divisions and Russian resistance to curbing production hamper negotiations. Hopes for a deal had seen oil companies add $490 billion to their combined market cap this year, following two years of losses totaling more than $1.5 trillion.

Metals surge

Base metals have been on a huge rally this year, with trading overnight in Shanghai adding to the surge as zinc and lead both closed at the upper limit on the futures exchange. While copper has jumped by 23 percent this month, the most in more than a decade, there are warnings that the metal's price may have overrun. There are fears in China that the price rises are being fueled by a speculative bubble as policy makers crack down on other popular investments in the economy.

Dollar slips

The dollar is headed for its biggest decline against the yen in two months, with the Japanese currency trading at 112.4 to the dollar at 5:29 a.m. ET, having traded close to 114 during Friday's session. The greenback was also weaker against the euro this morning, as investors reassess the outlook following Donald Trump's election victory. Despite this change, bond traders are not yet convinced that the worst is over for the fixed income market.

Fillon wins French nomination

Former Prime Minister Francois Fillon won the French Republican nomination for next year's presidential election by a wide margin in yesterday's run-off vote. Fillon, a Thatcherite conservative, is now the front-runner to win that vote as the left remains split over their candidate. Also this weekend, U.S. President-elect Donald Trump was on Twitter claiming he would have won the popular vote if "millions" of illegal votes were excluded, without providing evidence for his claim. Black Friday sales were down. Brick-and-mortar retail sales fell 5% year-over-year for Thanksgiving Day and Black Friday as online spending broke $3 billion for the first time, Reuters reports. Tensions are growing among OPEC members. The oil cartel's meeting is scheduled for Wednesday, and there are growing doubts as to whether members and nonmembers can agree to a production cut, according to Reuters. West Texas Intermediate crude oil is weaker by 0.2% near $46.00 a barrel. The US dollar is lower. The US dollar index is down 0.4% at 101.12 as the greenback loses ground against all of its major peers aside from the British pound. The Bank of Japan posted its first loss in four years. The BOJ announced a net loss of 200.2 billion yen ($1.8 billion) in the six months through September as the yen strengthened and the central bank was forced to write down the value of its bond holdings, Bloomberg says. The French presidential election is down to two candidates. French conservative François Fillon will face far-right National Front candidate Marine Le Pen in the May election, Reuters reports. Singapore is the world's most entrepreneurial country. That's according to the Ashish J Thakkar Global Entrepreneurship Index from the Mara Foundation and Opinium. New Zealand, Denmark, Canada, and the UK round out the top five. Samsung could split itself in two. The electronics giant is considering a proposal from US activist hedge fund Elliott Management that would split it into a holding vehicle for ownership purposes and an operating company, according to Seoul Economic Daily. The 2016 World Chess Championship is down to a single game. Titleholder Magnus Carlsen of Norway is tied with Sergey Karjakin of Russia at 5.5 points apiece heading into the 12th and final match, which is scheduled to take place at 2 p.m. ET in lower Manhattan. Rigged After All President-elect Donald Trump dismissed charges Sunday that his victory was illegitimate, lashing out on Twitter at critics who point to Hillary Clinton’s lead of more than two million votes in the national popular vote as evidence. “In addition to winning the Electoral College in a landslide, I won the popular vote if you deduct the millions of people who voted illegally,” Mr. Trump tweeted, without providing any corroboration for the allegation. Voting is restricted to U.S. citizens, and no evidence has emerged so far of widespread fraud. Separately, officials in three states that gave Mr. Trump his margin of victory—Wisconsin, Michigan and Pennsylvania—are gearing up for recounts in the face of heated pushback from Mr. Trump and his advisers. Meanwhile, we report that Mr. Trump’s low-tax, big-ticket fiscal plan is roiling some Republicans, while sparks are flying over possible picks for Mr. Trump’s cabinet, in particular Mitt Romney. Fidel’s Shadow The death of Fidel Castro is putting unexpected pressure on Mr. Trump to follow through on earlier promises to reverse the recent openings to Cuba made by President Barack Obama. While Mr. Trump could undo Mr. Obama’s efforts, which were implemented using executive authority, he could face resistance from U.S. companies now deeply invested in Cuba under the current administration’s policy. Those companies include major airlines, hotel operators and technology providers, while big U.S. phone carriers have signed roaming agreements on the island. In Florida, Cuban-American hard-liners are experiencing a resurgence, buoyed by Mr. Trump’s tough talk and hopes of a policy shift. In Cuba, some expect little real change, while others see a new chapter opening in island nation’s history. Mr.Castro’s legacy in the country he ruled for five decades is likely to endure for many years to come. Mind the Gap Gap CEO Art Peck is blunt in his criticism of the fashion industry’s long fascination with creative executives who are given broad powers to set the overall image of a brand. He calls them “false messiahs.” Under Mr. Peck, a former partner at Boston Consulting Group who arrived at the company in 2005, Gap has instead put operational executives in control of its major brands, including Old Navy, and has expanded the role of outside vendors—some of which have their own design teams. The moves are part of an attempt to save the iconic apparel company from fading into extinction. Earlier this month, Gap reported its seventh straight quarter of declining sales. We report that more than a dozen former and current executives said the company strains under the weight of bureaucracy. Stock markets around the world trade mixed. Hong Kong's Hang Seng (+0.5%) led in Asia, and Germany's DAX (-0.8%) lags in Europe. The S&P 500 is set to open down 0.3% near 2,205. US economic data is light. Dallas Fed will be released at 10:30 a.m. ET. The US 10-year yield is down 3 basis points at 2.33%.

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Welcome back! There's so much interesting stuff happening right now it's hard to even know where to begin. It's going to be a jam-packed week, with the jobs report on Friday and then big votes in Italy and Austria this Sunday, which may see the global anti-establishment wave roll on. Speaking of which, there's a really interesting read in The American Spectator from Stephen Moore, who for years has been one of the primary advocates of 80s-style supply-side economics (tax cuts, spending cuts, and deregulation). He declares that the Reagan era is over and that the GOP is now "officially a Trump working class party." What this means, says Moore, is that the party must get tougher on immigration and trade deals and get more comfortable spending money on infrastructure. Why does this matter? Well, the intellectual apparatus of the U.S. right has not been geared towards Trump-style populism. So seeing someone like Stephen Moore, a fellow at the Heritage Foundation, articulate Trumpism in this fashion is noteworthy. Furthermore, bankers and the equity-holding class in this country have been ebullient since the election, imagining a world of more spending, lower taxes and less regulation. And maybe they'll get all that! But the possibility should at least be entertained that a party that's no longer the party of Reagan but one favoring the "working class" (even if that's being defined too narrowly as white, less-educated workers in the rest belt) may not be as good for business as investors imagine.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief