Monday December 19 Daily Market Primer

• ·        Stocks ended last week mixed
• ·         Treasuries yields and the dollar eased from recent highs
• ·         The Electoral College votes today, no surprise is expected

US stocks fell slightly Friday, but ended last week with the Dow in the green (+.4%) for the sixth week in a row, and the S&P and the NASDAQ down by about .1%.   The dollar slipped a bit from recent highs at the end of the week.  Oil seems to be on the move again, with WTI trading close to $52 per barrel and Brent at $55.  Treasury yields are falling, with the 10 year back down to 2.54%.  And, since I’m writing this a little late this morning, I don’t have to mention stock futures since the US market has already opened slightly up on Monday.

	LAST	CHANGE	% CHANGE
DJIA	19,843.41	-8.83	-0.04%
Nasdaq	5,437.16	-19.69	-0.36%
S&P 500	2,258.07	-3.96	-0.18%
Russell 2000	1,364.19	-2.22	-0.16%
Global Dow	2,545.42	5.68	0.22%
Stoxx Europe 600	359.30	-0.72	0.14%
Nikkei 225	19,391.60	-9.55	0.14%
UK: FTSE 100	7,021.38	9.74	0.14%
CBOE Volatility	12.40	0.20	1.64%
Australia: S&P/ASX 200	5,562.10	29.20	0.53%
China: Shanghai Composite	3,118.08	-4.90	-0.16%
Hong Kong: Hang Seng	21,832.68	-188.07	-0.85%
Europe Dow	1,555.83	-0.61	-0.43%
India: S&P BSE Sensex	26,374.70	-114.86	-0.04%
France: CAC 40	4,820.58	-12.69	-0.26%
Germany: DAX	11,405.34	1.33	0.01%
Italy: FTSE MIB	19,056.60	41.85	0.22%
Spain: IBEX 35	9,352.80	-60.00	-0.64%
U.S. 3 Month	0.503	0/32
U.S. 2 Year	1.22	2/32
U.S. 5 Year	2.022	7/32
U.S. 10 Year	2.549	11/32
U.S. 30 Year	3.137	22/32
Germany 2 Year	-0.797	0/32
Germany 10 Year	0.284	10/32
Crude Oil	51.83	-0.07	-0.13%
Brent Crude	55.16	-0.05	-0.09%
Natural Gas	3.465	0.029	0.84%
S&P GSCI	392.5	-0.96	-0.24%
E-mini S&P 500	2256.25	1	0.04%

The US Electoral College votes today, and is widely expected to officially select Donald Trump in spite of last minute efforts to get electors to change their votes based mostly on Russian interference with the election. Barron’s is writing again about how to save America, in this one they argue against stifling trade http://bit.ly/TrumpTradeBarriers.  Bank Monte dei Paschi is trying to recapitalize with a 5 billion euro equity raise to avoid a government bailout.  Scotland is talking about UK referendum if the UK looses access the European market due to Brexit.  Apple is appealing its $14 billion euro EU tax bill, which is no surprise.  China started posting messages on Wiebo, the Chinese microblog version of Twitter, in response to Mr. Trump’s tweets about the submersible drone this weekend.  I downloaded the app to check it out but….its in Chinese.

Here’s the news:

Oil's future looks bright

Bets on rising oil prices have surged to their highest levels since July 2014 as investors give the supply-cut deal between OPEC members and non-OPEC countries the thumbs up. In trading this morning, the price of a barrel of West Texas Intermediate for January delivery rose to $52.18 by 5:00 a.m. ET. Over the weekend, BP Plc announced it has gained a stake in an Abu Dhabi oil concession that will provide 160,000 barrels a day, which the company is paying for with $2.2 billion of its own shares.

Scoxit?

Scottish First Minister Nicola Sturgeon said that the country will hold a new referendum on its place in the U.K. should Britain lose access to the single market at the conclusion of Brexit negotiations. In a weekend interview, International Trade Secretary Liam Fox said the U.K. could try to stay in the customs union in an arrangement similar to Turkey's arrangement with the EU. Uncertainty over the future is starting to weigh on employer decisions in Britain as they seek to increase employees now to 'lock in' talent they may have difficulty attracting port-Brexit.

Barclays cuts customers

Barclays Plc is looking to cut 7,000 clients who aren't trading with the bank enough to provide high returns. As new capital rules make dealing with many smaller firms less cost-effective, investment banks are concentrating their efforts on the large clients that generate the best profits. Citigroup Inc., Morgan Stanley, HSBC Holdings Plc and Deutsche Bank AG have all changed how they deal with smaller clients.

Markets quiet

Overnight, the MSCI Asia Pacific index advanced 0.1 percent while Japan's Topix index slipped 0.1 percent ahead of tomorrow's Bank of Japan monetary decision. In Europe, the Stoxx 600 Index was 0.2 percent lower at 5:24 a.m. ET in thin trading ahead of the Christmas break. S&P 500 futures added 0.2 percent.

Sub tweet

China rejected President-elect Donald Trump's comment on Twitter that the country had "stolen" a submersible drone, saying the country removed it to protect shipping in the South China Sea. Trump's anti-China rhetoric has rattled relations between the two nations, with leaders in Beijing biding their time ahead of Trump's presidential term that begins on Jan. 20. The world's oldest bank is trying to save itself. Monte Paschi is trying to sell stock to raise 5 billion euros, and if that fails, the Italian government is prepared launch a broader 15 billion euro ($15.7 billion) rescue plan for the banking system, a person close to the matter told Bloomberg. China's housing market is showing signs of slowing down. New-home prices in China's 70 major cities rose 0.6% month-over-month in November, down from the 1.1% growth experienced in October, according to National Bureau of Statistics data released on Monday. Japan's trade surplus narrows. Data from Japan's Ministry of Finance showed the country's trade surplus narrowed to 152.5 billion yen in November, down from 496.2 billion yen reported in October, as both imports and exports showed improvement. The Japanese yen is stronger by 0.6% at 117.22 per dollar. German businesses are growing more optimistic. "The German economy is in a festive mood," wrote Professor Dr. Clemens Fuest, the president of the Ifo Institute, after a survey of business conditions improved to 111.0 in December, up from 110.4 in November. The euro is weaker by 0.1% at 1.0439 against the dollar. Australia's 'AAA' rating is at risk. Standard & Poor's held Australia's long-term rating at AAA, but it said the "government's worsening forecast fiscal position, as outlined in its latest budget projections earlier today, further pressures the rating." The Australian dollar is down 0.4% at .7274 versus the dollar. Apple is going to war with the EU. The tech giant plans to formally launch a legal challenge against the European Union this week regarding the record-breaking $14 billion tax bill it received in August. Disney's "Rogue One" had a huge weekend. The movie raked in $155 million over the weekend, making for the second-biggest December opening ever. Stock markets around the world are mixed. Hong Kong's Hang Seng (-0.9%) lagged in Asia, and Spain's IBEX (+0.8%) is out front in Europe. The S&P 500 is set to open higher by 0.2% near 2,261. Earnings reporting is light. Lennar reports ahead of the opening bell. US economic data trickles out. Markit services PMI will be released at 9:45 a.m. ET. Additionally, Fed Chair Janet Yellen will speak on the job market at 1:30 p.m. ET. The US 10-year yield is lower by 1 basis point at 2.58%. From Russia With Love Fresh signs emerged Sunday that President-elect Donald Trump could embrace the intelligence community’s view that the Russians were behind a computer-hacking operation aimed at influencing the November election. Mr. Trump’s incoming chief of staff, Reince Priebus, said the president-elect could accept Russia’s involvement if there is a unified presentation of evidence from the FBI and other agencies. This followed weeks of skepticism from Mr. Trump and his supporters that there is sufficient evidence that Russia was responsible for cyberattacks against the Democratic National Committee or the leak of stolen emails. Mr. Priebus’s statement follows an intensifying bipartisan push on Capitol Hill to launch a separate investigation into the matter. Meanwhile, we report that Mr. Trump appears poised to seal his victory Monday despite the efforts of opposition groups to block his path by persuading members of the Electoral College to snub him. Flying to Iran Iranian officials have publicly hardened their resolve to proceed with a multibillion-dollar deal to buy dozens of Boeing jets, threatening to claw back any lost money if it is scuttled after Mr. Trump’s inauguration. The officials said the timing of the deal, ahead of the start of Mr. Trump’s administration, could make it more difficult to thwart. The agreement to buy 80 aircraft with a $16.6 billion list price represents one of Iran’s biggest post-sanctions economic spoils. For Boeing, it isn’t a blockbuster deal, but comes as the plane maker hits a bumpy patch for orders. Despite Mr. Trump’s opposition on the campaign trail to the international deal that lifted sanctions on Iran in exchange for curbs on its nuclear program, he hasn’t weighed in significantly since his election. Stalled Evacuation An evacuation deal involving trapped civilians and fighters in war-ravaged east Aleppo and two Syrian villages was thrown into doubt Sunday when assailants torched six buses assigned to the operation. Meanwhile, the U.N. Security Council reached an agreement on a resolution to deploy United Nations monitors to eastern Aleppo to supervise the evacuation.

Mnuchin's ultra-long bond idea is an ultra-longshot.

A $55 billion manager who bought at the low returns to cash.

The age of Erdoganomics has come.

Robot revolution may be key to reviving Japan's rust belt.

2016 in graphic detail.

Facts still matter.

2016 was supposed to be the year of political or geopolitical risk. At the start of the year, there were all kinds of warnings about how the U.S. election and the Brexit vote were going to make for a very difficult and volatile trading environment. While it's true that both of those votes had surprise outcomes (relative to consensus expectations), the volatility never really materialized. And if you spent the year trying to hopscotch around difficult moments, you probably missed out on big gains. Judging from the various 2017 look-ahead notes, the discussion has moved from politics to policy. Of course there are big elections coming up in Europe this year, but all of the talk is about what governments will actually do. Will the U.S. actually enact fiscal stimulus or tax reform? When will Article 50 be triggered? What will Trump tweet? We've had the political upsets... Now we will see if we're actually headed in a new directions.

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