The FT reports that: Global oil inventory hits record level. The IEA says crude oil stockpiles are near 3 billion barrels despite robust demand growth. WTI oil sold off $4 last week to $41 and is back down to the cyclical lows seen in August.
The ECBs Mario Draghi noted “clearly visible” downside economic risks and weak inflation in the euro area, reinforcing expectations of an ECB rate cut in December.
Meanwhile speeches by several Federal Reserve officials this week suggested that a December “lift off” in the US fed funds rate is likely – although tightening (less easing?) will be gradual.
These data points contributed to a global sell off in “risk assets”, namely stocks and commodities. Bonds rallied, but not that much.
The US stock market fell 3.6% with the S&P 500 closing at 2023. Most other stock markets fell a similar amount, although the Nikkei in Japan posted a 2% gain.
The commodity driven Canadian TSX stock market was off closer to 4%. It’s down 28% since its September 2014 highs. After trading close to the buck, it now takes $1.33 Canadian dollars to buy a US dollar. Time to take a vacation in Canada!
The ten year Treasury note gained in price as yields fell 5 basis points. It closed Friday at 2.28%.
Bloomberg: OECD trims global growth forecast on emerging market slowdown. World output will expand 2.9% in 2015 and 3.3% in 2016, down from the 3.0% and 3.6% predicted in September.
Japan halfway there. BoJ’s Kuroda said that the central bank is halfway to its inflation target and that it will stand by aggressive stimulus until a 2% inflation trend is established. “The latest data showed that consumer prices excluding fresh food and energy rose 1.2% year on year, and so we are still halfway toward the 2% inflation target”.
Michael Cembalest at JP Morgan notes: The Code of Federal Regulations now contains as many words as 130 King James Bibles, and about one million commandments in the form of “shall,” “must,” “may not,” “prohibited,” and “required”. Could these factors explain why the US ranks 49th out of 189 countries in the World Bank’s Starting a New Business category?
John Cochrane on The Elections Most Important Issue (it’s economic growth). http://www.hoover.org/research/elections-most-important-issue
Monster Merger: Anheuser-Busch has agreed to acquire rival beer-maker SABMiller for $107 billion. The combined entity would account for about half of the industry’s profit worldwide.
Another busy week for us here at APCM. The Alaska Municipal League and Alaska Government Finance Officers Association is in town for their annual meetings at the Captain Cook. Many members are clients of ours. I’ll be speaking Wednesday on Principles of Investment Success.
Have a great weekend everyone.
Jeff Pantages, CFA®
Chief Investment Officer