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What I Think I Learned Last Week #7

After back-to-back devastating hurricanes, North Korea firing missiles and testing H-bombs while threatening to reduce the US to « ashes and darkness » and sink Japan, and Russia conducting war games on NATO’s eastern front, what is the logical market reaction? To set new record highs, of course just like all three major US averages (Dow, S&P 500 and Nasdaq) did this week. The S&P 500 closed above 2500 for the first time.
Europe still lags behind. This time, it is in fintech. At an EU finance ministers meeting in Estonia, digital and financial technology dominated discussions where it was noted that fintech in Europe was worth $6 billion, compared to the US at $36 billion and China more than $100 billion.
Not wanting to be a laggard, the Bank of England hinted that it might soon raise interest rates for the first time in a decade. The British pound rose to the $1.36 level for the first time in a year.
In contrast, influential German Finance Minister Wolfgang Schäuble argued that the European Central Bank needed to be very cautious when exiting its extraordinary monetary policy.
China is considering joining France and the UK by placing a ban on internal combustion cars in an effort to reduce pollution. As the concept of global warming was created by the Chinese in order to make US manufacturing non-competitive (Donald Trump, 6 November 2012), this appears to be just another ploy to harm US car makers not named Tesla.
Global oil supply fell in August for the first time in four months, a result of Hurricane Harvey, declining OPEC output and summer production maintenance, said the International Energy Agency. In its closely watched monthly report, the IEA said oil supply had come down by 720,000 barrels a day last month from July, to 97.7 million barrels a day. However, that was still 1.2 million barrels a day more than during the same period a year prior.
US inflation numbers came out last week. Core CPI was up 0.2% on the month, in line with forecasts, and the 12 month rate remained at 1.7% for the fourth consecutive month. In contrast, headline CPI was an upside surprise at 0.4%, as Hurricane Harvey pushed up gasoline prices, but this is likely temporary as the US does not usually get a devastating hurricane every month of the year.
However, US retail sales for August were disappointingly weak for August, and July’s number was revised down significantly. With the core retail number falling 0.2%, it was the biggest drop in six months and well below the forecast for a 0.3% increase.
US industrial production fell 0.9% during August, its first decline in seven months and the biggest drop in eight years, as Hurricane Harvey shut down refineries and energy production in Texas. It was estimated that Harvey was responsible for 75 basis points of that decline.
Citigroup, predicted that it would see a 15% decline in trading revenues as low volatility in markets continues to impact results.
Brazil’s Bovespa stock market index hit an all-time high last week, passing the previous record high set on May 20, 2008.
Oracle reported earnings and revenues that beat expectations. However, the stock price went down on poor guidance. I guess it is appropriate that people pay attention to guidance from a company named Oracle.
Amazon is planning to open a one million square foot warehouse near Mexico City.
Target says it will hire 100,000 workers for the upcoming holiday season, far more than last year’s 70,000.
US chicken companies slaughter and process 170 million chickens per week. According to the Wall Street Journal, they think this is too slow and have asked approval from the Department of Agriculture to increase processing line speeds by 25%. While it might be an egg-cellent achievement, this seems like a fowl idea to me.
And that is what I think I learned last week…