REUTERS/Karthika Suresh Namboothiri

Gold rises as trade uncertainty hurts risk appetite

November 13, 2019

“Gold prices gained on Wednesday on lack of clarity on the U.S.-China trade negotiations, keeping markets wary about the tariff war’s toll on the health of the global economy.  Spot gold had risen 0.6% to $1,465.18 per ounce by 1251 GMT. U.S. gold futures were 0.9% higher at $1,466.10.  U.S. President Donald Trump said a trade deal was “close” but gave no new details on when or where an agreement would be signed, disappointing investors in what was billed as a major speech on his administration’s economic policies.

He also rattled some investors by threatening China with even more tariffs if they do not sign a deal.

‘Anything around trade talks are going to impact global sentiment… Protests in Hong Kong present major geopolitical risks, something that is going to continue fuelling risk aversion,’ said FXTM analyst Lukman Otunuga. ‘The key concern is whether the U.S. would take a diplomatic stance with regards to Hong Kong. If the U.S. does make a move, it is going to link back to U.S.-China trade talks.’ In recent weeks, both Beijing and Washington have hinted they were making progress toward an agreement that could scale back some tariffs, but a lack of information is starting to perturb markets.”

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Trump impeachment hearings today will echo through the ages

November 13, 2019

Impeachment Hearings“The gravity and drama of the first televised impeachment hearings into Donald Trump’s presidency will imprint themselves on history and reverberate far from Washington. The most crucial stage of the Ukraine investigation so far has profound implications beyond the political and personal reputation of Trump and the question of whether he abused his power by seeking political favors from a foreign power.

His fate will have sweeping consequences for the future understanding of powers vested within the presidency itself. The hearings will test whether the ancient machinery of US governance can effectively investigate a President who ignores the charges against him and fogs fact in defining a new post-truth political era. And notwithstanding Trump’s current Republican firewall, the hearings will begin to decide whether a presidency that has rocked America and the world will reach its full natural term. The fact that there is an impeachment process at all — and a debate over whether the President is so corrupt he should be ousted between elections — is in itself something of a national tragedy. There’s a reason why Gerald Ford called the Watergate scandal that led to the resignation of President Richard Nixon in 1974 before he was formally impeached, a ‘long national nightmare.’”

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Fed’s Powell Signals Comfort with Current Interest-Rate Stance

November 13, 2019

Interest Rate Stance“Federal Reserve Chairman Jerome Powell told lawmakers Wednesday that the central bank saw little need to cut interest rates further after making three reductions between July and October. ‘We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market’ and stable inflation, said Mr. Powell in written testimony to the Joint Economic Committee posted online Wednesday morning. ‘Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly,’ he added.

The Fed cut its benchmark interest rate to a range between 1.5% and 1.75% at its policy meeting two weeks ago to cushion the economy against risks of a sharp slowdown from weakening business investment and global growth. Investors don’t expect the Fed to cut rates at its final meeting of the year, on Dec. 10-11, and futures markets see a roughly 50% probability of one more rate cut by the middle of next year, according to CME Group. After an especially active few months for monetary policy, Mr. Powell indicated at a press conference on Oct. 30 that the central bank was comfortable entering a wait-and-see phase. His testimony Wednesday largely repeated that message … With both short-term interest rates and long-term bond yields much lower than in past economic expansions, Fed officials have highlighted the risk that monetary policy will have less ability to counteract a future downturn and are in the middle of a review of their policy-setting framework with an eye toward making their tools more potent.”

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BLOOMBERG/Felice Maranz

Citi Warns of a ‘War on Wall Street and Wealth’ in the 2020 Election

November 12, 2019

War on Wall Street“The road to the White House in 2020 may entail a war against Wall Street and wealth itself, as polling results encourage more candidates to cast a jaundiced eye toward the financial world, Citi warned in a note to clients. Some candidates are prioritizing greater accountability for big corporations, while others are concerned that ‘loosening the reins might foment another financial crisis,’ a Citi team led by economist Dana Peterson wrote. Still others believe ‘banks and their executives were not sufficiently penalized for the 2008-2009 crisis’ and that big companies are anti-competitive and “antagonistic towards consumer protection.”

Banks and wealthy individuals are viewed by others as a revenue source for ‘re-distributional policies, including further tax relief for low- and middle-income persons, and funding priorities from paid leave to jobs programs,’ Citi said. What should investors do? Understand ‘what policies can be achieved via legislation versus regulation,’ Peterson said. As any president may find law-making — including altering taxes — difficult, markets should instead focus on ‘proposals that can be implemented via regulatory channels, including through executive orders and presidential proclamations.’”

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BARRON’S/Ben Levisohn

Trump Impeachment Hearings Start Today. What It Means for the Stock Market.

November 13, 2019

Impeachment and Stock Market“It’s official: Months after Speaker of the House Nancy Pelosi announced that the House of Representatives will open a formal impeachment inquiry into President Donald Trump, public hearings are set to begin at 10 a.m. on Wednesday. Being market reporters, we’ll leave the punditry to Fox News, CNN, and the rest. What we care about is the impact on the stock market, and from what little information we have to go by, impeachment doesn’t seem to be high on the list of concerns. We don’t have a lot of examples to go by. Andrew Johnson was impeached—but not convicted—in 1868, and while I’m sure there is market data from back then, I don’t have any. We then have to wait until 1974, when impeachment proceedings began against Richard Nixon, but ended after he resigned. Bill Clinton was impeached in 1998, but acquitted in 1999. So that leaves us with a sample size of two.

And even the examples we have don’t tell us anything significant. From Feb. 6, 1974, when the impeachment process against Nixon formally began, through Aug. 9, 1974, when he resigned, the S&P 500 dropped 13%. So clearly, impeachment is bad for the stock market. Except that from the start of Clinton’s impeachment in January 1998 through his acquittal in February 1999, the S&P 500 gained 28%, according to Bespoke Investment Group data. There was a 20% drop in there, but that was caused by the implosion of Long-Term Capital Management, not anything related to the impeachment itself. So clearly impeachment is good for the stock market.”

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MARKET WATCH/Jeffry Bartash

Consumer prices rise at fastest pace in 7 mos on higher cost of gas, CPI shows

November 13, 2019

Consumer prices rise“Americans paid higher prices for gasoline, used cars, medical treatment and recreation in October, but inflation remained low and fairly stable.  The consumer price index jumped 0.4% in October, with energy accounting for more than half the increase, the government said Wednesday. Economists had forecast a 0.3% advance. The increase in the cost of living over the past 12 months edged up to 1.8% from 1.7%, but it’s still below last year’s peak of nearly 3%. Another closely watched measure of inflation that strips out food and energy advanced 0.2% last month.

Gas prices surged 3.7% in October, but Americans are still paying less to fill up now than they did a year ago. The cost of gas is about 7% lower. Prices for medical care rose 1% in October, marking the biggest increase in more than three years.  The cost of health care has been on the rise again after a prolong period of stable prices. Some analysts worry it could feed into higher inflation. The cost of recreation — ticket prices, cable TV and the like — also posted an unusually large increase last month. The 0.7% acceleration was the biggest gain since 1996. Food prices rose in October, but the cost of dining out is rising much faster than eating in.  The cost of ‘food at home’ — groceries — has climbed just 1% in the past year. Prices for ‘food away from home’ have shot up 3.3%, perhaps reflecting the higher cost of labor. Many states have increased minimum wages.”

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