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Dec 19, 2018

The government has been hit with a surplus. But what if the good times don't last?

Greg Jericho

Here’s a story you might have heard before – it’s about a government who (to quote a former prime minister) got hit in the arse with a rainbow and decided to assume the good times would last forever, and while facing a massive electoral defeat handed out a swag of tax cuts which created a structural deficit in the budget. And then, surprisingly, the good times did not last forever.
Yes, those who cannot remember the past are condemned to repeat it, and we saw this on Monday with the latest mid-year economic and fiscal outlook numbers.
Oh, everything looks good. Surpluses for the next decade, don’t you know! Government net debt is now projected to decline to 1.5% of GDP by 2028-29. Never mind that in the 2014-15 budget net debt was predicted “to decline to 0.7 per cent of GDP in 2024-25”. This time we will be correct!
Budget management is a bizarre thing that is determined mostly by dumb luck.
Costello got hit with a mining boom and masses of revenue. Swan got hit with the GFC, and revenue falling to levels not seen since the early 1970s . Even when investment boomed he was hit with a rising dollar that countered the impact that normally would have seen booming profits.
In the years Costello delivered a surplus the average level of revenue he had to play with was 25.3% of GDP. In all of Swan’s time as treasurer the highest amount of revenue in any one year he had was 23.2% of GDP.
And now we see revenue again projected to rise above 25.2% of GDP, and once again a surplus is projected. It certainly pays to be in power at the time China decides it really needs a lot of our iron ore and coal, and the world’s economy is doing well.
How big is that second rainbow with which the government has been hit?
Compared with the May budget, policy decisions taken have reduced the budget balance by $16.3bn over the four years from 2018-19 to 2021-22, but parameter changes – which are essentially changes to the economic outlook – have improved the budget bottom line by $30.4bn over those four years:
Two years ago the government’s own budget rules stated that “the overall impact of shifts in receipts and payments due to changes in the economy will be banked as an improvement to the budget bottom line.”
But that was then. There’s an election to win now.
Might as well hand out some more tax cuts, then. After all, the good times always last, don’t they?
In the Myefo the government has made it clear they are planning on announcing in the run up to the budget $9.2bn worth of tax cuts over the next three years, as this government decides, much like Howard and Costello did, that a tax cut bribe is the best hope of staying in power.
It continues the usual cycle of Liberal party budgetary management. During lean times they blame the poor for being frivolous and tighten welfare and reduce spending on services, and when the times turn good they indulge in the budgetary equivalent of doing tequila shots into the early hours.
And when they wake in opposition they blame the ALP for the budgetary hangover.
The thing is the ALP gets to play with the same extra $30.4bn. It will be interesting to see if it decides to take a seat at the bar next to the government and go shot for shot.
But what are the chances of a budgetary hangover?
Well headlines this week suggesting that as “trade war bites, China advisers recommend lowering 2019 growth target” are not exactly the stuff to make you start thinking the glass is always going to be half full.
The problem for the world is we have an insecure, paranoid idiot in the White House. And while companies seemed fine with this when he was handing them massive tax cuts, now that they start looking at the state of the US budget, the lack of increased investment from those tax cuts and Trump’s general desire to wreck the trade system, they are feeling rather less joyful.
Trump’s tax cuts have caused a massive increase in the US federal government deficit for little economic benefit. But at least they have shown very clearly that tax cuts do not pay for themselves:
It has reached the point where the yield for the US 10 year treasury bond is nearly as low as that for two year treasury bonds – a sign that investors are losing faith that the future is looking better than the present:
When the 10 year bond yield goes below the two year yield a recession usually follows (often due to a self-fulfilling prophecy). We’re not there yet, but there is more than enough cause for caution.
Locally things also deserve a bit of vigilance.
While the most recent estimate for private investment sees an overall increase in spending in 2018-19 compared to 2017-18, the growth in non-mining investment is slowing somewhat from what occurred last financial year:
The Department of Jobs leading indicator of employment remains in positive, but it is clearly less positive than it was at the start of the year:
It suggests employment growth will moderate somewhat, but should still grow steadily – if not at the levels seen in 2017:
As we have seen the picture for house prices looks to be one of further declines, given the drop in housing finance:
Only Tasmania has seen any really solid growth of owner-occupier home loans in the past year:
The housing picture might change somewhat by the announcement yesterday by the Australian Prudential Regulation Authority (Apra) to remove the restrictions in place since March 2017 of banks limiting interest-only lending to 30% of new home loans.
That measure had helped slow investor lending, but its removal is unlikely to set off a fresh surge of investor buying.
And the current outlook for interest rates is that they will stay exactly where they are. This can change (after all in June the market was predicting a rate rise by October next year), but it would require a big improvement in wages or inflation growth for that to happen:
It is also a sign that while the government’s budget is moving back to surplus, and thus actually slowing growth, the RBA still has its foot to the floor trying to keep growth going.
It suggests an economy that still has concerns – both looking within its borders at household’s level of income and wealth, and outside at the machinations of China and the US. And it is one where it might not be the best time to start assuming that good budgetary times are here to stay.
• Greg Jericho is a Guardian Australia columnist

Source: The Guardian

ALJAZEERA Video: Russsian pipeline in Europe faces final hurdle

Investopedia Markets: Stocks hit lows for the year as Fed hikes rates

By Caleb Silver Updated Dec 19, 2018

The FOMC raises rates as expected yet investors keep selling

U.S. markets sank to lows for the year following the FOMC's decision to raise overnight lending rates by one quarter percent to a target range of 2.25% - 2.5%. The rate hike was expected, but investors may have been hoping for signs that the FOMC would take future rate hikes off the table for 2019. They did not get them. FOMC Chair Jerome Powell indicated that there may be at least two rate hikes planned for 2019 to bring the overnight lending rate to 2.9%, to what the Federal Reserve calls 'neutral' policy.
U.S. markets were higher going into the Fed's announcement, but promptly sold off as Powell addressed members of the media following the announcement. In its statement, the FOMC said, "...the labor market has continued to strengthen and that economic activity has been rising at a strong rate." As per its mandate, the Federal Reserve adjusts monetary policy to foster economic growth, low unemployment and reasonable inflation. Chairman Powell indicated that the economy is as strong as it has been since before the 2008-09 financial crisis, although inflation was more subdued than expected. The Fed's target rate for inflation is between 2-2.5%, and it currently stands just below 2%.
The major U.S. markets are all in a correction, or worse, having fallen more than ten percent from their highs in September. The Russell 2000 is in a bear market, having fallen more than 20% from its highs. Powell and the Fed have been the target of recent criticisms from President Trump who has implored Powell to stop raising rates as it is hurting the markets and the economy. Powell responded to questions about those attacks in his press conference following the FOMC announcement saying that, "Political considerations are not a consideration." Powell indicated that volatility has heightened in financial markets but did not allow that fact to influence the FOMC's decision to raise rates.

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Source: Investopedia

The Guardian Review Video: Mark Zuckerberg's Facebook year in review (it's not been the best)

Bulletin I MarketWatch: Tilray and Budweiser maker will partner to research weed drinks; Tilray stock jumps

Max A. Cherney

Marijuana producer Tilray Inc. announced Wednesday that it has signed a research partnership with Budweiser maker Anheuser-Busch InBev SA, as the Canadian cannabis industry continues to strike deals with legacy industries.
The joint venture will run through Anheuser-Busch’s BUD, +0.07%  subsidiary Labatt Breweries of Canada, and each company intends to invest up to $50 million to research beverages infused with tetrahydrocannabinol, or THC, and cannabidiol, or CBD. THC is the compound that produces psychoactive effects, whereas CBD does not — though it has other properties some see as beneficial.
Tilray TLRY, -7.19%  said that the partnership is limited to Canada, and that the two companies will make decisions about developing products from the research in the future.
“For us, it’s early days in this industry and research feels like the right place to start,” Tilray Chief Executive Brendan Kennedy said on the phone Wednesday morning. “At Tilray, we’ve been performing research and develop for almost five years on lots of different aspects of cannabis and cannabinoid delivery.”
Don’t miss: Weed beer is near, and it’s gonna get weird
Tilray’s stock jumped more than 10% in after-hours trading Wednesday following the announcement, adding to gains from a different partnership revealed earlier this week. The company revealed a global distribution deal with pharmaceutical giant Novartis AG NVS, -1.10%  on Tuesday morningTimeTilray Inc. Cl 2Feb 18Apr 18Jun 18Aug 18Oct 18Dec 18

Beyond research into aspects of cannabis such as how long it takes the effects to become apparent and how low it lasts — some of such research Tilray has already undertaken — the joint venture will also explore how pot products are packaged, how production can be scaled and the recipes for creating new products.
The goal, says Kennedy, is to understand how to create and produce “iconic and responsible cannabis infused beverages and brands” that will arrive in product formats will likely be new to the industry.
Unlike rivals such as Cronos Group Inc. CRON, -3.21%  , CRON, -4.11%  which took a $1.8 billion investment from Marlboro maker Altria Group Inc. MO, +1.00%  , and Constellation Brands Inc.’s STZ, -0.31%  $4 billion investment in Canopy Growth Corp., CGC, -3.87% WEED, -4.28%  Kennedy said Tilray was not interested in an investment from its partner, and is not seeking to be being bought or acquired at this point.
A guide to pot stocks: What you need to know to invest in cannabis companies
“We obviously want to partner with other global pioneers and other leaders in their respective sectors,” he said. "We think it’s too early to give up control of our own destiny. Other companies have bought two of our competitors in this industry and it’s far too early for a transaction like that.”

Tilray’s volatile stock has soared to more than $200 from its initial public offering price of $17. Shares have declined 12% in the past five days, though rose more than 10% Tuesday after it announced the Novartis partnership. The ETFMG Alternative Harvest ETF MJ, -2.64%  has lost 6.7% in the past five days, as the S&P 500 index SPX, -1.54%  has fallen 2.9%.

Source: MarketWatch

EU FX I Currencies: Dollar eases, but off lows, after Fed signals few more hikes ahead

Sam Meredith

The dollar came off its lows but remained weaker overall on Wednesday after the Federal Reserve’s guidance on its tightening cycle was less dovish than expected, even though it forecast fewer interest rate hikes than it had in September.
The Fed raised interest rates, as expected, while citing the impact of ongoing market volatility and potential slowdowns around the world. The greenback earlier hit a seven-week low against the yen and a roughly one-week trough versus the euro before paring losses after the Fed’s decision.
In its policy statement, the Fed said the U.S. economy has been growing at a strong rate and the job market has continued to improve. It noted that “some” further gradual rate hikes would be needed, a subtle change that suggested it was preparing to stop raising borrowing costs.
Fresh economic forecasts released by the Fed on Wednesday showed policymakers expect two rate hikes next year and one the following year.
“We’ve still got the commitment to ‘further gradual increases’ ahead now prefaced by ‘some’ which many thought would be dropped altogether,” said Brian Coulton, chief economist, at Fitch Ratings in London. “Given the stock market declines and negative international economic news recognized in the statement this still points to quite a bit of confidence at the Fed in the ability of the U.S. economy to withstand a few more rate hikes,” Coulton said. “The downgrade to their 2019 growth forecast is pretty modest.”
The Fed sees U.S. economic growth slowing to 2.3 percent in 2019 from 3.0 percent this year, and inflation coming in below target at 1.19 percent next year. Juan Perez, senior currency trader at Tempus Consulting in Washington, said he still sees the dollar as resilient because Wednesday’s rate hike “does represent a higher return for investors.”
“We predict the dollar will swing as it closes the year, but will be on a downward trend if indeed the Fed admits more caution and monitoring of lagging indicators is needed before further tightening,” he added.
In mid-afternoon trading, the dollar was down 0.2 percent against the yen at 112.36 yen, while the euro was up 0.2 percent $1.1382.
U.S. President Donald Trump has berated the Fed repeatedly over its continued rate rises, and on Tuesday said in a tweet it was “incredible” for the central bank to even consider tightening given global economic uncertainties. The safe-haven yen and the Swiss franc both strengthened as Tuesday’s plunge in oil prices provided a stark reminder of dimming prospects for the global economy.
U.S. crude futures recovered on Wednesday, but have been in a downtrend since October. Risk sentiment has been soured by weaker-than-expected economic data out of China and the euro zone. The euro was supported by news that Italy had struck a deal with the European Commission over its contested 2019 budget, signaling an end to weeks of wrangling that had shaken financial markets.
The dollar index, which measures the greenback against six major currencies, was 0.2 percent lower at 96.940.

Source: CNBC

Bond Yields at Close Report: 30-year Treasury yield falls under 3% after Fed decision

Yun Li

CNBC: Jerome Powell NYEC 181128 4
Jerome Powell, Chairman of the Federal Reserve, speaking at the New York Economic Club on Nov. 28, 2018.
Adam Jeffery | CNBC
Long-term U.S. government debt yields fell sharply on Wednesday on fears the Federal Reserve is slowing the economy with its continued rate hikes and balance sheet reduction.
The Fed raised its benchmark interest rate a quarter-point but lowered its projections for future hikes.
The yield on the 30-year Treasury fell eight basis point to below 3 percent, while the yield on the 10-year Treasury dropped five basis points to 2.7793 percent. Bond yields move inversely to prices.
The Fed raised interest rates by a quarter point on Wednesday, taking the fed funds rate range to 2.50 percent from 2.25 percent. The central bank also revised lower its interest rate forecast to two hikes in 2019, one less than it had previously forecast in September.

Fed Chairman Jerome Powell later said in a press conference that the Fed’s balance sheet reduction program proceed as planned, which worries some market participants that shrinking the balance sheet too rapidly will slow the economy too fast.
“Powell said he sees no problem with balance sheet run off. That’s the one that hurts. That’s another potential path of dovishness that he didn’t take,” said James Paulsen, chief market strategist at Leuthold Group.
- CNBC’s Patti Domm contributed to this report.

Source: CNBC

Asia, Europe & US at Close Report.


Asian markets close mixed ahead of Federal Reserve policy decision

Yen Nee Lee

Asian stocks were mixed on Wednesday ahead of a policy decision by the U.S. Federal Reserve.
The widely anticipated trading debut of SoftBank Corp, the mobile unit of Japanese conglomerate SoftBank Group, ended in disappointment. The company’s shares closed 14.5 percent lower than its initial public offering price of 1,500 yen ($13.36). It was the most heavily-traded stock on the Tokyo Stock Exchange.
SoftBank Corp’s 2.65 trillion yen ($23.6 billion) IPO is the largest ever in Japan and the second-largest in the world behind Alibaba’s $25 billion IPO in 2014.
“I’m not 100 percent surprised that it’s down this much. If they’d been able to hold above that 1,500-level (IPO price), it could have been a different story,” said Andrew Jackson, head of Japanese equities at SooChow CSSD Capital Markets Asia.
“Once it dipped below it, a lot of these retail investors, first-time investors who don’t really know much about the markets, are probably in a big hurry to get out,” Jackson told CNBC’s “Street Sign,” noting that around 90 percent of those that subscribed to SoftBank Corp’s IPO were retail investors.
In the broader Japanese market, the Nikkei 225 finished the day 0.6 percent to 20,987.92 and the Topix closed 0.41 percent down to 1,556.15.

Asia-Pacific Market Indexes Chart

NIKKEINikkei 225 IndexNIKKEI20987.92-127.53-0.60
HSIHang Seng IndexHSI25865.3951.140.20
ASX 200S&P/ASX 200ASX 2005580.60-8.90-0.16
KOSPIKOSPI IndexKOSPI2078.8416.730.81
CNBC 100CNBC 100 ASIA IDXCNBC 1007338.603.210.04
Greater China markets were mixed. The Shanghai composite ended the day 1.05 percent lower at 2,549.5634 and the Shenzhen composite fell by 1.376 percent at the close to 1,294.4853. Meanwhile, Hong Kong’s Hang Seng Index was 0.12 percent higher in late Asian trading hours.
Shares of top Chinese oil firms fall following the plunge in oil prices overnight. Petrochina shares fell 3.28 percent in Hong Kong and 2.1 percent in Shanghai. Shares of China Petroleum and Chemical Corp slipped 4.85 percent in Hong Kong and 2.75 percent Shanghai.
Energy stocks in Australia were also mostly lower. Origin Energy tumbled by 5.69 percent at the close, while Woodside Petroleum fell by 1.82 percent. The ASX 200 slipped by 0.16 percent to 5,580.6 at the end of Wednesday’s trading session.
South Korean stocks, meanwhile, ended the session higher with the Kospi index rising 0.81 percent to 2,078.84.
Fed decision coming
It was another volatile trading day in the U.S., which saw the three major indexes ending the day broadly flat. The S&P 500 closed 0.01 percent at 2,546.16, the Dow Jones Industrial Average added 0.35 percent to 23,675.64 and the Nasdaq composite inched up 0.45 percent to 6,783.911 points.
One widely watched event coming on Wednesday in the U.S. is the monetary policy decision by the Federal Reserve. The central bank is expected to hike its benchmark overnight lending rate for a fourth and final time in 2018, and its outlook for 2019 will also be scrutinized by investors.
“The key for me is not whether they hike or don’t hike, I’d be very surprised if they pause ... the question is what do they convey about the path moving forward. Do they lower the dot projection from three to two or is it even more dovish than that? So the story really isn’t about the December hike, it’s what 2019 and critically what 2020 looks like,” Frances Donald, head of macroeconomic strategy at Manulife Asset Management, told CNBC’s “Squawk Box.”
China’s opening up
China is reportedly starting its Central Economic Working Conference this week after Chinese President Xi Jinping’s Tuesday speech to mark the 40th anniversary of the country’s market opening and reform.
David de Garis, director of economics and markets at National Australia Bank, said he expects China to “reset growth and reform objectives” this week. That could provide further hints into the status of China’s ongoing tariff fight with the U.S., which is now on hold until March.
Among the details that could come out from China include the growth target for 2019, growth-supportive policies and reform measures essential for a deal with the U.S., de Garis wrote in a morning note.
Ahead of the Fed decision, the U.S. dollar index — which measures the greenback a basket of major currencies — slipped to 96.871 from the precious close at 97.104.
The Japanese yen was stronger versus the U.S. dollar at 112.37 compared to 112.51 previously, while the Australian dollar inched up to 0.7191 from 0.7180.


Europe stocks close higher after Italy budget breakthrough; Fed meeting in focus; GSK jumps 4.4%

Ryan Browne,Sam Meredith

European stocks were higher Wednesday, after Italy and the European Union reached a breakthrough on Rome’s 2019 budget plans and as traders geared up for the Federal Reserve’s latest monetary policy decision.

European Markets: FTSE, GDAXI, FCHI, IBEX

FTSEFTSE 100FTSE6765.9464.350.96777209532
The pan-European Stoxx 600 provisionally closed 0.46 percent higher, with most sectors and major bourses in positive territory. Italy’s FTSE MIB was the top-performing index in Europe, up 1.7 percent, after Italy and the EU announced they had struck a new budget deal. The two have agreed to a 2019 deficit target of 2.04 percent, down from an initial target of 2.4 percent.
Continental banking stocks jumped more than 0.3 percent following the news, boosted by Italy’s notoriously fragile lenders. Italy’s Unicredit, Ubi Banca and Banco BPM were all trading more than 2 percent higher on the news. The euro also climbed on the back of the news, at one stage up nearly 0.6 percent to $1.1428.
Looking at individual stocks, Britain’s GlaxoSmithKline said it planned to split into two businesses on Wednesday. One side would deal with prescription drugs and vaccines and the other would focus on over-the-counter products. The revamp comes after the London-listed company formed a new joint venture with Pfizer’s consumer health division. Shares of GlaxoSmithKline rose 4.3 percent.
Meanwhile, France’s Natixis slumped toward the bottom of the benchmark during deals. The lender said late Tuesday it had booked 260 million euros ($296 million) of losses on poorly performing Asian derivatives. The announcement prompted shares to fall 6.7 percent on Wednesday.
On the data front, Britain’s inflation rate fell to a 20-month low in November, according to official data published Wednesday. The news is thought to offer some relief to consumers who have adopted a cautious approach to spending ahead of Brexit. Sterling traded slightly higher to around $1.266.
Fed rate decision
Market focus is largely attuned to a spectacular drop in crude futures, with international benchmark Brent crude and U.S. West Texas Intermediate (WTI) falling sharply overnight.
The declines have added to mounting pressure on the Fed to consider abandoning its commitment to yet more interest rate hikes.
Complicating matters for the central bank, President Donald Trump warned Tuesday that it must tread carefully in order not to “make yet another mistake,” while a Wall Street Journal editorial called for a pause.
“We don’t feel there’s any reason to hike today,” Brett Ewing, chief market strategist at First Franklin, told CNBC’s “Street Signs Europe” on Wednesday. “I think the Fed has put themselves in a box and guided the market into this hike.”
He added: “When you look at the inflation numbers here in the United States, they’ve actually been moderating here for the last four or five months.”
Nonetheless, market participants still widely expect the Fed to announce a quarter-point rate hike on Wednesday.
By the time of the European close, the S&P 500 index in the United States was around 0.6 percent higher.

Thomas Franck

U.S. stocks sank Wednesday in a wild session after the Federal Reserve raised its benchmark overnight lending rate for the fourth time this year.
The Dow Jones Industrial Average fell 351.98 points and closed at its lowest level so far this year at 23,323.66, erasing a 380 point gain that came prior to the Fed decision. The broad S&P 500 index also closed at a 2018 low, falling 1.5 percent to finish at 2,506.96 as technology and banks stocks rolled over. The Nasdaq Composite fell 2.1 percent to 6,636.83, its own 2018 closing low with shares of Apple losing more than 3 percent.
The major indexes all hit intraday lows for the year as well.

For traders, the Fed’s statement and Chairman Jerome Powell’s subsequent press conference did not suggest that the central bank would slow its pace of rate hikes as quickly as some had hoped. Markets took a leg lower during Powell’s comments that the central bank would continue to reduce the size of its balance sheet at the current pace.
The Dow and S&P 500, which are both in corrections, are on track for their worst December performance since the Great Depression in 1931, down more than 8 percent and 9 percent, respectively, this month. The S&P 500 is now in the red for 2018 by 6.3 percent.
The Dow has lost over 1,250 points this week.
The Fed decided to hike its benchmark overnight lending rate by one quarter point on Wednesday to a target range between 2.25 to 2.5 percent. The Fed did however trim its 2019 outlook for rate hikes to just two increases from three previously.

“I think the market reaction to all of this is the Fed is going to overdo it,” said James Paulsen, chief market strategist at Leuthold Group. “Powell said he sees no problem with balance sheet run off. That’s the one that hurts, that’s another potential path of dovishness that he didn’t take.”
The central bank permits $50 billion a month to run off the balance sheet, a collection of bonds the central bank bought to stimulate the economy during and after the financial crisis.
“I think that the run-off of the balance sheet has been smooth and has served its purpose,” he said during a news conference. “I don’t see us changing that.”
Equities across a range of sectors plunged following the Fed’s announcement. Consumer companies including TargetAmazonNewell Brands and Nordstrom all fell more than 3 percent. Banks including Citigroup and Wells Fargo each lost more than 1.5 percent.
Aircraft manufacturer Boeing, which had led the Dow higher earlier in the session, dropped 2.5 percent. Industrial conglomerate 3M shed 2.3 percent while United States Steel Corp lost 6 percent.
The benchmark 10-year Treasury note yield hit a fresh low of 2.798 percent, its lowest level since May 30. The 30-year Treasury bond broke below 3 percent. The bond market seemed to believe the Fed has already slowed the economy by too much.
“The Fed still sees a solid underpinning for the economy based on the numbers and still sees the viability of two rate hikes next year,” said Quincy Krosby, chief market strategist at Prudential Financial. “The market needs, for the Fed’s statement to prove correct, an unequivocally strong parade of strong economic data for that forecast to hold.”
“That’s been the tug of war in the market,” Krosby added. “The old adage is that the price action — that is the market — gets it before the data. That’s at the core of the debate.”
Complicating matters further for the central bank, President Donald Trump warned Tuesday that it must tread carefully in order not to “make yet another mistake;” strategists expect the Fed Chair to skirt addressing the president’s comments.
Asked about Trump’s criticism, Powell said Wednesday that “political considerations play no role whatsoever in our discussions or decisions about monetary policy. We’re always going to be focused on the mission that Congress has given us. ”
FedEx shares were slammed by more than 12 percent after CEO Richard Smith blamed “bad political choices” for weakness in its overseas business. FedEx lowered its 2019 earnings guidance and reported weakness in its international business, putting the stock on pace for its worst day on Wall Street in more than a decade.
“I’ll just conclude by saying most of the issues that we’re dealing with today are induced by bad political choices,” FedEx Chairman and CEO Frederick Smith said in a conference call Tuesday. “I mean, making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state-owned enterprise initiatives in China, the tariffs that the United States put in unilaterally. So you just go down the list, and they’re all things that have created macroeconomic slowdowns.”
Social media gaint Facebook also fell sharply on Wednesday. Its stock fell more than 7 percent Wednesday after admitting it allowed other big tech companies to read users’ private messages. The company’s blog post came after a New York Times investigation found that Facebook gave companies including Netflix, Spotify and the Royal Bank of Canada the ability to read, write and delete users’ private messages.
Further, the D.C. Attorney General said it would sue the company over the Cambridge Analytica scandal.
—CNBC’s Sam Meredith and Jeff Cox and Patti Domm contributed reporting.

Source: CNBC

Crude Oil at Close Report: US crude rises 2.1%, settling at $47.20, on signs of strong product demand

Tom DiChristopher

RT: Oil operations Permian Basin near Midland, Texas 180823
Oil operations in the Permian Basin near Midland, Texas
Nick Oxford | Reuters
Oil prices rose on Wednesday, recovering somewhat from a sharp sell-off during the previous session, after U.S. data showed strong demand for refined products.
Sentiment remains negative, however, as investors grapple with weakening demand and worries about oversupply.
Benchmark Brent crude oil was up 62 cents, or 1.1 percent, at $56.88 a barrel by 2:22 p.m. ET. The front-month U.S. light crude contract, which expires on Wednesday, rose $1.21 to $47.45 a barrel, a 2.6 percent gain. The second-month contract rose $1.10 a barrel to $47.70.
The markets slumped on Tuesday, extending a recent run of poor performance. Global benchmark Brent tumbled 5.6 percent on Tuesday, just above a 14-month low reached during the session, while WTI lost 7.3 percent, falling to its lowest level since August 2017.
Crude inventories fell by 497,000 barrels in the week to Dec. 14, smaller than the decrease of 2.4 million barrels analysts had expected. The decline was the third consecutive decrease, the U.S. Energy Information Administration said.
Distillate stockpiles, which include diesel and heating oil, fell by 4.2 million barrels, versus expectations for a 573,000-barrel increase, the EIA said. Distillate demand rose to the highest since January 2003, which bolstered buying, particularly in heating oil futures, the market’s proxy for diesel.
Heating oil futures gained 2.8 percent to $1.803 a gallon.
“The complex is piecing together a modest advance so far today but only one that offsets a miniscule portion of recent losses,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Broader financial markets have been under pressure on worries that higher U.S. interest rates could slow domestic growth.
Crude futures briefly pared gains after the Federal Reserve raised its benchmark interest rate on Wednesday. The stock market turned negative and the U.S. dollar strengthened following the announcement. Oil is sold in dollars, so a stronger greenback makes crude more expensive for holders of other currencies.
Brent has lost more than 33 percent of its value and WTI has fallen 38 percent since the beginning of October as crude supply has increased.
The Organization of the Petroleum Exporting Countries and other oil producers including Russia agreed this month to curb output by 1.2 million barrels per day (bpd) in an attempt to drain tanks and boost prices.
But the cuts will not happen until next month and production has been at or near record highs in the United States, Russia and Saudi Arabia.
The U.S. government has said shale production should climb to over 8 million bpd for the first time by the end of December. Global oil supply faces pockets of disruption.
Russian oil output has been running at a record 11.42 million bpd so far this month, an industry source told Reuters.
Saudi Arabia’s energy minister, Khalid al-Falih, said on Wednesday he expected global oil stocks to fall by the end of the first quarter.
— CNBC’s Tom DiChristopher contributed to this report.

Source: CNBC

Gold Price at Close Report: Gold falls as Fed raises rates, indicates further hikes for 2019

Tom DiChristopher

Gold prices fell on Wednesday giving up earlier gains, after the U.S. Federal Reserve raised interest rates and noted that “some” further gradual rate hikes would be needed next year.
The central bank, after the end of its last policy meeting of the year, said the U.S. economy has been growing at a strong rate and the job market has continued to improve. Fresh economic forecasts released on Wednesday showed policymakers expect two rate hikes next year and one the following year.
Gold fell 0.4 percent $1,244.59 at 2:51 pm ET. The metal earlier hit $1,258.03, its highest since July 10.
U.S. gold futures fell 0.37 percent to $1,248.90 an ounce.
“The U.S. Federal Reserve has gone ahead and raised interest rates, which is a temporary pullback for gold,” said George Gero, managing director at RBC Wealth Management.
“The outlook for two rate hikes next year is not dovish enough, gold will be a little bit range-bound lower until we see what the effects will be from the budget, the politics, Washington, Brexit and other usual worries.”
The dollar pared some losses after the Fed statement as investors had earlier bet the Federal Reserve would signal a slower pace of interest rate hikes next year as it grapples with financial market volatility and potential slowdowns in major economies around the world.
A Reuters poll earlier showed risks of a U.S. recession in the next two years rising to 40 percent, inducing a significant shift in expectations that the Fed will introduce fewer interest rate hikes next year.
Meanwhile, holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund rose 1.1 percent to 771.79 tonnes on Tuesday, the highest since Aug. 20.
Palladium hit a record high of $1,283.49 earlier in the session.
“The ability of the market to come back after selloffs reaffirms its underlying tight fundamentals and we expect palladium will move higher after the FOMC (Federal Open Market Committee meeting) is out of the way,” HSBC analyst James Steel wrote in a note on Dec. 18.
Silver fell 0.1 percent to $14.62, while platinum rose by nearly half a percent to $790.20 an ounce.

Metals I CMI Spot Prices as of the Close of Trading in New York

Spot Prices as of close of trading in New York
Wednesday, December 19, 2018