Market Morning: Commodities Climb, Yield Curve Inverts, Rioters Win, Big Tobacco Courts Cannabis
Commodities on the Move
Energy and metals prices are moving strongly higher today in tandem. Oil (NYSEARCA:USO), gold (NYSEARCA:GLD), natural gas (NYSEARCA:UNG), and gasoline (NYSEARCA:UGA) are all up over 2% this morning. Metals price are also moving higher though not as strongly. Gold is up another half a percent, silver close to a percent, the only laggard being platinum. This may be a knee jerk reaction to the purported truce between the US and China on the escalation of the trade war, in which case these spikes may settle back down over the next few days and weeks. On the other hand this could be early signs of inflation if it is rather a response to the imminent end of the current Federal Reserve hiking cycle, which became apparent in a recent comment by Fed Chair Jay Powell that the ever-elusive “neutral interest rate” has nearly been hit, whatever that is.
SEE: Cannabis Stock News Daily Roundup December 3
Yield Curve Turns Negative For The First Time Since 2007
It’s not the yield spread that everyone watches like hawk eyes lasering in on the carrion of a once raging bull, but it is part of the short end of the curve. 5-year treasury yields are now below 3-year treasury yields by a single basis point, so everyone start stocking your Armageddon bunkers. As for the main event, the 10Y-10Y yield spread it is hovering just above zero, at a new low of 13 basis points, the lowest since June 2007. The spread has collapsed markedly over the past week, falling 12 basis points since November 28. The last time the spread went negative, it took a little over a year for a financial crisis to develop, so we may be a ways away from any serious downside, though there is no guarantee that market history will repeat itself.
Macron Gives In To Rioters, Suspends New Fuel Taxes
Rioting works, sometimes. In a clear sign that French President Immanuel Macron is finally caving into pressure from the Yellow Vest rioters, he has suspended new fuel taxes that were designed to save the planet from climate change. And also raise government revenues. Given that the rioters are increasing their carbon footprints by setting fires, the suspension of the new taxes may help reduce the carbon footprint of the Yellow Vest movement, if a 6-month suspension is enough to disband the movement without it re-coalescing in 6-months’ time. Amazingly, politicians are considering solving this whole problem of citizens complaining about living standards by making it even more difficult to hire poor unskilled workers by raising the minimum wage, which some believe will solve all these problems. French stocks (NYSARCA:EWQ) are down slightly but don’t seem to be too bothered by the ongoing riots.
Big Tobacco King Altria In Talks with Cannabis Company Cronos
Altria (NYSE:MO), the $100 billion tobacco behemoth, is reportedly in talks with cannabis firm Cronos (NASDAQ: CRON), which was up 11% yesterday and 6% this morning. Altria shares are down 20% this year, which could be blamed on lower smoking rates in the United States, now measured at 14% of adults, the lowest ever. That could be part of it, but it could also be a reflection of current market traditions, since many stocks are down 20% or more anyway. The deal, if it goes through, would catapult cannabis into the mainstream in a big way, and would probably spur many other deals by other Big Tobacco companies so as not to miss out. It would be very bullish for the cannabis sector as a whole.
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