Week of Dec 16 2016 Weekly Recap & The Week Ahead

“Buy when others are despondently selling and sell when others are greedily buying” — Mark Mobius

1. Saudis Eye Deeper Cuts While Non-OPEC Joins Deal — OPEC and non-OPEC producers signed their first deal to cut output since 2001. Led by Russia, non-OPEC nations agreed to reduce production by 558K barrels per day, falling just short of the 600K target envisioned by OPEC. But following the meeting in Vienna, the Saudi Energy minister Khalid Al-Falih said everyone is committed to making sure the levels are enforced.
2. Bill Gates Pushes Green Energy on Call With Trump, While Building $1 Billion Fund — Bill Gates starts a new investment fund he and other billionaires started called Breakthrough Energy Ventures. Gates has tapped his vast network of technology and energy bigwigs to raise more than $1 billion that will be at the fund’s disposal, starting in 2017. The goal is to increase investments in energy-related technologies that will reduce, if not eliminate, greenhouse gas emissions. Investors in Breakthrough Energy Ventures include Jeff Bezos, chief executive officer of Amazon.com Inc., Richard Branson, the founder of Virgin Group Ltd., and Michael Bloomberg, the founder of Bloomberg LP. There are also prominent venture capitalists like John Doerr and Vinod Khosla, who have pumped a lot of money into green tech companies in the past.
3. Fed Raises Rates, Boosts Outlook for Borrowing Costs in 2017 Bloomberg, Federal Reserve officials raised interest rates for the first time this year and forecast a steeper path for borrowing costs in 2017, saying inflation expectations have increased “considerably” and suggesting the labor market is tightening. New projections show central bankers expect three quarter-point rate increases in 2017, up from the two seen in the previous forecasts in September, based on median estimates.
4. U.S. Challenges China’s Grain Import Quotas at WTO — the U.S. has launched a challenge to China’s use of tariff-rate quotas for rice, wheat and corn at the WTO, charging that China’s administration of the program breached its WTO commitments and hurt U.S. farm exports. The tariff-rate quotas for rice, wheat and corn were worth $7B-plus in 2015, and China would have imported up to an additional $3.5B of the crops last year if the quotas had been fully used, the Office of the U.S. Trade Representative said. It was the second challenge to China’s agricultural policies by the U.S. Trade Representative since September and the latest in an escalating number of trade disputes between the two countries.
5. Euro Currency Recorded a 13-year Low Versus the USD — the euro recorded a 13-year low, just above $101.51, but has remained above $1.0. The US rate premium is also consolidating. The US two-year premium rose this week above 200 bp for the first time since 2000. The Euro/USD is targeted to reach par in early 2017. Below is the weekly chart going back to Dec 2011 to Dec 16 2016.

The week ahead — Economic data from Econoday.com:

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