Market Morning: OPEC Cuts, Trump & Xi Ceasefire, Apple Goes to China, Deutsche Bank Hiring

Stock Market Roundup

OPEC Cuts Maintained, Putin and Bin Salman On Same Page

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Russia and Saudi Arabia agreed on an extension to the previous OPEC oil production cuts by 6 to 9 months. The meeting takes place today and tomorrow, July 1 and 2. The oil price environment since 2014 has pushed OPEC and Russia together somewhat, and the two have been on the same page ever since, at least in their public posturing. The current production cuts are for 1.2 million barrels per day, but exactly how that is counted is open to debate, as any country can inflate production capacity and the cartel depends mostly on trust between nations, which isn’t exactly bursting at the seams.

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“We will support the extension, both Russia and Saudi Arabia,” Putin said at a news conference in Osaka, Reuters reported. “As far as the length of the extension is concerned, we have yet to decide whether it will be six or nine months. Maybe it will be nine months.” The United States, the world’s biggest oil producer, doesn’t participate in these sorts of agreements because production is mostly determined by market conditions, so at least there’s that. Energy stocks (NYSEARCA:XLE) meanwhile remain stuck at the bottom of their trading range established since late 2015.

Trump Does Another 180, Eases Up On China

Wouldn’t you know, all the negative hype that President Donald Trump was packing in with the media over the last few days was probably just so he could pull the rug out from under negative expectations and announce the most tremendously positive conversation with a Chinese leader in the history of conversations between two human beings in all quantum dimensions. Trump has announced that he actually will be suspending new tariffs against American citizens who like buying stuff from China, even though he has repeatedly said that there are no promises and that Americans were “ripe” for new taxes on Chinese imports. He actually said that China was ripe for these, but since China doesn’t pay these taxes, despite Trump’s claims to the contrary, what he really meant was Americans.

Trump even agreed to let up on restrictions against Chinese telecom Huawei, even though the restrictions were based on national security grounds, which apparently don’t matter anymore because Xi Jinping asked nicely. Look for a bounce in Chinese stocks (NYSEARCA:FXI) today, and US markets as well, as everyone seemingly had fallen for Trump’s overt negativity over the last week. It will be interesting to see how gold responds to the trade reversal. If it keeps rising, gold may be heading higher for other reasons.

Apple Moves More Production to China

The tariffs don’t appear to be encouraging Big Tech move back to, or even stay in, the United States. The new Mac Pro computer from Apple (NASDAQ:AAPL) will be manufactured entirely in China rather than the US, instead of having its final assembly take place in Austin, Texas. The purpose of the new arrangement is to save on shipping costs back to Austin from China, where the initial stages of assembly take place. In order to preempt getting yelled at by Trump and his trade hawks, who thought that tariffs would prevent this sort of thing, Apple said, “Final assembly is only one part of the manufacturing process. Like all of our products, the new Mac Pro is designed and engineered in California and includes components from several countries including the United States.” This probably won’t do much to calm the President down, however. Expect angry anti-Apple tweets this week.

Insulin Caravan Picks Up Press In Trek to Canada

A self-styled caravan of 20 people has crossed the border into Canada in order to buy insulin at lower prices. Novo Nordisk (NYSE:NVO) and Eli Lilly (NYSE:LLY) watch out, because if this catches on and more caravans start moving up north, they are going to get more bad press than they’ve already gotten this year. One of the passengers on the caravan claims that her 26 year old son died because he had to ration insulin since it is so expensive in the US. Insulin prices have doubled between 2012 and 2016, and there are no signs of this trend slowing. One reason for cheaper prices in Canada is that Canada does not require a prescription for insulin, so this cuts out a lot of the convoluted middlemen like pharmacy benefit managers and insurance companies that get involved when prescriptions are needed. Nevertheless, the people on the caravan had their prescriptions with them so as to prove to authorities that they were not intending to resell the insulin in the US, which would do the controversial thing of balance markets without government approval. All congress would have to do is allow people to import as much insulin as they want. Fill up the caravan floor to ceiling and multiply that by 1,000 and then we’re getting somewhere.

Deutsche Bank, Nearing Bankruptcy, Goes on Hiring Spree

Deutsche Bank (NYSE:DB), whose stock has been finding ever newer and lower all time lows for the past 12 years, is going on a hiring spree, looking for 300 relationship and investment managers in the hope to generate new and more stable revenue streams. Deutsche’s investment  banking business has been in the dumps since the 2008 financial crisis, even though most markets across the world have reached new highs since then. Which raises the question of why anyone would continue to trust Deutsche to make money for them if they’ve failed for 11 years to do so for their clients during the biggest bull market for equities in world history. 300 is about a 33% increase from the current staff of investment and relationship managers at the bank. They will be spread across the world in Europe, the United States, and emerging markets, assuming the bank survives to complete the push.


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