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Oil price rises on Mideast tensions, stock markets cautious

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Oil prices climb in wake of iranian oil sanctions decision
After six weeks of declines that totaled 13 cents, the price of a gallon of diesel went up 1.3 cents a gallon for the week ending July 8 but dropped four tenths of a penny last week. (©2019 FOTOSEARCH)

BANGKOK — The price of oil rose on Friday after the U.S. said it had destroyed an Iranian drone near the Persian Gulf, where a lot of the world’s oil is shipped through. Stock markets were largely stable as investors monitor earnings and the ongoing trade talks between China and the U.S.

Energy prices were ratcheted higher after President Donald Trump said a U.S. warship had downed an Iranian drone that had been threatening. While Iran denied the incident, it’s the latest incident to increase tensions and uncertainty in the region, where oil tankers have been attacked or threatened.

About 20% of all oil traded worldwide passes through the Persian Gulf, so investors are aware of the potential for disruptions to ship traffic.

The U.S. benchmark for crude oil advanced 71 cents, or 1.3%, to $56.01 per barrel in electronic trading on the New York Mercantile Exchange. Brent, the international oil standard, picked up 98 cents, or 1.6%, to $62.91 per barrel.

Obviously, the price of on-highway diesel is an outgrowth of the price of oil.

Diesel has gone down seven of the last eight weeks.

After six weeks of declines that totaled 13 cents, the price went up 1.3 cents a gallon for the week ending July 8 but dropped four tenths of a penny last week.

Stock markets were mixed, with Britain’s FTSE 100 shedding 0.1% to 7,484 and the CAC 40 in Paris falling by the same rate to 5,543. In Germany, the DAX rose less than 0.1% to 12,236. Wall Street looked set for small gains, with the future for the Dow Jones Industrial Average up 0.2% and the future for the S&P 500 adding 0.1%.

Reports that Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer spoke with their Chinese counterparts as planned, with more talks to come, helped ease some concerns over the deepening trade war between Washington and Beijing.

The standoff over China’s longstanding trade surpluses and its policies aimed at building up advanced high-tech industries has added to concerns over slowing demand and weaker Chinese growth.

Expectations that the U.S. Federal Reserve will move quickly to cut interest rates have also helped buoy sentiment recently.

Comments by the president of the Federal Reserve Bank of New York, John Williams, suggesting central banks need to “take swift action” when conditions turn adverse, have whetting investors’ appetites for buying, analysts said.

“Investors are highly sensitive to dovish comments from Fed presidents these days, as they are trying to figure out whether the Fed would lower its interest rates by 50 basis points by the end of this month,” Ipek Ozkardeskaya of London Capital Group said in a report.

“Given that a 50-basis-point cut would trigger a further rally in global equities, any remark of dovish nature translates immediately into higher asset prices,” she said.

In Asian trading, Japan’s Nikkei 225 index jumped 2% to 21,466.99 while Hong Kong’s Hang Seng climbed 1.1% to 28,765.40. The Shanghai Composite index rose 0.8% to 2,924.20, while in South Korea, the Kospi added 1.4% to 2,094.36. India’s Sensex slipped 1.3% to 38,390.88. Shares rose in Taiwan and Southeast Asia.

Investors are looking ahead to corporate earnings.

So far, in the U.S. the results have been mixed, though only about 13% of S&P 500 companies have reported, according to FactSet. Analysts expect profits to fall 2.4% overall by the time all reports are tallied.

In currencies, the dollar rose to 107.60 Japanese yen from 107.30 yen on Thursday. The euro weakened to $1.1239 from $1.1279.

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ATA Truck Tonnage Index increased 3.3% in 2019

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Ata truck tonnage index increased 3.3% in 2019
After falling 3.4% in November 2019, the Truck Tonnage Index recovered in December, posting a 4% monthly increase. (courtesy: ATA)

ARLINGTON, Vir. — American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 3.3% in 2019, about half the annual gain in 2018 (6.7%). The increase was the tenth consecutive year in which the tonnage index has risen above the previous year.
The advanced SA For-Hire Truck Tonnage Index rose 4% in December after falling 3.4% in November. In December, the index equaled 118.2 (2015=100) compared with 113.6 in November.
“Last year was not a terrible year for for-hire truck tonnage, and despite the increase at the end of the year, 2019 was very uneven for the industry,” said ATA Chief Economist Bob Costello. “The overall annual gain masks the very choppy freight environment throughout the year, which made the market feel worse for many fleets. In December, strong housing starts helped advance the index forward.” It is important to note that ATA’s tonnage data is dominated by contract freight.
November’s reading was revised down slightly compared with the December 2019 data. In December 2018, the SA index rose 3%, which was preceded by a 2% year-over-year drop in November.
The not seasonally adjusted index, which represents the change in tonnage hauled by the fleets before seasonal adjustment, equaled 112.7 in December, 2% below the November level (115.1). In calculating the index, 100 represents the index from 2015.
Trucking serves as a barometer of the U.S. economy, representing 70.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 10.77 billion tons of freight in 2017. Motor carriers collected $700.1 billion, or 79.3% of total revenue earned by all transport modes.

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ACT Research For-Hire Trucking Index: Rates slip amid strong holiday freight

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Act research for-hire trucking index: rates slip amid strong holiday freight
For-hire index rates slip, but signs of freight recovery in 2020 "encouraging" (©2020 FOTOSEARCH)

COLUMBUS, Ind. – The latest release of ACT’s For-Hire Trucking Index showed improvement in for-hire freight volumes and utilization. The data used in the Index included December. Respectively, the data indicated 55.5 and 52.3 diffusion index readings, both up four points from November on a seasonally adjusted basis. But even as for-hire capacity contracted again, the Freight Rates Index slid to 48.7 in December.
The ACT For-Hire Trucking Index is a monthly survey of for-hire trucking service providers. ACT Research converts responses into diffusion indexes, where the neutral or flat level is 50.
Tim Denoyer, ACT Research’s Vice President and Senior Analyst commented, “We see encouraging signs that the freight downturn is in its late stages and the market will rebalance in 2020. However, the ongoing rate pressure, even as volumes ramped into the holidays, is symptomatic of ongoing excess industry capacity. Our survey respondents clearly get it, and reduced capacity for a sixth straight month, so we can pretty easily deduce that private fleet capacity additions through year-end 2019 are the main factor continuing to pressure for-hire rates.”
The ACT Freight Forecast provides forecasts for the direction of truck volumes and contract rates quarterly through 2020, with three years of annual forecasts for the truckload, less-than-truckload and intermodal segments of the transportation industry. For the truckload spot market, the report provides forecasts for the next twelve months.
In 2019, the average accuracy of ACT’s truckload spot rate forecasts was 98%. The ACT Research Freight Forecast uses equipment capacity modeling and the firm’s economics expertise to provide anticipated freight rates, helping businesses in transportation and logistics management plan with confidence.

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2019 trading performance ended on a sour note for transportation companies

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For major shippers, 2019 ended on a sour note; transportation companies have worst trading performance across market.
Transportation companies are showing the worst performance across the market and trading. Shares in railroad, trucking and ocean shipping companies are selling off. (Courtesy: FotoSearch)

For major shipping companies dealing with trade wars and slowing global growth, conditions appear to have deteriorated as 2019 came to a close.

Transportation companies are the worst performers across the market in trading. Shares in trucking, railroad and ocean shipping companies are selling off.

The trade war between the U.S. and China has taken a toll. Government data showed Friday that China’s economy grew by 6.1% last year, down from 6.6% in 2018, and a multi-decade low. The Trump administration has agreed to cancel planned tariff hikes on additional Chinese imports as part of an interim deal announced this week, and Beijing promised to buy more American farm goods.

Punitive duties already imposed by both sides, however, will stay in place.

JB Hunt Transport Services Inc., a trucking company, on Friday reported profits that fell well short of what industry analysts had expected, according to a survey by Zacks Investment Research. Shares in that company are down 2.7%.

FedEx reported last month that its profit slid 40%, hurt by higher costs, a shorter holiday season and its move to cut ties with Amazon.com. It too, cut its profit expectations.

UPS reports fourth quarter and full year results at the end of the month. Its shares have been falling over the past month and were down in trading as of Friday.

Global shipping and logistics provider Expeditors International said Friday that it expects fourth quarter operating income to fall between $177 million and $183 million.

CEO Jeffrey Musser cited trade disputes and slowing growth for a number of economies. The report comes a day after the railroad CSX reported a 7% decline in the freight it hauled during the final months of the year.

“We’ve seen impacts throughout the year from these market conditions, but the pace at which these changes occurred accelerated dramatically in the fourth quarter,” Musser said. “We know this environment will change over time, as it always has in the past.”

Shares of Expeditors International of Washington Inc., based in Seattle, slumped almost 5%.

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