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Despite the horrific terrorism news coming out of Europe this week, the economic news was good. The Eurozone grew in the second quarter at an annualized rate of 2.5%. The Dutch economy is surging, and the first half of 2017 has been the best six months for Italy since 2010. The all-important German economy has been growing at a solid rate as well.


U.S stock markets had their worst decline in three months on Thursday. Broad U.S. stock indices ended the week in the red while foreign markets continued to grow amidst generally postive economic growth news. Markets have done quite well, but there seems to be concern, with such a long, positive run, that these values can keep rising. Will the Fed’s plans to raise rates stall markets? Will corporate earnings rise fast enough to sustain these stock prices? Will the current political climate derail corporate tax reform? Will geopolitical instability send investors to safer investments? For the week, the S&P 500* decreased 0.65% (up 8.34% for the year). The MSCI All Country X US* increased 0.55% (up 15.91% for the year). The Barclays Global Aggregate Bond Index* decreased by 0.03% (up 6.72% for the year). The HFRX Global Hedge Fund Index* increased 0.11% (up 2.86% for the year).


“Industrial Production” is a measure of the output of the industrial sector of the economy which includes manufacturing, mining, and utilities. Industrial Production in the U.S. rose 0.2% in July following a 0.4% increase in June. Total industrial production in the U.S. has increased 2.2% in the past year. It is now 21.1% above the recession low, and above the pre-recession peak.



Europe gets one third of its natural gas from Russia, a dependence that Russia has often exploited politically and otherwise. Natural gas is most commonly exported via pipeline, but it can also be exported by liquifying it (LNG) and shipping it by tanker. Last month, Poland became the first Eastern European country to receive a shipment of U.S. LNG, and next week Luthuania will receive its first shipment. This follows a handful of other recent shipments of U.S. LNG to other parts of Europe. Russia’s state run energy companies have responded by lowering prices and developing their own LNG facilities. European countries are eager to lower dependence on Russia, but price is price and consumer demand will make it a challenge to eat into this market. Europe represents 75% of Russia’s export market so they will work very hard to keep their market share. Oil and gas revenues account for more than 40% of Russia’s federal budget.




INDUSTRIAL PRODUCTION UP: https://www.federalreserve.gov/releases/G17/Current/default.htmhttp://www.calculatedriskblog.com/2017/08/industrial-production-increased-02-in.html
U.S. AND RUSSIA COMPETING: https://www.wsj.com/articles/russia-readies-for-u-s-gas-competition-in-europe-1503140402
U.S. MARKETS DECLINE WHILE INTERNATIONAL MARKETS CONTINUE TO CLIMB: https://www.wsj.com/articles/investors-grapple-with-signs-of-unrest-1503237600
EUROPE COMING AROUND: https://www.wsj.com/articles/dutch-surge-aids-eurozone-recovery-1502874741