Tags: Janney | Luschini | Global | US

Janney Capital's Luschini: Global Ills Could Damp US Growth

By John Morgan   |   Saturday, 06 Jul 2013 10:53 AM

Global problems that are boiling over could be an unexpected drag on the American economy even in the face of the U.S. recovery, according to Mark Luschini, chief investment strategist at Janney Capital.

Luschini told Yahoo Breakout that rising oil prices and falling Chinese growth are the potential deadweights he is watching out for.

Crude oil climbed 2 percent to above $103 per barrel Friday as Egypt teetered on the edge of a civil war that some observers feared could affect the Suez Canal, through which many oil shipments to the West must pass. In New York, Nymex crude futures ended up $1.98 at $103.22 a barrel, the highest settlement since May 2012.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

“It’s putting pressure on oil prices. If we see it manifest into higher gas prices, that’s going to be a headwind we didn’t anticipate,” Luschini said.

Under the present uncertain circumstances, Luschini said he is holding some cash rather than keeping it invested in financial markets.

He told Yahoo the current international situation could also affect the pace of tapering, or gradually reducing the amount of monetary stimulus being provided by the Federal Reserve.

Any lasting spike in oil prices is “something that’s going to be considered an influence in their (the Fed’s) tapering decision making,” Luschini predicted.

A slowdown in Chinese manufacturing was also a concern. The latest HSBC manufacturing PMI for China was 48.2, the second consecutive month of contraction.

“China is the elephant in the room,” Luschini said. “We are continuing to get reports that their economy is slowing.”

Julian Jessop, an analyst at Capital Economics, told USA Today he is sticking with his call that oil prices will finish 2013 below $100 a barrel, despite instability in Egypt.

Jessop said his prediction is based on his belief that global demand will remain muted due to a weak global economy, oil supplies will stay ample, and Middle East worries will fade.

Reuters reported crude prices were still rising Friday, although ports and shipping through the Suez Canal were operating normally.

Investors fretted over the situation and were pricing in risk of Mideast supply disruptions if the Egyptian conflict spread to other nations in the region, Reuters said.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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