Tuesday 21 Oct 2014

CHINA

Economy

China’s gross domestic product rose 7.3% in Q3 2014 quarter from Q3 2013, the slowest growth since Q1 2009. This exceeded economists’ expectations of a 7.2% rise.

Comment

Decent exports and the fact that there is more to China’s domestic demand than real estate dampen the overall slowdown. Barring a major further slowdown we expect the policy stance to remain relatively restrained.
Louis Kuijs, Chief Greater China Economist, Royal Bank of Scotland Group Plc (HK) More

The weakest part of China’s economy is still the property sector. The government has relaxed some controls recently and property sales may pick up in the fourth quarter. However, we may not see improvement in sectors like heavy industry and we expect the economy to continue to slow down.
Wang Tao, Analyst, UBS (HK) More

It’s hard to square the GDP print with the industrial production numbers for the quarter. There are confusing things going on. You have credit growing at the slowest pace since 2002. You have real estate investment slowing on a monthly basis and you have industrial production averaging slightly above 8 percent on a quarterly basis, slightly down from Q2. With that being the most reliable component of GDP on a quarterly basis, 7.3 percent seems a bit high to me.
Andrew Polk, Economist, the Conference Board (Beijing) More

The government has reiterated that no broad stimulus will be implemented, and I think today’s data will further bolster and strengthen that trend
Zhu Haibin, Chief China Economist, JPMorgan Chase & Co. (HK) More

USA

Economy

US producer price index – Sep 2014

Extract

The Producer Price Index for final demand decreased 0.1 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in August and advanced 0.1 percent in July. On an unadjusted basis, the index for final demand increased 1.6 percent for the 12 months ended in September.

In September, the 0.1-percent decrease in final demand prices can be traced to the indexes for both goods and services, which moved down 0.2 percent and 0.1 percent, respectively.

Within intermediate demand, prices for processed goods inched up 0.1 percent, the index for unprocessed goods rose 0.6 percent, and prices for services were unchanged.

Bureau of Labor Statistics, “US producer price index – Sep 2014“, 21 Oct 2014 (08:30) More

Existing home sales – Sep 2014 Opinion

Sales of previously owned U.S. homes advanced 2.4 percent in September to a 5.17 million annual rate, the National Association of Realtors reported today in Washington. A gain of 1 percent was forecast in a Bloomberg News survey of economists. More

Extract

After a modest decline last month, existing-home sales bounced back in September to their highest annual pace of the year, according to the National Association of Realtors®. All major regions except for the Midwest experienced gains in September.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.4 percent to a seasonally adjusted annual rate of 5.17 million in September from 5.05 million in August. Sales are now at their highest pace of 2014, but still remain 1.7 percent below the 5.26 million-unit level from last September.

The median existing-home price for all housing types in September was $209,700, which is 5.6 percent above September 2013. This marks the 31st consecutive month of year-over-year price gains.

Total housing inventory at the end of September fell 1.3 percent to 2.30 million existing homes available for sale, which represents a 5.3-month supply at the current sales pace. Despite fewer homes for sale in September, unsold inventory is still 6.0 percent higher than a year ago, when there were 2.17 million existing homes available for sale.

All-cash sales were 24 percent of transactions in September, up slightly from August (23 percent) but down from 33 percent in September of last year. Individual investors, who account for many cash sales, purchased 14 percent of homes in September, up from 12 percent last month but below September 2013 (19 percent). Sixty-three percent of investors paid cash in September.

National Association of Realtors, “Existing home sales – Sep 2014“, 21 Oct 2014 (10:00am) More

Comment

We’re on a pretty stable trajectory. Borrowing costs are pretty contained. The rate of payroll growth is a modest positive for the housing market.
Guy LeBas, Managing Director, Janney Montgomery Scott LLC More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,941.28 +1.96% 1,848.36 +5.03%
DJIA INDU 16,614.81 +1.31% 16,576.66 +0.23%
NASDAQ IXIC 4,419.48 +2.40% 4,176.59 +5.82%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 21 Oct 2014 Watch Read
Comment

Now we can finally focus on earnings in the U.S. Apple’s numbers were stunning, so that should help markets. So far, earnings numbers look OK.
Kully Samra, Charles Schwab Corp. (UK) ($2.4 trillion) More

This was strong across all sectors, and Apple gave a good guidance. Any fund manager who is underweight on Apple is probably rethinking that position today.
Michael Binger, Senior Portfolio Manager, Gradient Investments More

PORTFOLIO

Index values Opinion

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.647 +2.52% 1.399 +17.73%
Valuation Rate USD/AUD 0.88305 -0.17% 0.89789 -1.65%
Portfolio Index AUD 1.865 +2.69% 1.558 +19.71%

52-week performance Opinion

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Portfolio stock news

VMware Q3 2014 earnings More

VMW’s Q3 revenue was $1,52bn, just above expectations of $1.5bn. EPS were $0.87, ahead of expectations $0.83. However analysts were concerned about a fall in profit margin from 22% of sales to 16% of sales in Q3 2014. In after hours trading VMW dropped 1.32% to $86.50.

VMware, Inc. (NYSE: VMW), the global leader in virtualization and cloud infrastructure, today announced financial results for the third quarter of 2014:

  • Revenues for the third quarter were $1.52 billion, an increase of 18% from the third quarter of 2013.
  • Operating income for the third quarter was $242 million, a decrease of 16% from the third quarter of 2013, reflecting the impact of the AirWatch acquisition. Non-GAAP operating income for the third quarter was $460 million, an increase of 5% from the third quarter of 2013, also reflecting the impact of the AirWatch acquisition, as expected.
  • Net income for the third quarter was $194 million, or $0.45 per diluted share, down 26% per diluted share compared to $261 million, or $0.60 per diluted share, for the third quarter of 2013. Non-GAAP net income for the quarter was $377 million, or $0.87 per diluted share, up 3% per diluted share compared to $363 million, or $0.84 per diluted share, for the third quarter of 2013. Both GAAP and Non-GAAP results on a year-over- year basis primarily reflect the acquisition of AirWatch, completed in the first quarter of 2014, as expected
  • Cash, cash equivalents and short-term investments were $7.09 billion, and unearned revenues were $4.37 billion as of September 30, 2014.

Stock price movements

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $102.47 +2.72% $80.1457 +27.85%
Amazon AMZN $315.33 +2.98% $398.79 -20.93%
Ebay EBAY $50.86 +3.37% $54.865 -7.30%
Facebook FB $78.69 +2.26% $54.649 +43.99%
Google A GOOGL $538.04 +1.06% $560.365 -3.98%
Google C GOOG $526.54 +1.09% $560.365 -6.04%
Linkedin LNKD $205.38 +3.50% $216.83 -5.28%
VMware VMW $88.19 +0.60% $89.71 -1.69%

Monday 20 Oct 2014

Port Melbourne's 2014/2015 cruise ship season is underway.

Port Melbourne’s 2014/2015 cruise ship season is underway.

Eurozone

Economy

Euro area balance of payments – Aug 2014

Extract

In August 2014 the seasonally adjusted current account of the euro area recorded a surplus of €18.9 billion. In the financial account, combined direct and portfolio investment recorded net outflows of €19 billion (non-seasonally adjusted).

Current account

The seasonally adjusted current account of the euro area recorded a surplus of €18.9 billion in August 2014. This reflected surpluses for goods (€15.3 billion), services (€7.8 billion) and income (€4.2 billion), which were partly offset by a deficit for current transfers (€8.4 billion).

The seasonally adjusted 12-month cumulated current account for the period ending in August 2014 recorded a surplus of €242.9 billion (2.5% of euro area GDP), compared with €202.2 billion (2.1% of euro area GDP) for the 12 months to August 2013 (see Table 1 and Chart 1). The increase in the 12-month cumulated current account surplus was due mainly to increases in the surpluses for goods (€183.6 billion, up from €147.9 billion) and services (€120.1 billion, up from €102.6 billion), which were partly offset by a decrease in the surplus for income (€54.3 billion, down from €69.3 billion). The deficit for current transfers remained broadly stable.

Financial account

In the financial account, combined direct and portfolio investment recorded net outflows of €19 billion in August 2014, mainly as a result of net outflows for portfolio investment (€28 billion) which were partly offset by net inflows for direct investment (€9 billion).

The net inflows for direct investment were a result of net inflows for both other capital (mostly inter-company loans) (€5 billion) and for equity capital and reinvested earnings (€3 billion).

The net outflows for portfolio investment were accounted for almost entirely by net outflows for debt instruments (€49 billion), particularly for bonds and notes (€40 billion), which were partly offset by net inflows for equity (€21 billion).

The financial derivatives account recorded net outflows of €13 billion.

Other investment recorded net inflows of €17 billion, which mainly reflected net inflows for other sectors (€24 billion) and, to a lesser extent, for the Eurosystem (€6 billion), which were partly offset by net outflows for MFIs excluding the Eurosystem (€7 billion) and general government (€5 billion).

The Eurosystem’s stock of reserve assets increased by €9 billion in August 2014 (from €585 billion to €594 billion), mainly on account of valuation effects (transactions contributed to an increase of €1 billion in overall reserve assets).

In the 12 months to August 2014 combined direct and portfolio investment recorded cumulated net inflows of €39 billion, compared with net inflows of €33 billion in the 12 months to August 2013. This change resulted from lower net outflows for direct investment (€53 billion, after €84 billion) and lower net inflows for portfolio investment (€92 billion, after €117 billion).

European Central Bank, “Euro area balance of payments (August 2014)” 20 Oct 2014 More

USA

Economy

Unemployment

Bloomberg considers that “Federal Reserve policy makers are missing a key element as they assess the health of the labor market: data that includes whether those who are employed are overqualified for their job or would like to work more hours. As a result, the “significant underutilization of labor resources” that Fed officials highlighted last month as they renewed a pledge to keep interest rates low for a “considerable period” is probably even more severe than currently estimated. And the information gap means policy makers may have more difficulty gauging the right moment to raise rates off zero.More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,904.01 +0.91% 1,848.36 +3.01%
DJIA INDU 16,399.67 +0.12% 16,576.66 -1.07%
NASDAQ IXIC 4,316.07 +1.35% 4,176.59 +3.34%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 20 Oct 2014 Watch Read
IBM takes a dive

IBM dropped 7.11% today on worse than expected software sales and lower productivity in services in Q3:

  • Revenue was $22.4bn, down 4% from $23.34bn in Q3 2013, (10th straight quarterly fall), due to declines in its hardware division and in emerging markets. Analysts had expected $23.37bn.
  • Adjusted EPS from continuing operations were $3.68, down from $4.08 in Q3 2013. Analysts had expected $4.31.

CEO Ginni Rometty had hoped for a strong second half of the year, but following the Q3 outcome has abandoned her 2015 operating earnings target. IBM’s chip-manufacturing division has performed so badly that IBM will pay Globalfoundries $1.5bn to take the operation off its hands. This follows the recent $2.1bn sale of IBM’s low-end server unit to Lenovo Group Ltd. More

We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry.
Ginni Rometty, chairman, president and chief executive officer, IBM More

Comment

It’s all about earnings today. Yes, IBM (IBM) earnings were a big miss, but other company earnings are coming in better than expected and that’s good news. The growth rate for the third quarter has been ratcheted up and that’s some good news for the market.
Karyn Cavanaugh, Senior Market Strategist, Voya Investment Management LLC. ($215bn) More

PORTFOLIO

Index values Opinion

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.607 +1.88% 1.399 +14.84%
Valuation Rate USD/AUD 0.88452 +0.37% 0.89789 -1.49%
Portfolio Index AUD 1.817 +1.50% 1.558 +16.58%

52-week performance Opinion

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Stock price movements

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stock news

Apple Q4 2014 earnings Opinion

Apple store at the Inverted Pyramid, the Louvre, Paris, France

Apple store at the Inverted Pyramid, the Louvre, Paris, France (Oct 2014)

Apple reported its Q4 results after market close today. In after-hours trading AAPL has risen more than 3.5% to above $101.

Extract

Apple® today announced financial results for its fiscal 2014 fourth quarter ended September 27, 2014. The Company posted quarterly revenue of $42.1 billion and quarterly net profit of $8.5 billion, or $1.42 per diluted share. These results compare to revenue of $37.5 billion and net profit of $7.5 billion, or $1.18 per diluted share, in the year-ago quarter. Gross margin was 38 percent compared to 37 percent in the year-ago quarter. International sales accounted for 60 percent of the quarter’s revenue.

Apple is providing the following guidance for its fiscal 2015 first quarter:

  • revenue between $63.5 billion and $66.5 billion
  • gross margin between 37.5 percent and 38.5 percent
  • operating expenses between $5.4 billion and $5.5 billion
  • other income/(expense) of $325 million
  • tax rate of 26.5 percent.”

Comment

Demand for the new iPhones has been staggering. We’re selling everything we’re making.
Tim Cook, CEO, Apple More

The guidance looks very strong. How good beyond the already good – that’s going to be one of the key questions we’re going to be asking ourselves.
Alex Gauna, Analyst, JMP Securities LLC More

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $99.76 +2.14% $80.1457 +24.47%
Amazon AMZN $306.21 +0.85% $398.79 -23.22%
Ebay EBAY $49.20 +2.61% $54.865 -10.33%
Facebook FB $76.94% +1.30% $54.649 +40.79%
Google A GOOGL $532.38 +1.80% $560.365 -4.99%
Google C GOOG $520.84 +1.89% $560.365 -7.05%
Linkedin LNKD $198.44 +1.27% $216.83 -8.48%
VMware VMW $87.66 -1.89% $89.71 -2.29%

FX: USD/AUD

The AUD rose strongly against the USD today (Chart: xe.com)

The AUD rose strongly against the USD today (Chart: xe.com)

Week: 13-19 Oct 2014

USA

US market indices Impact

Index 17 Oct 2014 Week 10 Oct 2014 Month 30 Sep 2014 Year 31 Dec 13
S&P 500 1,886.76 -1.02% 1,906.13 -4.34% 1,972.29 +2.08% 1,848.36
DJIA 16,380.41 -0.99% 16,544.10 -3.89% 17,043.12 -1.18% 16,576.66
NASDAQ 4,258.44 -0.42% 4,276.24 -5.23% 4,493.39 +1.96% 4,176.59

The shape of the week

S&P500, DJIA and NASDAQ index performance this week (Chart: Yahoo Finance)

S&P500, DJIA and NASDAQ index performance this week (Chart: Yahoo Finance)

Comment

This was a really spectacular week to watch. A lot of risks came into the minds of short-term orientated traders.
Herbert Perus, Head of Equities, Raiffeisen Capital Management (Vienna) ($36bn) More

The market got to a position where it was prone to weakness and it happened to occur at the same time that scary news such as Ebola was rolling out. It’s a confluence of factors coming together to lead to a very difficult two weeks in the market.
Robert Stimpson, Fund Manager, Oak Associates Ltd More

This should be it. The market should do well once we get by some of these geopolitical risks that are on top of us right now, the Ebola thing and the mid-cycle elections. I would think the market is going to be strong into the close this year.
Michael Mullaney, Chief Investment Officer, Fiduciary Trust Co ($11.3bn) More

PORTFOLIO

Long term (52-week) performance Impact

:-( Our fifth straight week of losses:

  • our weekly USD index is down 5.23% from 1.664 on 13 Sep 2014 to 1.577.
  • our weekly AUD index is down 4.38% from 1.872 on 27 Sep 2014 to 1.790.

Our losses are in the same ballpark as the market, which has suffered four straight weeks of losses since 20 Sep 2014:

  • The S&P500 index is down 6.12% from 2,010 to 1,887.
  • The DJIA index is down 4.93% from 17,230 to 16,380 and is negative 1.18% for the year to date.
  • The NASDAQ Composite is down 5.38% from 4,580 to 4,258.
USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Looking at the risks to a return to positive growth:

  • European growth slowdown: The ECB is expected to begin US Fed style asset (private-sector debt instrument) purchases from banks next week More, and the ECB is likely to keep interest rates low to support growth.
  • China growth slowdown: Like Europe, there may be an economic policy response: China’s central bank may inject up to CNY200bn (USD32.6bn) into 20 large national and regional banks More. Hong Kong’s democracy campaign is unlikely to represent a threat to market performance. More
  • Emerging markets growth slowdown: We can’t evaluate this risk in relation to our portfolio. More
  • Ebola: This issue, first flagged in PortfolioTicker on 9 Aug 2014 and discussed in detail on 16 Aug 2007 and 28 Aug 2014 is worrying because the epidemic is not being quarantined in Africa and the death toll has now passed 6,000 More
  • Geopolitical: The Ukraine/Russia situation is quiet for now More, and while the ISIL situation is a current operation, it appears to be under control at present. More
  • US monetary policy: The issues are not “if” but “when”. The US economy is rising above the need to maintain asset buying (QE3: expected to end this month) and accommodative interest rates, but the Federal Reserve is very sensitive to market reactions to these policy areas. As a long term investor we’re not currently concerned about this issue.
  • US mid-term elections: We can’t evaluate this risk.
  • Falling oil prices: Appear to have found a bottom, closing at $82.75 (Nov 2014 crude)
  • Reporting season: The market is currently in reporting season, and outlooks (forecast revenue and earnings) represent the greatest area of risk.

This week’s performance Impact

Index 17 Oct 2014 Week 10 Oct 2014 Month 30 Sep 2014 Year 31 Dec 13
USD Index 1.577 -2.92% 1.625 -4.46% 1.651 +12.73% 1.399
Trading USD/AUD 0.88126 +0.93% 0.87314 +0.09% 0.88048 -1.85% 0.89789
AUD Index 1.790 -3.81% 1.861 -4.55% 1.875 +14.85% 1.558

Portfolio stocks

Apple AAPL -3.04%

AAPL share price performance this week (Chart: Yahoo Finance)

AAPL share price performance this week (Chart: Yahoo Finance)

Amazon AMZN -2.49%

AMZN share price performance this week (Chart: Yahoo Finance)

AMZN share price performance this week (Chart: Yahoo Finance)

Ebay EBAY -7.54%

EBAY share price performance this week (Chart: Yahoo Finance)

EBAY share price performance this week (Chart: Yahoo Finance)

Facebook FB +4.17%

FB share price performance this week (Chart: Yahoo Finance)

FB share price performance this week (Chart: Yahoo Finance)

Google Class A GOOGL -5.80%

GOOGL share price performance this week (Chart: Yahoo Finance)

GOOGL share price performance this week (Chart: Yahoo Finance)

  • Friday close: $522.97 -5.80% from $555.19.
  • P/E (historical): 27.42 Change from 28.68
  • P/E (1 year fwd): 24.42 Change from 25.91
  • Target (1 year): NASDAQ consensus $670Change, range $600 ↔ $750.
  • SEC filings (CIK 0001288776): Edgar Search (New, Beta)

Google Class C GOOG -6.12%

GOOG share price performance this week (Chart: Yahoo Finance)

GOOG share price performance this week (Chart: Yahoo Finance)

  • Friday close: $511.17 -6.12% from $544.49.
  • P/E (historical): 21.28 Change from 18.98
  • Analyst recommendations: 7Change strong buy, 3 buy, 0 hold.

Linkedin LNKD +0.89%

LNKD share price performance this week (Chart: Yahoo Finance)

LNKD share price performance this week (Chart: Yahoo Finance)

VMware VMW -1.25%

VMW share price performance this week (Chart: Yahoo Finance)

VMW share price performance this week (Chart: Yahoo Finance)

USD/AUD

USD/AUD over the last week (Chart: xe.com)

USD/AUD over the last week (Chart: xe.com)

Friday 17 Oct 2014

USA

Economy

Consumer confidence – Prelim – Oct 2014 Opinion

The Oct 2014 Index of Consumer Sentiment rose to 86.4, up from the 84.6 score for Sep 2014 and 82.5 in Aug 2014. Economists had expected a fall to around 84.0. October’s figure of 86.4 was the highest score since Jul 2007.

Extract

U.S. consumer sentiment rose in October to the highest in more than seven years, boosted by views on personal finances and the national economy, a survey released on Friday showed.

The Thomson Reuters/University of Michigan preliminary October reading on the overall index on consumer sentiment came in at 86.4, the highest since July 2007. The gains were unexpected, as a Reuters survey showed a forecast for a slip to 84.1 from last month’s 84.6 reading.

The survey’s gauge of consumer expectations also rose to hit 78.4, the highest since October 2012, from 75.4 and beating a forecast for 74.4.

The survey’s barometer of current economic conditions was unchanged at 98.9 and also beat its forecast of 98.0.

Thomson Reuters-University of Michigan, “Consumer confidence – Prelim – Oct 2014“, 17 Oct 2014 More

Comment

The data show absolutely no signs that fear and panic is about to overtake the consumer sector (in relation to broader concerns about the global economic meltdown, escalating military conflicts, and rising concerns about Ebola).
Richard Curtin, Survey Director More

An improving job market and lower energy costs are going to offset a lot of what’s happening. Consumers’ take-home pay is going up and they’re paying a lot less at the pump.
Joseph LaVorgna, Chief U.S. Economist, Deutsche Bank Securities Inc. More

New residential construction (permits, starts, completions – Sep 2014 Opinion

Housing starts in Sep 2014 rose to 1.017m (seasonally adjusted annualised rate), up 6.3% from 0.957m Aug 2014 and ahead of economists’ expectations of 1.008 million.

Extract

BUILDING PERMITS

Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,018,000. This is 1.5 percent (±1.1%) above the revised August rate of 1,003,000 and is 2.5 percent (±1.2%) above the September 2013 estimate of 993,000.
Single-family authorizations in September were at a rate of 624,000; this is 0.5 percent (±1.1%) below the revised August figure of 627,000. Authorizations of units in buildings with five units or more were at a rate of 369,000 in September.

HOUSING STARTS

Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,017,000. This is 6.3 percent (±9.3%) above the revised August estimate of 957,000 and is 17.8 percent (±14.4%) above the September 2013 rate of 863,000.

Single-family housing starts in September were at a rate of 646,000; this is 1.1 percent (±8.3%) above the revised August figure of 639,000. The September rate for units in buildings with five units or more was 353,000.

HOUSING COMPLETIONS

Privately-owned housing completions in September were at a seasonally adjusted annual rate of 999,000. This is 8.6 percent (±17.2%) above the revised August estimate of 920,000 and is 31.3 percent (±23.7%) above the September 2013 rate of 761,000.

Single-family housing completions in September were at a rate of 624,000; this is 1.0 percent (±11.6%) above the revised August rate of 618,000. The September rate for units in buildings with five units or more was 368,000.

US Census Bureau, “New residential construction (permits, starts, completions – Sep 2014“, 17 Oct 2014 (09:15am) More

Comment

The trend in starts continues to be up. As the job market’s gotten better, as the mortgage rates have remained low and in the last leek gone even lower, the underlying demand for single-family homes has improved.
David Berson, Chief Economist, Nationwide Insurance More

While the residential real estate market has definitely gotten better, which is good for the U.S. economy, it has not fully recovered. I believe there are several factors holding the housing market back from a complete recovery, including slow household formation, elevated student debt levels and still-tight credit.
John Stumpf, Chief Executive Officer, Wells Fargo & Co More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,886.76 +1.29% 1,848.36 +2.08%
DJIA INDU 16,380.41 +1.63% 16,576.66 -1.18%
NASDAQ IXIC 4,258.44 +0.97% 4,176.59 +1.96%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 17 Oct 2014 Watch Read
Comment: Premarket

It is a psychological market these days. The market is overshooting in one or the other direction, without being driven by the obvious logical reasons you find in normal markets.
Soeren Steinert, Associate Director for Equities Trading, Quoniam Asset Management GmbH (Frankfurt) ($24bn) More

Any news coming from the ECB in terms of its asset-purchase program will be quite positive and supportive to equity markets, especially after the recent selloff. There was at the beginning of October a big negative reaction after Mario Draghi gave unclear messages to the markets and this has weighed on stock markets.
Guillaume Duchesne, Equity Strategist, BGL BNP Paribas SA (Luxembourg) More

Comment: Trading Session

The (economic) fundamentals continue to look solid. The turmoil in the market doesn’t reflect the underlying U.S. economic fundamentals.
Gus Faucher, Economist, PNC Financial Services Group Inc. More

The market was clearly oversold and today’s gains are just a rebound. Central banks can provide more support but they can’t do everything. A good earnings season could give us the confidence that the market needs.
Virginie Robert, Co-Founder, Constance Associes (Paris) More

The market has a buy-the-dip mentality right now. The disconnect between the sharp market drops this week and the pretty good U.S. fundamentals might’ve gotten some people interested in buying again.
John Canally, Economic Strategist, LPL Financial Corp More

PORTFOLIO

Index values Opinion

:-| About square Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.577 +1.00% 1.399 +12.73%
Valuation Rate USD/AUD 0.88126 +0.06% 0.89789 -1.85%
Portfolio Index AUD 1.790 +0.94% 1.558 +14.86%

52-week performance Opinion

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Stock price movements

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $97.67 +1.46% $80.1457 +21.87%
Amazon AMZN $303.64 +0.26% $398.79 -23.86%
Ebay EBAY $47.95 +0.15% $54.865 -12.60%
Facebook FB $72.95 +4.57% $54.649 +38.98%
Google A GOOGL $522.97 -2.60% $560.365 -6.67%
Google C GOOG $511.17 -2.54% $560.365 -8.78%
Linkedin LNKD $195.96 -1.22% $216.83 -9.63%
VMware VMW $89.35 +0.85% $89.71 -0.40%

Thursday 16 Oct 2014

USA

Economy

Unemployment Insurance Weekly Claims Report: Week to 11 Oct 2014 Opinion

Extract

In the week ending October 11, the advance figure for seasonally adjusted initial claims was 264,000, a decrease of 23,000 from the previous week’s unrevised level of 287,000. This is the lowest level for initial claims since April 15, 2000 when it was 259,000. The 4-week moving average was 283,500, a decrease of 4,250 from the previous week’s unrevised average of 287,750. This is the lowest level for this average since June 10, 2000 when it was 283,500.

The advance seasonally adjusted insured unemployment rate was 1.8 percent for the week ending October 4, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending October 4 was 2,389,000, an increase of 7,000 from the previous week’s revised level. The previous week’s level was revised up 1,000 from 2,381,000 to 2,382,000. The 4-week moving average was 2,403,750, a decrease of 10,750 from the previous week’s revised average. This is the lowest level for this average since June 17, 2006 when it was 2,399,000. The previous week’s average was revised up by 250 from 2,414,250 to 2,414,500.

U.S. Employment and Training Administration, “Unemployment Insurance Weekly Claims Report – Week to 11 Oct 2014“, 16 Oct 2014 (08:30am) More

Comment

This is a little bit heartening to remind everybody that the U.S. economy so far seems it’s doing pretty well. It sets up a pretty good October employment report … You hear stories that businesses are having trouble finding workers. If you’re having trouble finding workers, you’re certainly not going to lay off the ones you already have.
Guy Berger, U.S. Economist, RBS Securities Inc. More

Industrial production – Sep 2014 Opinion

Extract

Industrial production increased 1.0 percent in September and advanced at an annual rate of 3.2 percent in the third quarter of 2014, roughly its average quarterly increase since the end of 2010. In September, manufacturing output moved up 0.5 percent, while the indexes for mining and for utilities climbed 1.8 percent and 3.9 percent, respectively. For the third quarter as a whole, manufacturing production rose at an annual rate of 3.5 percent and mining output increased at an annual rate of 8.7 percent. The output of utilities fell at an annual rate of 8.5 percent for a second consecutive quarterly decline. At 105.1 percent of its 2007 average, total industrial production in September was 4.3 percent above its level of a year earlier. The capacity utilization rate for total industry moved up 0.6 percentage point in September to 79.3 percent, a rate that is 1.0 percentage point above its level of 12 months earlier but 0.8 percentage point below its long-run (1972–2013) average.

Federal Reserve, “G.17 (419): Industrial Production and Capacity Utilization – Sep 2014“, 16 Oct 2014 (09:15am) More

Comment

The fact that we can get a 1 percent increase in production when you have a decline in the auto sector is striking. There’s broad-based strength. Industrial production is solid.
Ward McCarthy, Chief Financial Economist, Jefferies LLC More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,862.76 +0.01% 1,848.36 +0.78%
DJIA INDU 16,117.24 -0.15% 16,576.66 -2.77%
NASDAQ IXIC 4,217.39 +0.05% 4,176.59 +0.98%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 16 Oct 2014 Watch Read
Comment

There is a combination of concerns over the outlook for global growth and concerns on the outlook for inflation in the wake of a slew of negative data. There is the likelihood that third-quarter corporate earnings expectations which have already been lowered may very well be lowered again.
Jeremy Batstone-Carr, Head of Research at Charles Stanley & Co. (London) More

We’ve got an overreaction going on because of health concerns and foreign policy concerns and all this stuff coming together that’s just scaring people. There’s this sense that we’re out of control, and that’s being reflected into markets. The U.S. economy is doing quite nicely.
Stephen Schwarzman, Chief Executive Officer, Blackstone Group LP More

PORTFOLIO

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.562 -1.24% 1.399 +11.61%
Valuation Rate USD/AUD 0.8807 -0.66% 0.89789 -1.91%
Portfolio Index AUD 1.773 -0.58% 1.558 +13.79%

52-week performance Opinion

 USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)


USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Hmmm … looks like an extended downturn – should we be worried?
Let’s select out 3 stocks: AAPL, FB and GOOGL:

AAPL, FB and GOOGL performance over the last 12 months (Chart: Yahoo Finance)

AAPL, FB and GOOGL performance over the last 12 months (Chart: Yahoo Finance)

Looking at P/Es, we don’t see significant overpricing here:

  • AAPL: Historic P/E: 15.55, 1 Year Forward P/E: 15.41 (looks OK to us)
  • FB: Historic P/E: 78.95, 1 Year Forward P/E: 55.89 (OK for a growth stock)
  • GOOGL: Historic P/E: 27.74, 1 Year Forward P/E: 24.59 (a bit high maybe)

So are we worried?

  • the US economy seems OK, even with the withdrawal of Fed stimulus
  • Apple’s underlying business looks set to keep growing – especially with new products and a new line of business (Apple Pay)
  • Google’s revenue and non GAAP EPS continue to grow – the EPS are below expectations, but remain positive and growing
  • Facebook remains under brilliant management, and we don’t see any problems right now.

Right now we’re happy that our 12 month portfolio gains are still above 20%, and on a 2014 YTD basis we’re more than 10 times the market’s gains. There’s room for more write-down before we get worried.

Stock news

Apple announces iPad Air 2, iPad Mini 3, and OSX Yosemite software Opinion

Apple announces better tablets for "selfies"

Apple announces better tablets for taking “selfies” (Louvre sculpture)

At today’s iPad Event, CEO Tim Cook unveiled a new, slim iPad: the iPad Air, which measures 6.1 millimeters in width, making it the world’s thinnest tablet. It has a 64bit A8X CPU, 12 times faster than the original iPad. The iPad Air2 is priced at $499 (16GB), $599 (64 GB) and $699 (128 GB).

The new iPad Mini 3 is priced from $399, against the iPad Mini ($249) and iPad Mini 2 ($299).

The OSX 10 Yosemite OS announced as a beta in Jun 2014 is available from today.

Apple Pay, the new mobile-payments system for iPhone 6, iPhone 6 Plus, iPad Air 2 and iPad mini 3 will be rolled out on 20 Oct 2014 with Apple 8.1 OS. US retail chain Walgreens is reported to be preparing to adopt Apple Pay on Saturday, 18 Oct 2014.

Google’s Q3 2014 earnings Opinion

Google announced its Q3 2014 earnings after the market closed. In a down day for tech stocks, GOOGL had closed at $536.92, down -0.70%. About an hour later (in extended trading), GOOGL was $523.77, down 3.13%.

The problem was that Google missed analysts’ expectations More:

  • gross revenue of $16.5bn was below expectations of $16.6bn
  • non-GAAP earnings per share (EPS) of $6.35 was below expectations of $6.53.
Extract More

Google Inc. reported consolidated revenues of $16.52 billion for the quarter ended September 30, 2014, an increase of 20% compared to the third quarter of 2013. Google Inc. reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the third quarter of 2014, TAC totaled $3.35 billion, or 23% of advertising revenues.

Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures at the end of this release.

  • GAAP operating income in the third quarter of 2014 was $3.72 billion, or 23% of revenues. This compares to GAAP operating income of $3.76 billion, or 27% of revenues, in the third quarter of 2013. Non-GAAP operating income in the third quarter of 2014 was $5.36 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.62 billion, or 34% of revenues, in the third quarter of 2013.
  • GAAP net income (including net loss from discontinued operations) in the third quarter of 2014 was $2.81 billion, compared to $2.97 billion in the third quarter of 2013. Non-GAAP net income in the third quarter of 2014 was $4.37 billion, compared to $3.82 billion in the third quarter of 2013.
  • GAAP EPS (including impact from net loss from discontinued operations) in the third quarter of 2014 was $4.09 on 688 million diluted shares outstanding, compared to $4.38 in the third quarter of 2013 on 678 million diluted shares outstanding. Non-GAAP EPS in the third quarter of 2014 was $6.35 compared to $5.63 in the third quarter of 2013.
  • Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense. Non-GAAP net income and non-GAAP EPS exclude SBC expense, net of the related tax benefit, as well as net income (loss) from discontinued operations. In the third quarter of 2014, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP EPS also excluded an impairment charge of $378 million related to a patent licensing royalty asset acquired in connection with the purchase of Motorola.
  • In the third quarter of 2014, the expense related to SBC from our continuing operations and the related tax benefits were $1,255 million and $258 million compared to $856 million and $200 million in the third quarter of 2013. In addition, net loss from discontinued operations in the third quarter of 2014 was $185 million, compared to $193 million in the third quarter of 2013.

Stock price movements

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $96.26 -1.31% $80.1457 +20.11%
Amazon AMZN $302.86 -1.02% $398.79 -24.06%
Ebay EBAY $47.88 -4.70% $54.865 -12.73%
Facebook FB $72.63 -0.79% $54.649 +32.90%
Google A GOOGL $536.92 -0.70% $560.365 -4.18%
Google C GOOG $523.51 -1.04% $560.365 -6.40%
Linkedin LNKD $198.39 -0.62% $216.83 -8.50%
VMware VMW $88.60 -1.08% $89.71 -1.24%

Wednesday 15 Oct 2014

CHINA

Economy

China’s National Bureau of Statistics has reported that inflation (CPI) fell to 1.6% in Sep 2014 from 2.0% in Aug 2014. September’s figure is below expectations of 1.7%, and less than half of the government’s Mar 2014 target of 3.5%. More

USA

Ebola Opinion

A second US case of ebola has been identified. More

Extract

A second Texas nurse who tested positive for Ebola after caring for a patient with the virus had traveled by plane a day before she reported symptoms, U.S. health and airline officials said on Wednesday, adding that she should not have been on a commercial flight.

The worker at Texas Health Presbyterian Hospital in Dallas had taken a Frontier Airlines flight from Cleveland, Ohio to Dallas/Fort Worth International Airport on Monday, the officials said.

The latest revelation raised fresh questions about the handling of Duncan’s case and its aftermath by both the hospital and the U.S. Centers for Disease Control and Prevention (CDC). Concerns over Ebola have rattled markets, with the Dow Jones Industrial Average down 2.5 percent on Wednesday.

Lisa Maria Garza and Terry Wade, Reuters, “Second nurse with Ebola should not have traveled by plane, CDC says“, 15 Oct 2014 More

Emirates aircraft quarantined at Boston (Source: The Guardian)

Emirates aircraft quarantined at Boston (Source: The Guardian)

Emergency teams dressed in protective suits boarded a plane on the runway at Boston’s international airport after it arrived from Dubai with five passengers showing flu-like symptoms. Health officials later ruled out Ebola from the five passengers.More (Video)

Economy

Advance estimate of monthly sales for retail and food services – Sep 2014 Opinion

The advance estimate of retail sales for Sep 2014 suggests that retail expenditure fell 0.3% from a 0.6% rise in Aug 2014. This drop was larger than the predicted 0.1% fall. More

Extract

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $442.7 billion, a decrease of 0.3 percent (±0.5%) from the previous month, but 4.3 percent (±0.9%) above September 2013. Total sales for the July through September 2014 period were up 4.5 percent (±0.7%) from the same period a year ago. The July to August 2014 percent change was unrevised from 0.6% (±0.2%).

Retail trade sales were down 0.4 percent (±0.5%) from August 2014, but 4.0 percent (±0.7%) above last year. Auto and other motor vehicle dealers were up 10.4 percent (±3.2%) from September 2013 and food services and drinking places were up 7.1 percent (±3.3%) from last year.

US Census Bureau, “Advance monthly sales for retail and food services – September 2014“, 15 Oct 2014 (0830) More

Comment

The pickup in consumption that we’re all waiting for hasn’t quite taken off yet. The fact that real wages and salaries haven’t picked up that dramatically, it puts a ceiling on how much spending can accelerate.
Omair Sharif, U.S. economist, RBS Securities Inc. More

Producer price indexes – Sep 2014 Opinion

The producer price index fell 0.1% in Sep 2014, below expectations of a 0.1% rise.

Extract

The Producer Price Index for final demand decreased 0.1 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in August and advanced 0.1 percent in July. On an unadjusted basis, the index for final demand increased 1.6 percent for the 12 months ended in September.

In September, the 0.1-percent decrease in final demand prices can be traced to the indexes for both goods and services, which moved down 0.2 percent and 0.1 percent, respectively.

Within intermediate demand, prices for processed goods inched up 0.1 percent, the index for unprocessed goods rose 0.6 percent, and prices for services were unchanged.

Bureau of Labor Statistics, “Producer price indexes – September 2014“, 15 Oct 2014 (0830) More

Comment

If we really get a sustained, disinflationary forecast then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider.
John Williams, President, Federal Reserve Bank of San Francisco More

Manufacturing and trade inventories and sales – August 2014 Opinion

Extract

Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for August, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,353.4 billion, down 0.4 percent (±0.1%) from July 2014, but were up 4.5 percent (±0.6%) from August 2013.

Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,752.3 billion, up 0.2 percent (±0.1%) from July 2014 and up 5.7 percent (±0.4%) from August 2013.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of August was 1.29. The August 2013 ratio was 1.28.

US Census Bureau, “Manufacturing and trade inventories and sales – August 2014“, 15 Oct 2014 (1030) More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,862.49 -0.81% 1,848.36 +0.76%
DJIA INDU 16,141.74 -1.06% 16,576.66 -2.62%
NASDAQ IXIC 4,215.32 -0.28% 4,176.59 +0.93%

The shape of the day

Markets were trashed today on weak economic data (amongst other things), with the S&P500 index down 3% in the early afternoon.

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 15 Oct 2014 Watch Read
Comment

The market was already in a bad, bad mood ahead of the largely known weakness in retail sales this morning. Even the best report of the year would have failed to make much impact on investor sentiment captivated by signs of the bear and other factors such as the spread of the Ebola virus.
Andrew Wilkinson, Chief Market Analyst, Interactive Brokers LLC More

You have more concerns about Ebola, Empire manufacturing and retail sales numbers were quite poor, and even some earnings have been disappointing.
Matt Maley, Equity Strategist, Miller Tabak & Co LLC More

The clincher is that some of the concerns about Europe and the other economies slowing down has reached our shores today with the retail sales number and the PPI number. It’s normal and it’s long overdue – markets can’t grind higher for that long without some sort of ‘get back here’.
Scott Armiger, Portfolio Manager, Christiana Trust More

The economy isn’t as strong as perhaps everyone thought. The concern here is that the weakness in Europe and Asia is going to be exported to the U.S. and our economy is going to be negatively impacted.
Bruce Bittles, Chief Investment Strategist, RW Baird & Co ($110bn) More

The market is transitioning from fear to outright panic. They’re selling things very much across the board, seems to be urgent. We’re moving toward the bottom of the market correction. We’re probably not quite there yet, but this is a necessary precursor to a bottom, that is, to have this type of panic, selling frenzy.
Gene Peroni, Portfolio Manager, Advisors Asset Management Inc. ($14.7bn) More

You could argue, with the unemployment rate at 5.9 percent, things are getting better. The economy is growing at 3 percent. The Fed or any central bank should be hiking rates very soon. However, if the dollar is strengthening, that already leads to a tightening of monetary conditions (which) makes higher interest rates less necessary.
David Woo, Head of Global Rates and Currencies. Bank of America Merrill Lynch More

PORTFOLIO

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.581 -1.08% 1.399 +13.01%
Valuation Rate USD/AUD 0.88659 +1.26% 0.89789 -1.26%
Portfolio Index AUD 1.783 -2.30% 1.558 +14.45%

52-week performance Opinion

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Stock price movements

In after hours trading Ebay was trashed (down more than 5%) after releasing its Q3 2014 earnings:

  • Revenue in Q3 2014 was $4.4bn, up 12% on Q3/2013, and a bit above expectations of $4.37bn
  • EPS was 68 cents, a cent above the expected 67 cents

However eBay’s outlook was below expectations:

  • Q4 2014 revenue: $4.85bn to $4.95bn, below the expected $5.16bn
  • Q4 2014 earnings: 88 cents to 91 cents, below the expected 91 cents
  • FY 2014 revenue: $17.85bn to $17.95bn, below an earlier estimate of $18bn to $18.3bn.
Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $97.54 -1.23% $80.1457 +21.70%
Amazon AMZN $305.97% -0.76% $398.79 -23.28%
Ebay EBAY $50.24 -0.69% $54.865 -8.43%
Facebook FB $73.21 -0.52% $54.649 +33.96%
Google A GOOGL $540.73 -1.45% $560.365 -3.50%
Google C GOOG $530.03 -1.47% $560.365 -5.41%
Linkedin LNKD $199.62 +1.84% $216.83 -7.94%
VMware VMW $89.57 +0.16% $89.71 -0.16%

FX: USD/AUD

The USD weakened against the AUD today. (Chart: xe.com)

The USD weakened against the AUD today. (Chart: xe.com)

Tuesday 14 Oct 2014

"Midnight at the Oasis": boarding QF10 (A380) at Dubai

“Midnight at the Oasis”: boarding QANTAS QF10 (A380 super jumbo) at Dubai Song

EUROPE

Eurozone

Economy: Industrial production Opinion

Extract

In August 2014 compared with July 2014, seasonally adjusted industrial production fell by 1.8% in the euro area (EA18) and by 1.4% in the EU28, according to estimates from Eurostat … In July 2014 industrial production rose by 0.9% and 0.7% respectively.

In August 2014 compared with August 2014, industrial production decreased by 1.9% in the euro area and by 0.8% in the EU28.

Eurostat, “August 2014 compared with July 2014: Industrial production down by 1.8% in euro area. Down by 1.4% in EU28“, 14 Oct 2014 More

UK

Economy: Inflation Opinion

Extract

Inflation has slumped to its lowest rate for five years, hitting 1.2% in September and taking pressure off the Bank of England to raise interest rates in coming months.

The news took financial markets by surprise and the pound weakened against the euro and the dollar as traders pushed back bets of when the central bank will start to raise rates from their current record low.

Financial markets are now pricing in the first hike in borrowing costs in mid-2015. Until now the market consensus had been the early months of next year, though some economists had warned growth was softening and price pressures were benign.

Katie Allen, The Guardian, “UK inflation falls to five-year low of 1.2%“, 14 Oct 2014 More

Ireland

Tax policy: phased abolition of “Double Irish” scheme

Bowing to pressure from international criticism, Finance Minister Michael Noonan today announced in his budget speech to the Irish Parliament (Dáil) the phased abolition (over 4 years) of its “double Irish” tax scheme that has enabled multinationals such as Apple to reduce company tax. More

USA

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,877.70 +0.16% 1,848.36 +1.59%
DJIA INDU 16,315.19 -0.04% 16,576.66 -1.58%
NASDAQ IXIC 4,227.17 +0.32% 4,176.59 +1.21%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 14 Oct 2014 Watch Read
Comment

It has been a pretty fierce sell-off and investors reached an extreme risk aversion. You can’t keep that selling momentum forever. Concerns that slower global growth would affect the U.S. have been overdone. We know the Fed will only adjust interest rates once the time is right, and they have reassured markets.
Thomas Thygesen, Head of Cross-Asset Strategy, Skandinaviska Enskilda Banken AB (Copenhagen) More

The last hour (of trading) has come down to ‘do you want to hold stocks overnight or not?’. There’s a lot of skittishness and concerns out there with headlines on a global slowdown, a recession in Europe, a slowdown in Asia and Ebola.
Ryan Detrick, Strategist, See It Market More

It was disappointing to see the gains we’ve had over nine months dissipate so quickly. If this market doesn’t calm down and we continue to see sentiment turn negative, it could set up for a difficult period over the next two months.
Larry Peruzzi, Senior Equity Trader, Cabrera Capital Markets Inc Reuters

PORTFOLIO

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.598 -0.61% 1.399 +14.23%
Valuation Rate USD/AUD 0.87555 -0.60% 0.89789 -2.49%
Portfolio Index AUD 1.825 -0.37% 1.558 +17.15%

52-week performance Opinion

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Stock price movements

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $98.75 -1.06% $80.1457 +23.21%
Amazon AMZN $308.31 +0.61% $398.79 -22.69%
Ebay EBAY $50.59 +0.26% $54.865 -7.79%
Facebook FB $73.47 +0.66% $54.649 +34.44%
Google A GOOGL $548.69 +0.72% $560.365 -2.08%
Google C GOOG $537.94 +0.89% $560.365 -4.00%
Linkedin LNKD $196.02 +1.50% $216.83 -9.80%
VMware VMW $89.43 -1.16% $89.71 -0.31%

Monday 13 Oct 2014

EMERGING ECONOMIES

Data fron 19 large emerging economies collated by research firm Capital Economics show that industrial output in August and consumer spending in the second qurter fell to their lowest levels since 2009. Export growth in August also plunged. These trends are contributing to a sense that slower growth is becoming a permanent fixture among the world’s most dynamic group of economies.
James Kynge (London) and Chris Giles (Washington), “Emerging markets slowdown fuels concern for global outlook“, Financial Times, 13 Oct 2014.

CHINA

Investors leaving China Opinion

Chinese equity funds are on course to record a fourth year of net outflows from US and European investors as concerns about the strength of China’s economy take hold.
Investors pulled $1.1bn from China-focused equity funds in the US this year, causing their asset base to drop by nearly fifth to $5.8bn, according to figures compiled for FTfm by Morningstar …
European investors have withdrawn EUR596m (USD754m) from Chinese equity funds over the same period although their asset base remains substantially larger, at EUR28bn.

Madison Marriage, “Investors flee China equity funds“, Financial Times FTfm, 13 Oct 2014.

EUROPE

Investors deserting Europe Opinion

Investors have had enough of Europe.

Amid a global selloff that has sent the Standard & Poor’s 500 Index down 5.2 percent in three weeks, losses have been almost twice as big in the Euro Stoxx 50 Index, where last week’s 4.5 percent retreat was the largest since 2012. A record $1 billion was withdrawn from an exchange-traded fund tracking Europe in the period as Mario Draghi, the central-bank president, warned of signs the recovery is losing momentum.

Investors are bailing as the economy threatens to fall back into another recession just after ending the longest contraction in its history last year. Equity losses approaching $1.6 trillion since September mark a reversal for markets that fund managers named as the favorites as recently as July …

The Euro Stoxx 50 has tumbled for three consecutive weeks, the longest streak since June 2013. Valuations are failing to provide a floor, with companies in the gauge trading at 13.6 times projected profits, up 84 percent from a low in September 2011 and 20 percent higher than the five-year average …

Economic reports this month showed investors have reason for concern. Industrial production in Germany tumbled the most since 2009 in August, while French manufacturing contracted for a fifth month in September while expanding at a slower pace in Spain. Economists forecast Italy’s gross domestic product will probably shrink for a third year. S&P lowered France’s credit-rating outlook to negative from stable on Oct. 10 …

The International Monetary Fund cut its outlook for growth in the euro area last week and said the region faces the risk of a recession. The currency bloc will expand 1.3 percent next year, slower than the 1.5 percent pace predicted in July, after a 0.8 percent gain in 2014, the IMF said. It projects the U.S. economy will expand 2.2 percent this year and 3.1 percent in 2015, more than previously estimated.

Sofia Horta e Costa, Bloomberg, 13 Oct 2014 More

USA

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,874.74 -1.65% 1,848.36 +1.43%
DJIA INDU 16,321.07 -1.35% 16,576.66 -1.54%
NASDAQ IXIC 4,213.66 -1.46% 4,176.59 +0.89%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 13 Oct 2014 Watch Read
Comment

There has been weakness all day and there’s no leadership so when you get this exogenous thing, whether it’s caused by Ebola or not, and airlines are getting decimated, it’s hurting everything else.
Michael Block, Chief Equity Strategist, Rhino Trading Partners LLC More

PORTFOLIO

Index values Opinion

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.608 -1.01% 1.399 +14.84%
Valuation Rate USD/AUD 0.88085 +0.88% 0.89789 -1.90%
Portfolio Index AUD 1.826 -1.88% 1.558 +17.17%

52-week performance Opinion

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Stock price movements

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $99.81 -0.91% $80.1457 +24.54%
Amazon AMZN $308.45 -1.59% $398.79 -23.16%
Ebay EBAY $50.46 -2.70% $54.865 -8.03%
Facebook FB $72.99 +0.11% $54.649 +33.56%
Google A GOOGL $544.75 -1.88% $560.365 -2.79%
Google C GOOG $533.21 -2.07% $560.365 -4.85%
Linkedin LNKD $193.13 -0.57% $216.83 -10.93%
VMware VMW $90.48 +0.00% $89.71 +0.86%

Week: 6-12 Oct 2014

EUROPE

European bank mergers struggling through EU national interests

Global banks are global in life, but national in death (Mervyn King, 2009)

“Global banks are global in life, but national in death” (Mervyn King, Governor, BOE, 2009)

Prospects for cross-border mergers have faded since Europe has yet to address national regulators’ power to stop capital moving across borders, company law requiring subsidiaries to be run independently and secrecy laws.More

USA

US market indices Impact

Index 10 Oct 2014 Week 3 Oct 2014 Month 30 Sep 2014 Year 31 Dec 13
S&P 500 1,906.13 -3.14% 1,967.90 -3.35% 1,972.29 +3.13% 1,848.36
DJIA 16,544.10 -2.74% 17,009.69 -2.93% 17,043.12 -0.20% 16,576.66
NASDAQ 4,276.24 -4.45% 4,475.62 -4.83% 4,493.39 +2.39% 4,176.59

The shape of the week

S&P500, DJIA and NASDAQ index performance this week  (Chart: Yahoo Finance)

S&P500, DJIA and NASDAQ index performance this week (Chart: Yahoo Finance)

PORTFOLIO

Bunting portfolio indices Impact

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

This week’s performance Impact

What a horrible week! Nevertheless, our portfolio (which lost 0.65% in USD) outperformed the market (which lost 2.74% – 4.45%) :-)

Index 10 Oct 2014 Week 3 Oct 2014 Month 30 Sep 2014 Year 31 Dec 13
USD Index 1.625 -0.65% 1.635 -1.55% 1.651 +16.125 1.399
Trading USD/AUD 0.87314 +0.11% 0.87222 -0.83% 0.88048 -2.76% 0.89789
AUD Index 1.861 -0.75% 1.875 -0.76% 1.875 +19.41% 1.558

Portfolio stocks

Apple AAPL +1.11%

AAPL share price performance this week (Chart: Yahoo Finance) AAPL share price performance this week (Chart: Yahoo Finance)[/caption][/caption]

Amazon AMZN -3.52%

AMZN share price performance this week (Chart: Yahoo Finance)

AMZN share price performance this week (Chart: Yahoo Finance)

Ebay EBAY -4.74%

EBAY share price performance this week (Chart: Yahoo Finance)

EBAY share price performance this week (Chart: Yahoo Finance)

Facebook FB -5.85%

FB share price performance this week (Chart: Yahoo Finance)

FB share price performance this week (Chart: Yahoo Finance)

Google Class A GOOGL -5.30%

GOOGL share price performance this week (Chart: Yahoo Finance)

GOOGL share price performance this week (Chart: Yahoo Finance)

  • Friday close: $555.19 -5.30% from $586.25.
  • P/E (historical): 28.68 Change from 30.29
  • P/E (1 year fwd): 25.91 Change from 26.37
  • Target (1 year): NASDAQ consensus $665, range $600 ↔ $750.
  • SEC filings (CIK 0001288776): Edgar Search (New, Beta)

Google Class C GOOG -5.35%

GOOG share price performance this week (Chart: Yahoo Finance)

GOOG share price performance this week (Chart: Yahoo Finance)

  • Friday close: $544.49 -5.35% from $575.28.
  • P/E (historical): 18.98 Change from 20.06
  • P/E (1 year fwd): 21.86
  • Analyst recommendations: 6 strong buy, 3 buy, 0 hold.

Linkedin LNKD -7.89%

LNKD share price performance this week (Chart: Yahoo Finance)

LNKD share price performance this week (Chart: Yahoo Finance)

VMware VMW -3.80%

VMW share price performance this week (Chart: Yahoo Finance)

VMW share price performance this week (Chart: Yahoo Finance)

USD/AUD

USD/AUD over the last week (Chart: xe.com)

USD/AUD over the last week (Chart: xe.com)

Friday 10 Oct 2014

USA

Economy

US import and export price indexes – Sep 2014

Extract

Prices for U.S. imports fell 0.5 percent in September, after declining 0.6 percent in August and 0.3 percent in July, the U.S. Bureau of Labor Statistics reported today. Each of the 3 monthly decreases was led by falling fuel prices. The price index for U.S. exports also declined in September, decreasing 0.2 percent following a 0.5-percent drop in August.

All Imports: Overall import prices continued a 3-month downward trend in September, falling 0.5 percent. Prices for imports decreased 1.4 percent from June to September, the largest quarterly drop since the index declined 1.4 percent during the final quarter of 2013. In September, fuel prices drove the decrease, although nonfuel prices also declined. The price index for overall imports fell 0.9 percent for the year ended in September, the largest 12-month decrease since the index fell 1.1 percent in February.

Fuel Imports: Prices for import fuel decreased 2.1 percent in September following a 3.1-percent drop in August and a 1.5-percent decline in July. Lower petroleum and natural gas prices contributed to the September decline, falling 2.0 percent and 5.0 percent, respectively. Fuel prices decreased 5.8 percent over the past 12 months, the largest year-over-year decline since the index fell 8.1 percent between April 2012 and April 2013. The decrease in fuel prices over the past year was led by a 6.6-percent drop in petroleum prices which more than offset a 35.6-percent increase in natural gas prices.

All Imports Excluding Fuel: Nonfuel import prices edged down 0.1 percent in September, after recording no change the previous month. In September, lower prices for nonfuel industrial supplies and materials and automotive vehicles more than offset an increase in the price index for foods, feeds, and beverages. Despite the decline, prices for nonfuel imports rose 0.5 percent over the past year. Higher prices for consumer goods; nonfuel industrial supplies and materials; and foods, feeds, and beverages all contributed to the advance.

All Exports: The price index for exports declined 0.2 percent in September, which continued an overall downward trend for the index since April. In September, lower prices for both agricultural exports and nonagricultural exports contributed to the decline. Export prices decreased 0.2 percent for the year ended in September, the first 12-month decline for the index since a 0.1-percent drop in April.

Agricultural Exports: Agricultural prices declined 0.9 percent in September following declines of 3.0 percent, 1.8 percent, and 1.9 percent over the previous 3 months. In September, the decrease was driven by a 6.2-percent drop in soybean prices, a 2.1-percent decline in meat prices, and a 3.9-percent fall in corn prices. The price index for agricultural exports fell 2.9 percent over the past year, led by lower prices for soybeans and corn.

All Exports Excluding Agriculture: Prices for nonagricultural exports declined 0.2 percent for the second consecutive month in September. Decreasing prices for nonagricultural industrial supplies and materials, consumer goods, and automotive vehicles all contributed to the drop in overall nonagricultural prices. The price index for nonagricultural prices recorded no change for the year ended in September. Each of the major finished goods categories rose over the past 12 months, while nonagricultural industrial supplies and materials prices declined.

Bureau of Labor Statistics, “U.S. Import and Export Price Indexes“, 10 Oct 2014 (08:30am) More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,906.13 -1.15% 1,848.36 +3.13%
DJIA INDU 16,544.10 -0.69% 16,576.66 -0.20%
NASDAQ IXIC 4,276.24 -2.33% 4,176.59 +2.39%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 10 Oct 2014 Watch Read
Comment

It’s been an emotional roller coaster. It’s really about investors’ degree of confidence on growth outside of the U.S. and that’s what has been called into question.
Mark Freeman, Chief Investment Officer, Westwood Holdings Group Inc. ($20.1bn) More

PORTFOLIO

Index values Opinion

:-| About square Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.625 -0.95% 1.399 +16.12%
Valuation Rate USD/AUD 0.87314 -1.15% 0.89789 -2.76%
Portfolio Index AUD 1.861 +0.20% 1.558 +19.41%

52-week performance Opinion

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)

Stock price movements

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $100.73 -0.29% $80.1457 +25.68%
Amazon AMZN $311.39 -1.26% $398.79 -21.92%
Ebay EBAY $51.86 -1.89% $54.865 -5.48%
Facebook FB $72.91 -3.95% $54.649 +33.42%
Google A GOOGL $555.19 -2.74% $560.365 -0.92%
Google C GOOG $544.49 -2.92% $560.365 -2.83%
Linkedin LNKD $194.239 -3.84% $216.83 -10.42%
VMware VMW $90.48 -2.44% $89.71 +0.86%