Week: 20-26 Oct 2014

EUROPE

ECB stress test expected to fail 25 eurozone banks

At 6pm EDT on Sunday the European Central Bank and European Banking Authority will release the results of the EBA’s stress test (including asset quality and capital adequacy) of 130 eurozone banks More FAQ.

A preliminary indication given to banks last Thursday is reported to have failed 25 banks in Ireland, Italy, Greece and Austria. Banks which fail the test will have until November 10 to address capital shortfalls. Royal Bank of Scotland Group Plc analysts estimate the net capital shortfall of the entire system to be EUR 10.2bn More

Permanent TSB (Image: Irish Times)

Ireland’s Permanent TSB (Image: Irish Times)

The Irish Times reports that the 99.2% State-owned Permanent TSB’s capital shortfall will be between EUR 800m and EUR 1 bn, This amount will have to be raised from the private sector within 2 weeks. More

USA

Upcoming mid-term elections

The mid-term general election is scheduled for Tuesday 4 Nov 2014. The scope of mid-term elections includes all 435 seats in the House of Representatives and 33 of the 100 seats in the Senate as well as 38 state and territorial governorships, 46 state legislatures (except Louisiana, Mississippi, New Jersey and Virginia), and four territorial legislatures. More

Two years later, on 8 Nov 2016, the Presidency will be decided by another election – however the leadup to party conventions in Jun-Jul 2016 will be a major distraction to market (investor) certainty. It seems a long wait for USA whose President currently has an approval rating of just 40%.

US Federal government debt

Public debt growth slowing Impact

It’s been a long time since we looked at US debt. Under Public Law 113-83, Temporary Debt Limit Extension Act passed in mid Feb 2014, the statutory debt limit was suspended through March 15, 2015. At the end of Feb 2014, debt subject to limit was $17,416bn. At the end of Sep 2014 that figure had risen only 2% ($365bn) to 17,781bn.

US public debt history (Sep 2014) (Source: US Treasury)

US public debt history (Sep 2014) (Source: US Treasury) More

Public debt / GDP flattening Impact

With USA’s GDP rising and public debt growth slowing, USA’s public debt to GDP ratio of 101%, while more than 70% above its historical normal, is hopefully flattening.

US Debt/GDP Long Term (Source: Federal Reserve Bank of St Louis)

US Debt/GDP Long Term (Source: Federal Reserve Bank of St Louis) More

US Debt/GDP 5-year focus  (Source: Federal Reserve Bank of St Louis)

US Debt/GDP 5-year focus (Source: Federal Reserve Bank of St Louis) More

Upcoming holiday shopping season

Early critical dates are:

  • Thanksgiving: 27 Nov 2014 (Black Friday business is migrating forward into Thanksgiving)
  • Black Friday: 28 Nov 2014
  • Cyber Monday: 1 Dec 2014 (online shopping event)

UPS (Kurt Kuehn, CFO) expects an 11% increase in shipping volumes in Dec 2014, while Fedex expects an increase of almost 9%. In 2013 UPS was surprised by an unexpected peak in shipment demand – it has taken action to ensure delivery, and may even turn down peak delivery requests.

US market indices Impact

This was the best week for stocks so far this calendar year: NASDAQ up 5.29% (best week since Dec 2011), S&P500 up 4.12%, and the Dow up 2.59%.

Index 24 Oct 2014 Week 17 Oct 2014 Month 30 Sep 2014 Year 31 Dec 13
S&P 500 1,964.58 +4.12% 1,886.76 -0.39% 1,972.29 +6.29% 1,848.36
DJIA 16,805.41 +2.59% 16,380.41 -1.39% 17,043.12 +1.38% 16,576.66
NASDAQ 4,483.71 +5.29% 4,258.44 -0.22% 4,493.39 +7.35% 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

Ebola is something you want to keep an eye on, but the probability of widespread infection is pretty small, and I think that’s what the market believes. Stocks were oversold. Investors were over-worried about global growth, they were over-worried about Ebola.
Scott Wren, Senior Equity Strategist, Wells Fargo Advisors More

PORTFOLIO

Long term (52-week) performance 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

Index 24 Oct 2014 Week 17 Oct 2014 Month 30 Sep 2014 Year 31 Dec 13
USD Index 1.674 +6.16% 1.577 +1.43% 1.651 +19.68% 1.399
Trading USD/AUD 0.88473 +0.39% 0.88126 +0.48% 0.88048 -1.47% 0.89789
AUD Index 1.893 +5.75% 1.790 +0.94% 1.875 +21.46% 1.558

Portfolio stocks

Apple AAPL +7.73%

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

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

Amazon AMZN -5.46%

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

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

Ebay EBAY +6.61%

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

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

Facebook FB +6.21%

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

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

Google Class A GOOGL +4.96%

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

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

  • Friday close: $548.90 +4.96% from $522.97.
  • P/E (historical): 28.78 Change from 27.42
  • P/E (1 year fwd): 26.23 Change from 24.42
  • Target (1 year): NASDAQ consensus $650Change, range $530Change ↔ $750.
  • SEC filings (CIK 0001288776): Edgar Search (New, Beta)

Google Class C GOOG +5.60%

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

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

  • Friday close: $539.78 +5.60% from $511.17.
  • P/E (historical): 22.47 Change from 21.28
  • Analyst recommendations: 8Change strong buy, 3 buy, 0 hold.

Linkedin LNKD +3.13%

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

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

VMware VMW -6.17%

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 24 Oct 2014

Celebrity's Century visiting Port Melbourne on a humid 30C day

Celebrity’s Century visiting Port Melbourne on a humid 30C day

EUROPE

EU budget contribution demands

The EU has developed new calculations that determine backdated amendments to the amounts each member must contribute to its budget. New calculations create winners and losers.

The winners include:

  • France: -EUR 1,011m (-GBP 801m)
  • Germany: -EUR 775m (-GBP 614m)
  • Denmark: -EUR 319m (-GBP 253m)

The losers include:

  • UK: +EUR 2,115m (+GBP 1,676m)
  • Netherlands: +EUR 642m (+GBP 506m)
  • Italy: +EUR 338m (+GBP 268m)

The UK and Netherlands have indicated that they will not pay the backdated surcharge. More

UK Prime Minister David Cameron is also rejecting claims by outgoing European Commission President Jose Manuel Barroso that the UK risks alienating other member states and putting its EU membership in doubt with its plan to curb the rights of EU migrants to work in the UK (e.g. limit the number of national insurance numbers given to low-skilled immigrants). More

USA

Ebola

A New York City doctor tested positive for Ebola after returning from aid work in West Africa. Authorities are tracing his contacts while assuring the public the risk of contracting the disease is minimal. It’s the first case of Ebola diagnosed in the nation’s most populous city.More

Economy

New residential sales – Sep 2014 Opinion

Extract

Sales of new single-family houses in September 2014 were at a seasonally adjusted annual rate of 467,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.2 percent (±15.7%) above the revised August rate of 466,000 and is 17.0 percent (±20.6%) above the September 2013 estimate of 399,000.

The median sales price of new houses sold in September 2014 was $259,000; the average sales price was $313,200. The seasonally adjusted estimate of new houses for sale at the end of September was 207,000. This represents a supply of 5.3 months at the current sales rate.

U.S. Census Bureau, “New residential sales – Sep 2014“, 24 Oct 2014 (10:00am) More

Comment

We expected this was going to be a very lengthy recovery for the housing sector and we still have a long way to go. The low mortgage rates are very helpful. The job growth is very, very helpful. But we’re still seeing relatively tight mortgage credit and relatively weak growth in average wages.
Scott Brown, Chief Economist, Raymond James & Associates Inc More

We expect the housing market recovery to remain relatively gradual over the coming months.
Gennadiy Goldberg, Economist, TD Securities More

Usual weekly earnings of wage and salary workers – Sep 2014 Opinion

Extract

Median weekly earnings of the nation’s 107.9 million full-time wage and salary workers were $790 in the third quarter of 2014 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported today. This was 2.5 percent higher than a year earlier, compared with a gain of 1.8 percent in the Consumer Price Index for All Urban Consumers (CPI-U) over the same period.

Bureau of Labor Statistics, “Usual weekly earnings of wage and salary workers – Sep 2014“, 24 Oct 2014 (10:00am) More

Comment

The Labor Department said median usual pay for Americans employed full-time was $790 per week in the third quarter. That’s about a dollar less per week than in the third quarter of 2007, using the department’s adjustment for inflation. There’s been no net gain (in median wages in real terms) since 1999.Bloomberg

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,964.58 +0.71% 1,848.36 +6.29%
DJIA INDU 16,805.41 +0.76% 16,576.66 +1.38%
NASDAQ IXIC 4,483.71 +0.69% 4,176.59 +7.35%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 24 Oct 2014 Watch Read
Comment

I remain unconvinced that this is a back to the races environment. Sentiment got way too complacent in September and we’ve had overseas weakness concerns about Europe and China, earnings are solid but revenue growth is down from the second quarter, and Ebola has been another snowflake in that avalanche.
James Abate, Chief Investment Officer, Centre Funds ($1bn) More

We’re still close to all-time highs, and the market is very sensitive to these highly valued stocks like Amazon. If valuations aren’t getting justified by earnings when the stock market may not be supported by quantitative easing in five days’ time, these companies that miss estimates are going to get pummelled.
Jasper Lawler, Market Analyst, CMC Markets Plc (London) More

Bloomberg notes that “Markets started to turn around on Oct. 16 after St. Louis Federal Reserve Bank President James Bullard said policy makers should consider delaying the end of quantitative easing. The S&P 500 (SPX) is up about 5 percent since then, recouping about half of the drop since its record in mid-September.More (Lloyd says: I wouldn’t count on the Fed maintaining QE).

Earnings have been very good. A large part of this market rise since the decline has been on the idea the Fed will be here to protect you.
Mark Spellman, Portfolio Manager, Alpine Funds ($4.3bn) More

PORTFOLIO

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.674 -0.21% 1.399 +19.68%
Valuation Rate USD/AUD 0.88473 +0.48% 0.89789 -1.47%
Portfolio Index AUD 1.893 -0.68% 1.558 +21.46%

52-week performance Opinion

Our AUD index fell to 1.893, not far below yesterday’s 1.906, mainly because of

  • Amazon’s 8.34% fall, and continuing decline in Google and Linkedin, and
  • the AUD’s rise against the USD today.
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

New record highs for Apple and Facebook could not offset losses by AMZN (from yesterday’s earnings report) and continuing decline of Google (decline in price per click) and LNKD (probably also concerns about advertising revenue).

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

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

Portfolio stock prices

It’s disappointing to note that only Apple and Facebook have produced positive gains this calendar year to date. The broader market has been feeling the drag too: the Dow Jones Industrial Average is up just 1.36% YTD, having been in negative territory too.

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $105.22 +0.37% $80.1457 +31.29%
Amazon AMZN $287.06 -8.34% $398.79 -28.02%
Ebay EBAY $51.12 +0.65% $54.865 -6.83%
Facebook FB $80.67 +0.79% $54.649 +47.61%
Google A GOOGL $548.90 -0.86% $560.365 -2.05%
Google C GOOG $539.78 -0.77% $560.365 -3.67%
Linkedin LNKD $202.10 -0.26% $216.83 -6.79%
VMware VMW $83.84 +1.59% $89.71 -6.54%

Thursday 23 Oct 2014

EUROPE

Economy

Flash consumer confidence indicator for EU and euro area – Oct 2014 Opinion

Confident consumers at Les Deux Magots, Paris, France

Confident consumers at Les Deux Magots, Paris, France

Extract

In October 2014, after four months of decline, the DG ECFIN flash estimate of the consumer confidence indicator increased slightly in the EU (by 0.6 points to -7.4) and remained broadly stable in the euro area (+0.3 points to -11.1) compared to September.

Consumer confidence indicators for EU and Eurozone (Source: EC DGFIN)

Consumer confidence indicators for EU and Eurozone (Source: EC DGFIN)

European Commission – DG Economic and Financial Affairs “Flash Consumer Confidence Indicator Oct 2014“, 23 Oct 2014 More

Markit Flash Eurozone PMI Opinion

Stable PMI masks steepest fall in output prices since global crisis and renewed job losses

  • Flash Eurozone PMI Composite Output Index(1) at 52.2 (52.0 in September). 2-month high.
  • Flash Eurozone Services PMI Activity Index(2) at 52.4 (52.4 in September). Unchanged.
  • Flash Eurozone Manufacturing PMI(3) at 50.7 (50.3 in September). 2-month high.
  • Flash Eurozone Manufacturing PMI Output Index(4) at 51.9 (51.0 in September). 3-month high.

The Eurozone saw a marginal upturn in growth of business activity in October, according to the flash PMI results. The headline Markit PMI rose from September’s ten-month low of 52.0 to 52.2, signalling the first upturn in the pace of expansion for three months. However, the index remained below the average seen in the third quarter, and was the second-weakest reading seen so far this year.

Manufacturing output expanded at the fastest rate for three months, while growth of service sector activity was unchanged on the six-month low seen in September. In both cases, rates of growth remained historically weak and below the averages seen in the year to date.

Furthermore, although output rose at a slightly faster rate, new orders barely rose in October, registering the smallest monthly improvement since orders began rising in August of last year. Manufacturers reported a second consecutive monthly drop in new orders, albeit again only modest, while inflows of new business in the service sector showed the smallest rise since January.
Backlogs of work fell at the fastest rate since June of last year, dropping in both services and, to a lesser extent, manufacturing.

Subdued demand prompted firms to cut staffing evels. Although only marginal, the reduction in headcounts was notable in being the first since November of last year. Service providers reported the first cut in payroll numbers since March, though manufacturers reported a slight upturn in employment.

Prices were increasingly being cut in order to help boost sales. Average prices charged for goods and services showed the largest monthly fall since February 2010, having now fallen almost continually for just over two-and-a-half years.

Charges for services fell at the steepest rate since January 2010 while a more modest decline was seen in the manufacturing sector, where prices fell only marginally and to a lesser extent than in September.

Price cuts occurred despite overall input costs rising in October, pointing to a further squeeze on operating margins. That said, manufacturing input prices fell for the second month running.

Finally, business optimism about the year ahead in the service sector fell to the lowest since June of last year. The outlook is perhaps a little brighter in manufacturing, where the amount of goods purchased for use in production rose for the first time in three months.

By country, France saw business activity fall for a sixth successive month, deteriorating at the fastest rate since February. More Rates of decline accelerated slightly in both manufacturing and services. New business and employment suffered the largest falls since June and April of last year respectively. French selling prices dropped at the fastest rate since October 2009.

There was better news out of Germany, where the PMI rose to its highest for three months More. While services saw the slowest pace of expansion since June, growth of manufacturing output rebounded to a three-month high. However, German companies also reported that new business rose at the slowest pace since September of last year, while employment growth slowed and prices charged were cut to the greatest extent since September 2012.

Elsewhere across the region, output growth partially recovered from the slide to a ten-month low in September. But new business growth was the weakest for 11 months, employment barely rose and prices charged fell at the steepest pace since July of last year.

Markit Economics, “Markit Flash Eurozone PMI“, 23 Oct 2014 More

Comment

The rough patch is not over, with many details in the PMI survey warranting caution.
Christian Schulz, Economist, Berenberg Bank More

JAPAN

Economy

Markit/JMMA Flash Japan Manufacturing PMI Opinion

Extract

New order growth surges to highest in eight months

Key points:

  • Flash Japan Manufacturing PMI at 52.8 (51.7 in September). Modest improvement in business conditions in September.
  • Flash Japan Manufacturing Output Index at 52.3 (53.4 in September). Moderate growth for third successive month.

Markit Economics, “Markit/JMMA Flash Japan Manufacturing PMI“, 23 Oct 2014 More

CHINA

Economy

HSBC Flash China Manufacturing PMI Opinion

Extract

Slowest expansion of output in five months

Key points:

  • Flash China Manufacturing PMI at 50.4 in October (50.2 in September). Three-month high.
  • Flash China Manufacturing Output Index at 50.7 in October (51.3 in September). Five-month low.

Markit Economics, “HSBC Flash China Manufacturing PMI“, 23 Oct 2014 More

USA

Economy

Unemployment Insurance Weekly Claims Report: Week to 18 Oct 2014 Opinion

Extract

In the week ending October 18, the advance figure for seasonally adjusted initial claims was 283,000, an increase of 17,000 from the previous week’s revised level. The previous week’s level was revised up by 2,000 from 264,000 to 266,000. The 4-week moving average was 281,000, a decrease of 3,000 from the previous week’s revised average. This is the lowest level for this average since May 6, 2000 when it was 279,250. The previous week’s average was revised up by 500 from 283,500 to 284,000.

The advance seasonally adjusted insured unemployment rate was 1.8 percent for the week ending October 11, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending October 11 was 2,351,000, a decrease of 38,000 from the previous week’s unrevised level of 2,389,000. This is the lowest level for insured unemployment since December 23, 2000 when it was 2,340,000. The 4-week moving average was 2,381,000, a decrease of 22,750 from the previous week’s unrevised average of 2,403,750. This is the lowest level for this average since May 20, 2006 when it was 2,377,750.

U.S. Employment and Training Administration, “Unemployment Insurance Weekly Claims Report – Week to 18 Oct 2014“, 23 Oct 2014 (08:30am) More

Comment

The labor market is continuing to get better. We’re going to get another solid number for payrolls in October. Companies are very reluctant to lay off the workers they already have on the payroll. They expect demand to pick up and they expect more of what we call plow-horse economic growth – slow and steady.
Robert Stein, Deputy Chief Economist, First Trust Portfolios LP More

There’s no let-up in the labor-market improvement. There’s no sign of any spillover from the turmoil in the markets and the global slowdown. The U.S. economy is chugging along despite the global turmoil.
Jim O’Sullivan, Chief U.S. Economist, High Frequency Economics More

A lot of this latest uptick in confidence is also associated with the decline in gasoline prices, which has heavy influence on consumer psychology. The decline in gas prices leaves them in a better position heading into the holiday-shopping season.
Michelle Girard, Chief U.S. Economist, RBS Securities Inc. More

Markit Flash U.S. Manufacturing PMI Opinion

Extract

U.S. Manufacturing PMI hits three-month low in October amid weakest pace of new business growth since January

At 56.2 in October, down from 57.5 in September, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ IndexTM (PMI) indicated a slower improvement in overall business conditions across the manufacturing sector. Although still comfortably above the neutral 50.0 value, the index was the lowest since July and notably weaker than the average seen during the third quarter as a whole (57.1).
Softer new business growth was the main negative influence on the headline PMI in October, as the latest rise in new orders was much weaker than in September and the slowest for nine months. A number of survey respondents commented on more cautious spending patterns among clients, especially in relation to export sales. October data pointed to only a moderate expansion of new orders from abroad, with the pace of growth easing sharply to a three-month low.
In line with softer new business gains, manufacturing output growth also slowed in October. The latest increase in production volumes was the weakest since March. Moreover, the rate of output growth has now moderated for two months in a row, which represents the first back-to-back slowdown since May 2013.
October data pointed to resilient manufacturing payrolls trends, despite a continued moderation in both output and new business growth. The rate of job creation was little-changed from September’s two-and-a-half year high and much sharper than the average seen since the survey began in May 2007. Survey respondents generally pointed to increasing backlogs of work at their plants and positive sentiment towards the long-run business outlook.

Markit Economics, “Markit Flash U.S. Manufacturing PMI“, 23 Oct 2014 (09:45am) More

Mortgage interest rates Opinion

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates hitting fresh lows for the year for the second consecutive week amid declining bond yields. At 3.92 percent the average 30-year fixed rate is at its lowest level since the week of June 6, 2013.

30-year fixed-rate mortgage (FRM) averaged 3.92 percent with an average 0.5 point for the week ending October 23, 2014, down from last week when it averaged 3.97 percent. A year ago at this time, the 30-year FRM averaged 4.13 percent.

15-year FRM this week averaged 3.08 percent with an average 0.5 point, down from last week when it averaged 3.18 percent. A year ago at this time, the 15-year FRM averaged 3.24 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.91 percent this week with an average 0.5 point, down from last week when it averaged 2.92 percent. A year ago, the 5-year ARM averaged 3.00 percent.

1-year Treasury-indexed ARM averaged 2.41 percent this week with an average 0.4 point, up from last week when it averaged 2.38 percent. At this time last year, the 1-year ARM averaged 2.60 percent.

Federal Home Loan Mortgage Corporation (FHLMC) (Freddie Mac), “Mortgage Rates Decline Further“, 23 Oct 2014 More

Comment

The dip in rates here are for people who were looking at the numbers throughout the summer and saying ‘It’s pretty close’. And now you have a place where that refinance might make sense.
Keith Gumbinger, Vice President, HSH.com (mortgage-data company) More

Stock market indices Opinion

Caterpillar Inc (CAT.N) and 3M Co (MMM.N) led the market up today after reporting their earnings. Caterpillar, which also raised its full-year profit view, was up 5.2 percent at $99.52 while 3M added 6 percent to $147.34.

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,950.82 +1.23% 1,848.36 +5.54%
DJIA INDU 16,677.90 +1.32% 16,576.66 +0.61%
NASDAQ IXIC 4,452.79 +1.60% 4,176.59 +6.61%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 23 Oct 2014 Watch Read
Comment

It’s good to see good numbers in any company, but if we’re looking at headwinds like currency and slowing global growth, seeing multinationals like Caterpillar and 3M post solid beats gives us confidence that economic growth is holding on and probably better than the market is currently expecting.
Phil Orlando, Chief Equity Market Strategist, Federated Investors More

We’re seeing some peace here in earnings and better macro data, which is helping to fuel investor confidence. That trend in jobless claims suggests we are going to see another good job increase for October.
Alan Gayle, Director of Asset Allocation, RidgeWorth Investments ($45bn) More

The fundamental focus is on earnings. The bigger picture fear of global growth slowdown is going to remain with us. That’s going to prevent any meaningful market appreciation. Investors should be prepared for a choppy ride.
Leo Grohowski, Chief Investment Officer, BNY Mellon Wealth Management ($187bn) More

PORTFOLIO

Index values Opinion

:-) Our AUD-denominated index closed above 1.9 today for the first time.

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.678 +1.71% 1.399 +19.92%
Valuation Rate USD/AUD 0.88048 -0.24% 0.89789 -1.94%
Portfolio Index AUD 1.906 +1.96% 1.558 +22.29%

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

Investors dump Amazon after Q3 earnings miss Opinion

In after-hours trading AMZN was down 10.6% (to $279.80) after reporting a Q3 2014 net loss of $437m or $0.95 per share compared with a loss of $41 million or $0.09 per share in Q3 2013. This was Amazon’s largest quarterly loss in 14 years. More Investors have long complained about Bezos’ disregard for investors’ calls for positive earnings, and have trashed the stock. However some funds, e.g. Hennessy Technology Fund, maintain a significant holding (about 4.5% of the portfolio). The Bunting Technology Portfolio has 5.1% allocated to Amazon, and – yes – we’re as unimpressed as Hennessy’s Co-Portfolio Manager Skip Aylesworth about Amazon’s performance in 2014: down 20% (probably 28% tomorrow) so far this calendar year.

We look at Amazon in terms of online retail, media (movie) delivery, and cloud services. Google considers Amazon as its main competitor (outside of search). It is a good investment – but we just wish it wouldn’t reinvest every cent (and more) of profit into “future growth”. But then it was Bezos who said, so long ago, “Get Big Fast”, and he hasn’t stopped.

The biggest component is the expense side of the equation. They’ve got a big checkbook they keep writing upon, which all results in a top line that is less robust than thought.
Scott Tilghman, Analyst, B. Riley & Co. More

Portfolio stock prices

:-) New record closing prices for Apple and Facebook. Apple peaked at $105.05 before closing at $104.83. Facebook peaked at $80.63 before closing at $80.04.

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $104.83 +1.79% $80.1457 +30.80%
Amazon AMZN $313.18 +0.07% $398.79 -21.47%
Ebay EBAY $50.79 +1.32% $54.865 -7.43%
Facebook FB $80.04 +2.13% $54.649 +46.46%
Google A GOOGL $553.65 +2.02% $560.365 -1.20%
Google C GOOG $543.98 +2.12% $560.365 -2.92%
Linkedin LNKD $202.62 +2.07% $216.83 -6.55%
VMware VMW $82.53 +0.71% $89.71 -8.00%

USD/AUD

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

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

Wednesday 22 Oct 2014

EUROPE

Monetary Policy

The European Central Bank bought Spanish covered bonds in a third day of asset purchases that has seen it acquire notes from Italy to Germany, according to people familiar with the matter.

The ECB is adding to French and Portuguese securities it bought this week, said the people, who asked not to be identified they’re not authorized to talk about it. The central bank will reveal the amount of debt purchased on Oct. 27.

The ECB entered the 2.6 trillion-euro ($3.3 trillion) covered bond market as part of efforts to improve companies’ and households’ access to financing. While policy makers could embark on further stimulus after purchasing the securities, there’s no specific plan to buy corporate bonds, ECB Governing Council member Luc Coene said in an interview with L’Echo newspaper today.

Bloomberg Businessweek, “ECB Said to Expand Covered Bond Purchases“, 22 Oct 2014 More

USA

Economy

Consumer price index (CPI) – Sep 2014

Extract

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.

Increases in shelter and food indexes outweighed declines in energy indexes to result in the seasonally adjusted all items increase. The food index rose 0.3 percent as five of the six major grocery store food group indexes increased. The energy index declined 0.7 percent as the indexes for gasoline, electricity, and fuel oil all fell.

The index for all items less food and energy increased 0.1 percent in September. Along with the shelter index, the index for medical care increased, and the indexes for alcoholic beverages and for personal care advanced slightly. Several indexes were unchanged, and the indexes for airline fares and for used cars and trucks declined in September.

The all items index increased 1.7 percent over the last 12 months, the same increase as for the 12 months ending August. The 12-month change in the index for all items less food and energy also remained at 1.7 percent. The 12-month change in the shelter index has been gradually increasing, and reached 3.0 percent for the first time since January 2008. The food index has also risen 3.0 percent over the span, while the energy index has declined 0.6 percent.

Bureau of Labor Statistics, “Consumer price index (CPI) – Sep 2014“, 22 Oct 2014 (08:30) More

Comment

Inflation remains very tame. For now, it gives the Fed the green light to keeping monetary policy accommodative. Over the long haul, they’d prefer to see inflation go up a little.
Jim O’Sullivan, Chief U.S. Economist, High Frequency Economics More

There are very few price pressures throughout the economy. It’s generally positive for consumer spending.
Gus Faucher, Economist, PNC Financial Services Group Inc. More

The ongoing inflation weakness will give the Fed leeway to take a restrained approach to tightening monetary conditions.
Robert Hughes, Senior Research Fellow, American Institute for Economic Research More

Real earnings – Sep 2014

Extract

Real average hourly earnings for all employees fell 0.2 percent from August to September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from unchanged average hourly earnings combined with a 0.1 percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings increased by 0.2 percent over the month due to a 0.3 percent increase in the average workweek more than offsetting the decline in real average hourly earnings.

Real average hourly earnings increased by 0.3 percent, seasonally adjusted, from September 2013 to September 2014. This gain in real average hourly earnings, combined with a 0.3 percent increase in the average workweek, resulted in a 0.6 percent increase in real average weekly earnings over this period.

Bureau of Labor Statistics, “Real earnings – Sep 2014“, 21 Oct 2014 (08:30) More

Comment

It is hard to have strong economic growth when spending power is largely flat.
Joel Naroff, Chief Economist, Naroff Economic Advisors More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 1,927.11 -0.73% 1,848.36 +4.26%
DJIA INDU 16,461.32 -0.92% 16,576.66 -0.70%
NASDAQ IXIC 4,382.85 -0.83% 4,176.59 +4.94%

The shape of the day

Markets were distracted by terrorist shootings in Ottawa commencing at about 9:52am (22 minutes into the trading session) today More and by continuing falls in the price of crude oil More

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 22 Oct 2014 Watch Read
Comment

If markets can connect the dots that this (the Ottawa shootings) is a wider-ranging concern on domestic terrorism, it’ll put weight on the markets along with global growth. If it’s unrelated to terrorism, markets can probably move on and focus on fundamentals.
John Canally, Chief Economic and Investment Strategist, LPL Financial More

The (reporting) season has been mixed, and the global economy is a concern for big multinational companies, but the fact that the market can shake off some bad reports is indicative of what good footing it is on right now.
Bruce Bittles, Chief Investment Strategist, Robert W. Baird & Co More

PORTFOLIO

Index values Opinion

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.650 +0.15% 1.399 +17.90%
Valuation Rate USD/AUD 0.88261 -0.05% 0.89789 -1.70%
Portfolio Index AUD 1.869 +0.20% 1.558 +19.95%

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 $102.99 +0.51% $80.1457 +28.50%
Amazon AMZN $312.97 -0.75% $398.79 -21.52%
Ebay EBAY $50.13 -1.44% $54.865 -8.63%
Facebook FB $78.37 -0.41% $54.649 +43.41%
Google A GOOGL $542.69 +0.87% $560.365 -3.15%
Google C GOOG $532.71 +1.17% $560.365 -4.94%
Linkedin LNKD $198.52 -3.34% $216.83 -8.44%
VMware VMW $81.95 -7.08% $89.71 -8.65%

AUSTRALIA

Economy

Inflation – Consumer Price Index

Extract

The Consumer Price Index (CPI) rose 0.5% in the September quarter 2014, following a rise of 0.5% in the June quarter 2014.

The most significant price rises this quarter were for fruit (+14.7%), new dwelling purchase by owner-occupiers (+1.1%), property rates and charges (+6.3%) and other services in respect of motor vehicles (+5.8%). These rises were partially offset by falls in electricity (-5.1%) and automotive fuel (-2.5%).

The CPI rose 2.3% through the year to the September quarter 2014, following a rise of 3.0% through the year to the June quarter 2014.

Australian Bureau of Statistics, “ABS CPI September quarter 2014 rises 0.5%“, 22 Oct 2014 More

Comment

Aside from the carbon tax impact, the outlook for inflation is not greatly changed. Over the past year, inflation has eased in several areas, including clothing, transport – thanks to lower petrol prices – and communications, as phone plans increasingly offer more data and calls for the same or lower price.

However, there are several areas where price increases remain strong – largely due to increases in taxes and fees – such as education, health services and alcohol and tobacco. Food inflation has also been accelerating, as has the cost of housing.

With the economy’s rebalancing act progressing slowly, domestic wage growth having slowed, oil prices falling and global inflation subdued, the risk would seem to be that inflation remains well contained from here.

Paul Bloxham, Chief Economist, HSBC More

The CPI report had no significant impact on the AUD (Chart: xe.com)

The CPI report had no significant impact on the AUD (Chart: xe.com)

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” (Apollo masters Python, Louvre)

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)