Wed 4 Mar 2015

News

Regular Items

China: HSBC China Services PMI – Feb 2015 Opinion

Extract

HSBC China Composite PMI data (which covers both manufacturing and services) pointed to a further increase in Chinese business activity in February, thereby extending the current trend to 10 months. Though modest, the rate of expansion quickened to a five-month high, with the HSBC Composite Output Index posting at 51.8 in February, up from January’s recent low of 51.0.

HSBC China Output PMI

HSBC China Output PMI

Stronger growth of total business activity was supported by faster increases in output across both the manufacturing and service sectors in February. Manufacturing output increased at the quickest rate since last August, while services activity growth picked up slightly since January’s six-month low. The latter was highlighted by the HSBC China Services Business Activity Index registering at 52.0 in February, up from 51.8 at the start of the year.

Latest survey data also signalled stronger growth of new business across both monitored sectors in February. Chinese service providers saw a solid increase in new work, with the rate of increase accelerating from January’s recent low. Anecdotal evidence mentioned that new projects and stronger underlying client demand had boosted new work intakes. Meanwhile, new orders rose modestly across China’s manufacturing sector. As a result, new business expanded at the quickest rate since last November at the composite level.

Markit Economics, “HSBC China Services PMI (with Composite PMI data) – Chinese business activity growth hits five-month high“, 4 Mar 2015 More

Australian National Accounts: National Income, Expenditure and Product (incl GDP) – Q4 2014 Opinion

Extract

In seasonally adjusted terms, GDP increased 0.5% in the December quarter, through the year GDP growth was 2.5%.

GDP, Percentage changes - Volume measures

GDP, Percentage changes – Volume measures

On the expenditure side, the increase this quarter (in seasonally adjusted volume terms) was driven by Net exports (0.7 percentage points) and Final consumption expenditure (0.6 percentage points). These increases were partially offset by a decrease in Changes in inventories (-0.6 percentage points).

Australian Bureau of Statistics, “5206.0 – Australian National Accounts: National Income, Expenditure and Product (incl GDP) – Q4 2014“, 4 Mar 2015 More

Comment

The good news is we’ve now completed 23 years of continuous growth, the bad news is we’re still running below trend, which will keep upward pressure on the unemployment rate, and keeps the RBA on rate-cut watch. These figures are pretty much in line with what the Reserve Bank was expecting to see, so it doesn’t add to the case of a rate cut. But when you have a central bank with a strong easing bias, as they laid out pretty clearly yesterday, then you’ve got to think there’s a good chance in the next couple of months we’ll see another cut.

Michael Blythe, Chief Economist, Commonwealth Bank, 4 Mar 2015 ABC

Australian PSI – Feb 2014 Opinion

Extract

Australian PSI® – Key Findings for February:

  • The Australian PSI® expanded for the first time in 12 months in February, rising 1.8 points to 51.7.
  • The new orders (up 2.8 points to 53.5) and employment (up 2.8 points to 54.6) sub-indexes expanded for a second successive month, while supplier deliveries ended eight months in contraction (up 4.9 points to 51.5).
  • Sales across services businesses contracted in February (down 2.2 points to 48.6) and stock levels (up 2.1 points to 48.1) fell for a ninth month.
  • The selling prices sub-index contracted marginally (up 1.1 points to 49.2), leaving services businesses’ margins under intense pressure amid ongoing increases in wages (up 1.0 point to 57.7) and other input costs (up 3.1 points to 64.8).
  • The retail trade sub-index remained broadly stable (down 0.3 points to 49.7), while wholesale trade (up 0.3 points 47.2) spent a 40th month in contraction.
  • Backing up its sharp 11.2-point rise in January, the finance & insurance sub-sector reached a historical high in February (up 12.4 points to 68.9) – likely reflecting the boost of the RBA’s interest rate cut. The large health & community services sub-sector (up 1.4 points to 59.5) was the only other sub-sector to expand in February, continuing a long-term trend to expansion.

Australian Industry Group, “Australian PSI – Feb 2014“, 4 Mar 2015 More

Europe: Retail Trade – Jan 2015 Opinion

Extract
Deflated turnover for total retail trade

Deflated turnover for total retail trade

In January 2015 compared with December 2014, the seasonally adjusted volume of retail trade rose by 1.1% in the euro area (EA19) and by 0.8% in the EU28, according to estimates from Eurostat. In December retail trade rose by 0.4% in both zones.

In January 2015 compared with January 2014 the retail sales index increased by 3.7% in the euro area and by 4.0% in the EU28.

Eurostat, “Volume of retail trade up by 1.1% in euro area, Up by 0.8% in EU28 – Jan 2015“, 4 Mar 2015 More

Eurozone: Composite PMI – Feb 2015 Opinion

Extract

Key points:

  • Final Eurozone Composite Output Index: 53.3 (Flash 53.5, January 52.6)
  • Final Eurozone Services Business Activity Index: 53.7 (Flash 53.9, January 52.7)
Markit Eurozone PMI and GDP

Markit Eurozone PMI and GDP

The growth rate of eurozone economic output accelerated for the third straight month in February, rising to its highest since July of last year. At 53.3, the final Markit Eurozone PMI® Composite Output Index signalled an expansion for the twentieth month in a row, but came in slightly softer than the earlier flash estimate of 53.5.

For the first time since April 2014, expansions in economic activity were signalled across each of the ‘big-four’ eurozone economies.

By nation, output growth was again led by Ireland and Spain. The rate of expansion in economic activity also accelerated to a four-month high in Germany, while Italy saw output rise for the second month running (albeit at a slower pace).

A key development from the February surveys was that France exited stagnation, with the region’s second-largest economy seeing the strongest growth of both output and new business since August 2011.
Eurozone companies saw output pushed higher by rising levels of incoming new business. New order inflows improved for the third month running and at the fastest pace since July 2014. There were also signs that the upturn in demand tested capacity at some firms, as backlogs of work rose for the first time in ten months.

Markit Economics, “Markit Eurozone Composite PMI® – final data Includes Markit Eurozone Services PMI® – Eurozone economic growth at seven-month high, as output expands across ‘big-four’ nations“, 4 Mar 2015 More

USA: ADP National Employment Report – Feb 2015

The ADP National Employment Report showed private employers added 212,000 jobs in February, short of the 220,000 forecast, although January’s reading was revised upward to 250,000 from the initial 213,000.Reuters

Extract

Private sector employment increased by 212,000 jobs from January to February according to the February ADP National Employment Report®.

ADP Payrolls, “ADP National Employment Report: Private Sector Employment Increased by 212,000 Jobs in February“, 4 Mar 2015 More

USA: ISM Report on Business – Non-Manufacturing – Feb 2015 Opinion

Extract

Key points:

  • Business Activity Index at 59.4%
  • New Orders Index at 56.7%
  • Employment Index at 56.4%

The NMI® registered 56.9 percent in February, 0.2 percentage point higher than the January reading of 56.7 percent. This represents continued growth in the non-manufacturing sector.

The Non-Manufacturing Business Activity Index decreased to 59.4 percent, which is 2.1 percentage points lower than the January reading of 61.5 percent, reflecting growth for the 67th consecutive month at a slower rate.

The New Orders Index registered 56.7 percent, 2.8 percentage points lower than the reading of 59.5 percent registered in January.

The Employment Index increased 4.8 percentage points to 56.4 percent from the January reading of 51.6 percent and indicates growth for the 12th consecutive month.

The Prices Index increased 4.2 percentage points from the January reading of 45.5 percent to 49.7 percent, indicating prices contracted in February for the third consecutive month.

According to the NMI®, 14 non-manufacturing industries reported growth in February. Comments from respondents have increased in regards to the affects of the reduction in fuel costs and the impact of the West Coast port labor issues on the continuity of supply. Overall, supply managers feel mostly positive about the direction of the economy.

Institute for Supply Management, “February 2015 Non-Manufacturing ISM® Report On Business®: NMI® at 56.9% – Feb 2015“, 4 Mar 2015 More

USA: Markit US Services PMI – Feb 2015 Opinion

Extract

Key points:

  • Fastest increase in business activity since October 2014
  • Growth of new work picks up from January’s record low
  • February’s survey marks five years of sustained job creation
Markit U.S. Services Business Activity Index

Markit U.S. Services Business Activity Index

Adjusted for seasonal influences, the final Markit U.S. Services Business Activity Index registered 57.1 in February, up from 54.2 in the previous month and the highest reading since October 2014. Reports from survey respondents suggested that stronger client demand and improving economic conditions had boosted business activity in February. Firms noted that bad weather in the northeast had caused disruptions early in February, but a number of respondents also suggested that there had been a catch-up effect towards the end of the month.

The final seasonally adjusted Markit U.S. Composite PMI Output Index (covering manufacturing and services) registered 57.2 in February, up from 54.4 in January and the highest reading since October 2014. Faster private sector output growth reflected stronger contributions from both manufacturing (57.3) and services (57.1) in February.

Markit Economics, “Markit U.S. Services PMI – final data (with composite PMI) – Feb 2015 – Service sector activity rises at faster pace in February, led by strong rebound in new business“, 4 Mar 2015 More

Global: JP Morgan Global Composite PMI – Feb 2015 Opinion

Extract

Output: Feb 2015: 53.9, up from 53.0 in Jan 2015
New Orders: Feb 2015: 54.0, up from 52.1 in Jan 2015
Input Prices: Feb 2015: 51.4, up from 50.8 in Jan 2015
Output Charges: Feb 2015: 50.6, up from 49.9 in Jan 2015
Employment: Feb 2015: 51.7, unchanged from Jan 2015
Backlogs: Feb 2015: 51.0, up from 50.5 in Jan 2015

JPMorgan global PMI output

JPMorgan global PMI output

Growth of global economic activity ticked up to a five- month high during February, as rates of output expansion accelerated in both the manufacturing and service sectors. Companies also benefited from a solid improvement in new order inflows, as new business rose at the quickest pace since September last year.
The JPMorgan Global All-Industry Output Index – which is produced by JPMorgan and Markit in association with ISM and IFPSM – posted 53.9 in February, up from 53.0 in January. The index has signalled expansion for 29 consecutive months.

Markit Economics, “JP Morgan Global Composite PMI – Feb 2015“, 4 Mar 2015 More

Oil and Gas Futures

Futures prices

  • NYMEX West Texas Intermediate (WTI) (Apr 2015): $51.84/barrel Chart
  • ICE (London) Brent North Sea Crude (Apr 2015) $60.38/barrel Chart
  • NYMEX Natural gas futures (Apr 2015): $2.770/MMBTU Chart

USA Stock Market Indices Opinion

Index Ticker Today Change 31 Dec 14 YTD
S&P 500 SPX (INX) 2,098.53 -0.44% 2,058.90 +1.92%
DJIA INDU 18,096.90 -0.58% 17,823.05 +1.54%
NASDAQ IXIC 4,967.14 -0.26% 4,736.05 +4.88%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 4 Mar 2015 Watch Read
Comment

It’s less about the recent economic data and more where we are today, and it’s more about looking forward to monetary policy changing as well.
Stephen Massocca, Chief Investment Officer, Wedbush Equity Management LLC More

The market is vulnerable to some sort of short-term decline, primarily because valuations are stretched. It’s hard to find inexpensive parts of the market.
Dan Morris, Global Investment Strategist, TIAA-CREF Asset Management (NY) ($611 billion) Bloomberg

Portfolio

Index values Opinion

:-| About square Currency Today Change 31 Dec 14 YTD
Portfolio Index USD 2,045 -0.45% 1.741 +17.44%
Valuation Rate USD/AUD 0.78724 +0.04% 0.82153 -4.17%
Portfolio Index AUD 2.598 -0.49% 2.119 +22.55%

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

The shape of the portfolio today (Chart: Yahoo Finance)

The shape of the portfolio today (Chart: Yahoo Finance)

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 14 YTD
Apple AAPL $128.54 -0.63% $110.38 +16.45%
Amazon AMZN $382.72 -0.49% $310.35 +23.32%
Ebay EBAY $58.31 +0.09% $56.12 +3.90%
Facebook FB $80.89 +1.63% $78.02 +3.68%
Google A GOOGL $578.33 -0.08% $530.66 +8.98%
Google C GOOG $573.37 -0.05% $526.40 +8.92%
Linkedin LNKD $265.23 -0.12% $229.71 +15.46%
Visa V $273.75 -0.56% $262.20 +4.41%
VMware VMW $86.08 +0.13% $82.52 +4.31%

FX: USD/AUD

The AUD ended the day a little higher (Chart: xe.com)

The AUD ended the day a little higher (Chart: xe.com)

Tue 3 Mar 2015

News

Regular Items

Reserve Bank of Australia: Monetary Policy

The RBA kept its official cash rate unchanged at 2.25%, an outcome predicted by 11 of 29 economists surveyed by Bloomberg News.

Extract

At its meeting today, the Board decided to leave the cash rate unchanged at 2.25 per cent.
Growth in the global economy continued at a moderate pace in 2014. A similar performance is expected by most observers in 2015, with the US economy continuing to strengthen, even as China’s growth slows a little from last year’s outcome.

Commodity prices have declined over the past year, in some cases sharply. The price of oil in particular has fallen significantly. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global output and temporarily to lower CPI inflation rates.

Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns at all-time lows over recent months. Some risk spreads have widened a little but overall financing costs for creditworthy borrowers remain remarkably low.

In Australia the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak. As a result, the unemployment rate has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate.

Credit is recording moderate growth overall, with stronger growth in lending to investors in housing assets. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months. The Bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.

The Australian dollar has declined noticeably against a rising US dollar, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.

At today’s meeting the Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings.

Reserve Bank of Australia, “Statement by Glenn Stevens, Governor: Monetary Policy Decision“, 3 Mar 2015 More

FX: USD/AUD

The AUD strengthened on the RBA interest rate decision (Chart: xe.com)

The AUD strengthened on the RBA interest rate decision (Chart: xe.com)

Oil and Gas Futures

Futures prices

  • NYMEX West Texas Intermediate (WTI) (Apr 2015): $50.37/barrel Chart
  • ICE (London) Brent North Sea Crude (Apr 2015) $61.04/barrel Chart
  • NYMEX Natural gas futures (Apr 2015): $2.710/MMBTU Chart

USA Stock Market Indices Opinion

Index Ticker Today Change 31 Dec 14 YTD
S&P 500 SPX (INX) 2,107.78 -0.45% 2,058.90 +2.37%
DJIA INDU 18,203.37 -0.47% 17,823.05 +2.13%
NASDAQ IXIC 4,979.90 -0.56% 4,736.05 +5.15%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 3 Mar 2015 Watch Read

Portfolio

Index values Opinion

Note that today’s rise in index values incorporates the addition of Visa to the portfolio.
This explains 2.05% of today’s 2.18% rise which, without Visa, would have been just +0.13% to 2.013.

:-) Outperformed Currency Today Change 31 Dec 14 YTD
Portfolio Index USD 2,054 +2.18% 1.741 +17.97%
Valuation Rate USD/AUD 0.78695 +0.66% 0.82153 -4.21%
Portfolio Index AUD 2.610 +1.51% 2.119 +23.15%

52-week performance Opinion

Note that today’s rise in index values iincorporates the addition of Visa to the portfolio.

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

The shape of the portfolio today (Chart: Yahoo Finance)

The shape of the portfolio today (Chart: Yahoo Finance)

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

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

Portfolio stock prices

:-) We added Visa to our portfolio today, with a purchase price of $275.80. We see Visa as a key component of the infrastructure of the internet, with a substantial share of online purchase activity.

Stock Ticker Today Change 31 Dec 14 YTD
Apple AAPL $129.36 +0.21% $110.38 +17.20%
Amazon AMZN $384.61 -0.27% $310.35 +23.93%
Ebay EBAY $58.26 -0.21% $56.12 +3.81%
Facebook FB $79.60 -0.19% $78.02 +2.03%
Google A GOOGL $578.79 +0.66% $530.66 +9.07%
Google C GOOG $573.64 +0.40% $526.40 +8.97%
Linkedin LNKD $265.54 -1.44% $229.71 +15.60%
Visa V $275.30 -1.07% $262.20 +5.00%
VMware VMW $85.97 -0.72% $82.52 +4.18%

Mon 2 Mar 2015

News

Regular Items

Japan: Markit Japan Manufacturing PMI – Feb 2015

Extract
Markit Manufacturing PMI: Output Index

Markit Manufacturing PMI: Output Index

The headline PMI posted at 51.6 in February, down slightly from 52.2 in January, but nonetheless signalling a moderate overall improvement in operating conditions at Japanese manufacturers. Furthermore, the latest reading posted above the long-run series average.

Production at Japanese goods producers rose for the seven consecutive month in February, with the latest increase the quickest since March 2014. According to panellists, this was supported by an increase in new work intakes and the start-up of new projects.

Markit Economics, “Markit Japan Manufacturing PMI – Manufacturing production rises at quickest pace since March 2014“, 2 Mar 2015 More

China: HSBC China Manufacturing PMI – Feb 2015

Extract
HSBC China Manufacturing PMI

HSBC China Manufacturing PMI

Manufacturers in China saw a renewed improvement in overall operating conditions in February, with output and total new orders both expanding at faster rates. However, latest data indicated that external demand was relatively weak, with new export business declining for the first time in 10 months. Meanwhile, average input costs declined sharply over the month, as companies continued to benefit from lower costs for oil and oil- related products, which contributed to a solid fall in prices charged.

After adjusting for seasonal factors, including the recent Chinese New Year, the HSBC Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy posted at 50.7 in February, compared to the earlier flash reading of 50.1. This was up from January’s reading of 49.7, and signalled the first improvement in the health of the sector since last October, albeit marginal.

The renewed improvement in overall operating conditions was supported by a stronger expansion of output in February. Though modest overall, it was the quickest increase in production since last August. According to panellists, greater client demand led firms to raise output over the month, as highlighted by a stronger expansion of total new orders. Data suggested that firmer domestic demand had helped to boost new business, as new export work declined moderately for the first time since April 2014.

Markit Economics, “HSBC China Manufacturing PMI – Operating conditions improve for the first time in four months“, 2 Mar 2015 More

Australia: Ai Group Australian PMI – Feb 2015

Extract

The Australian PMI® fell 3.6 points to 45.4 in February, indicating a third month in contraction.

Three of the eight manufacturing sub-sectors expanded in February, if at slightly slower paces: food, beverages and tobacco (down 2.8 points to 60.1); textiles, clothing & furniture (down 3.4 points to 56.0); and the non-metallic mineral products (down 2.3 points to 66.2).

The machinery and equipment (up 1.4 points to 43.5); printing and recorded media (up 2.2 points to 48.3); metal products (up 1.9 points to 45.0); and wood and paper products (down 3.6 points to 41.5) sub-sectors all continued to contract this month.

The Petroleum, coal, chemicals & rubber products sub-index (down 6.0 points to 34.7) fell to its lowest reading since June 2009, with the rapid decline in global oil prices, the ongoing decline of local mining construction activity, and the progressive closure of automotive assembly weighing on sales of Australian-made chemical inputs and components.

Among the activity sub-indexes, only manufacturing exports (unchanged at 53.9 points) expanded in February. Manufacturing production (down 3.7 points to 45.0) declined for a fourth month, new orders (down 3.4 points to 44.2) declined for a third month, and manufacturing sales (steady at 45.3) recorded a ninth consecutive month in contraction.

Manufacturing employment contracted for a second month in February (down 1.6 points to 45.9).

Input costs remain elevated (up 5.1 points to 72.4), while selling prices continued to contract (down 1.4 points to 48.3). The wages sub-index increased slightly, rising 1.8 points to 55.3.

Australia Industry Group, “Australian PMI®: Weak domestic demand hits manufacturing“, 2 Mar 2015 More

Germany: Markit / BME Germany Manufacturing PMI – Feb 2015

Extract
Markit / BME Germany Manufacturing PMI vs. Bundesbank Manufacturing Output

Markit / BME Germany Manufacturing PMI vs. Bundesbank Manufacturing Output

February data signalled a further improvement in manufacturers’ operating conditions, as highlighted by the final seasonally adjusted Markit/BME Germany Manufacturing Purchasing Managers’ Index® (PMI®) – a single-figure snapshot of the performance of the manufacturing economy – remaining above the crucial 50.0 threshold. However, at 51.1, up marginally from January’s 50.9, the rate of improvement was only modest overall and below the long-run series average of 51.9.

The slight improvement in the headline number largely reflected a stronger rise in new business placed with German manufacturing companies. The rate of growth in new work was the quickest in seven months, although weak by historical standards. The latest rise in order intakes was broad-based, as new export orders also increased on the month. Companies linked higher demand to an improving economic environment and a weak euro.

With demand rising, German manufacturers scaled up their production in February. Output has now increased for 22 months running, and the rate of expansion was little-changed from January’s modest pace.

February data signalled marginal employment growth in Germany’s goods-producing sector, which some survey participants linked to increased business requirements. Meanwhile, latest survey data pointed to some capacity pressures in the sector, with backlogs of work rising at the most marked pace in four months.

Input costs in Germany’s manufacturing sector declined further in February. Despite slowing since January’s five-and-a-half year peak, the rate at which input prices fell was substantial and strong by historical standards. Low oil prices continued to exert downward pressure on input costs, according to survey evidence.

Furthermore, output prices declined for a fourth successive month in February. However, the rate at which selling prices fell was the weakest in this sequence and only marginal overall.

Markit Economics, “Markit/BME Germany Manufacturing PMI® – final data – PMI signals modest improvement in manufacturers’ operating conditions“, 2 Mar 2015 More

Eurozone: Markit Eurozone Manufacturing PMI – Feb 2015

Key points:

  • Final Eurozone Manufacturing PMI at 51.0 in February (Flash: 51.1, January Final:51.0)
  • France falls back to bottom of euro PMI league table
  • Jobs growth led by Ireland, Italy and Spain, but further cuts seen in France and Austria.
Manufacturing PMI® (overall business conditions)

Manufacturing PMI® (overall business conditions)

The growth rate of the eurozone manufacturing sector remained lacklustre in February. At 51.0, the final seasonally adjusted Eurozone Manufacturing PMI® was unchanged from January’s six-month high and below the earlier flash estimate of 51.1.

The rate of expansion in manufacturing production was also the same as in the prior month, despite a slight uptick in growth of new order inflows to a seven-month high. However, the rate of increase in total new business remained only moderate, as subdued domestic market conditions offset accelerated growth in new export orders.

Manufacturing employment edged higher for the sixth straight month in February, with the rate of jobs growth the best during that sequence. Subsequently, backlogs of work were broadly unchanged over the month.

Countries ranked by Manufacturing PMI®: Feb 2015

  • Ireland: 57.5 (182-month high)
  • Spain: 54.2 (2-month low)
  • Netherlands: 52.2 (5-month low)
  • Italy: 51.9 (7-month high)
  • Germany: 51.1 (flash 50.9) (2-month high)
  • Austria: 48.7 (2-month high)
  • Greece: 48.4 (2-month high)
  • France 47.6 (flash 47.7) (2-month low)

Markit Economics, “Markit Eurozone Manufacturing PMI® – final data – Eurozone manufacturing maintains modest growth in February“, 2 Mar 2015 More

Europe: Unemployment – Jan 2015

Extract

The euro area (EA19) seasonally-adjusted unemployment rate was 11.2% in January 2015, down from 11.3% in December 2014, and from 11.8% in January 2014. This is the lowest rate recorded in the euro area since April 2012. The EU281 unemployment rate was 9.8% in January 2015, down from 9.9% in December 2014 and from 10.6% in January 2014. These figures are published by Eurostat, the statistical office of the European Union.

Member States

Among the Member States, the lowest unemployment rates in January 2015 were recorded in Germany (4.7%) and Austria (4.8%), and the highest in Greece (25.8% in November 2014) and Spain (23.4%).

Compared with a year ago, the unemployment rate in January 2015 fell in twenty-four Member States, remained stable in Belgium and increased in Cyprus (15.7% to 16.1%), Finland (8.4% to 8.8%) and France (10.1% to 10.2%). The largest decreases were registered in Spain (25.5% to 23.4%), Estonia (8.5% to 6.4% between December 2013 and December 2014), and Ireland (12.1% to 10.0%).

eurozone_ue_20150302

Youth unemployment

In January 2015, 4.889 million young persons (under 25) were unemployed in the EU28, of whom 3.281 million were in the euro area. Compared with January 2014, youth unemployment decreased by 562 000 in the EU28 and by 259 000 in the euro area. In January 2015, the youth unemployment rate5 was 21.2% in the EU28 and 22.9% in the euro area, compared with 23.3% and 24.3% respectively in January 2014. In January 2015, the lowest rates were observed in Germany (7.1%), Austria (8.2%) and Denmark (10.8%), and the highest in Spain (50.9%), Greece (50.6% in November 2014), Croatia (44.1% in the fourth quarter 2014) and Italy (41.2%).

Eurostat, “Euro area unemployment rate at 11.2% – EU28 at 9.8%“, 2 Mar 2015 More

Europe: Flash euroarea inflation – Feb 2015

The annual rate of inflation in the eurozone stood at -0.3% in Feb 2015. Economists in a Bloomberg survey predicted -0.4% growth after growth of -0.6% in Jan 2015. Economists in Bloomberg’s monthly poll forecast eurozone consumer prices will fall 0.5% in Q1/2015 and 0.1% for the year. That compares with the ECB’s inflation goal of just below 2%. Bloomberg

Extract

Euro area annual inflation is expected to be -0.3% in February 2015, up from -0.6% in January, according to a flash estimate from Eurostat.

Looking at the main components of euro area inflation, services is expected to have the highest annual rate in February (1.1%, compared with 1.0% in January), followed by food, alcohol & tobacco (0.5%, compared with -0.1% in January), non-energy industrial goods (-0.2%, compared with -0.1% in January) and energy (-7.9%, compared with -9.3% in January).

Eurostat, “Flash estimate – February 2015 – Euro area annual inflation up to -0.3%“, 2 Mar 2015 More

Comment

Inflation is still very low and core inflation is on a downward trend. The rebound is driven by energy prices, which are stabilizing, but it’s too early to speculate about the ECB or reach a conclusion.
Fabio Fois, European Economist, Barclays Plc Bloomberg

USA: Personal Income and Outlays – Jan 2015

Extract

Personal income increased $50.8 billion, or 0.3 percent, and disposable personal income (DPI) increased $52.6 billion, or 0.4 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $18.9 billion, or 0.2 percent. In December, personal income increased $45.3 billion, or 0.3 percent, DPI increased $37.3 billion, or 0.3 percent, and PCE decreased $35.7 billion, or 0.3 percent, based on revised estimates.

Real DPI increased 0.9 percent in January, compared with an increase of 0.5 percent in December. Real PCE increased 0.3 percent, in contrast to a decrease of 0.1 percent. The price index for PCE decreased 0.5 percent, compared with a decrease of 0.2 percent.

Bureau of Economic Analysis, “Personal Income and Outlays: Jan 2015“. 2 Mar 2015 (08:30) More

USA: ISM Report on Business – Manufacturing – Feb 2015

Extract

The January PMI® registered 53.5 percent, a decrease of 1.6 percentage points from December’s seasonally adjusted reading of 55.1 percent. The New Orders Index registered 52.9 percent, a decrease of 4.9 percentage points from the seasonally adjusted reading of 57.8 percent in December. The Production Index registered 56.5 percent, 1.2 percentage points below the seasonally adjusted December reading of 57.7 percent. The Employment Index registered 54.1 percent, a decrease of 1.9 percentage points below the seasonally adjusted December reading of 56 percent. Inventories of raw materials registered 51 percent, an increase of 5.5 percentage points above the December reading of 45.5 percent. The Prices Index registered 35 percent, down 3.5 percentage points from the December reading of 38.5 percent, indicating lower raw materials prices in January relative to December. Comments from the panel indicate that most industries, but not all, are experiencing strong demand as 2015 kicks off. The West Coast dock slowdown continues to be a problem, negatively impacting both exports and imports as well as inventories.

Institute for Supply Management, “January 2015 Manufacturing ISM® Report On Business® – PMI® at 53.5%“, 2 Mar 2015 (08:30) More

USA: Markit US Manufacturing PMI – Feb 2015

Extract

The final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ IndexTM (PMITM) rose to 55.1 in February from 53.9 in the previous month. The reading signalled the most marked improvement in business conditions in the sector since October 2014.

usa_pmi_20150302

Manufacturing production growth quickened to the sharpest in four months during February, with firms linking higher output to increases in new business. This was highlighted by a marked rise in total new orders. As with production, the rate of growth in new business was the fastest since last October. Meanwhile, new export orders continued to rise, albeit only modestly.

Higher new orders was one factor leading to an accumulation of backlogs of work in February, while supplier delivery delays had also contributed to rising outstanding business. Delivery times lengthened to the greatest extent since February 2014, with firms reporting adverse weather conditions in some parts of the country. Meanwhile, stocks of finished goods increased at the sharpest pace since the series began.

Manufacturers raised employment, as has been the case in each month since July 2013. That said, the rate of job creation eased to the slowest in seven months. Higher levels of new work and the replacement of leavers contributed to the latest expansion of staff numbers.
Input prices at manufacturing firms decreased for the second successive month, albeit only marginally. The latest fall in costs was partly linked to reduced prices for steel and other commodities.

Although input costs declined, firms continued to raise their output prices in February. The rate of inflation remained modest, but picked up to a three- month high. Charges have been raised in each month since September 2012.

A solid increase in purchasing activity was recorded amid reports of greater production requirements. That said, the rate of expansion eased to the slowest since January 2014.

Markit Economics, “Markit U.S. Manufacturing PMI – final data – Output growth quickens to four-month high“. 2 Mar 2015 (09:45) More

Global: JPMorgan Global Manufacturing PMI – Feb 2015

Extract

Global Manufacturing PMI Summary

  • Global PMI: 52.0, up from 51.7 in Jan 2015 – Expanding, faster rate
  • Output: 53.3, up from 52.9 – Expanding, faster rate
  • New Orders: 52.3, same as Jan 2015 – Expanding, same rate
  • New Exports: 50.9, down from 51.0 – Expanding, slower rate
  • Employment: 51.1, same as Jan 2015 – Increasing, same rate
  • Input Prices: 49.0, up from 47.5
  • Output Prices: 49.6, up from 49.2

The global manufacturing sector expanded for the twenty-seventh consecutive month in February. The rate of output growth accelerated to a six-month high, as companies scaled up production to meet rising levels of new work and new export orders.

The J.P.Morgan Global Manufacturing PMI – a composite index1 produced by JPMorgan and Markit in association with ISM and IFPSM – rose to 52.0 in February, from 51.7 in January.

JPMorgan Global Manufacturing PMI (SA)

JPMorgan Global Manufacturing PMI (SA)

The US remained a prime driver of the global manufacturing upturn, as the US PMI rose to a four- month high. Neighbouring Mexico also saw solid growth during the latest survey month. However, the Canadian PMI signalled contraction for the first time in almost two years, as demand was hit by reduced orders from the oil and gas sector.

Growth was seen across much of the European manufacturing sector in February, with the strongest pockets of expansion registered in the UK, Ireland, Spain and East European nations such as Poland and the Czech Republic. Growth was also signalled in Germany, the Netherlands and Italy, while downturns continued in France, Austria and Greece.

Completing the picture of modest, yet broad-based expansion across the global manufacturing sector were the performances of the Asian nations. Mild growth was signalled in China, Japan, South Korea, Taiwan, India and Vietnam.

Brazil, Turkey, Russia and Indonesia all reported deteriorations in business conditions in February.
Global manufacturing employment rose for the nineteenth successive month in February, with the rate of jobs growth remaining consistent with those registered since September of last year.

Among the largest manufacturing nations covered by the survey, staffing levels increased in the US, the euro area, the UK, Taiwan, South Korea and Brazil.

JP Morgan, Markit Economics, “J.P.Morgan Global Manufacturing PMI“, 2 Mar 2015 (11:00) More

Oil and Gas Futures

Futures prices

  • NYMEX West Texas Intermediate (WTI) (Apr 2015): $49.59/barrel Chart
  • ICE (London) Brent North Sea Crude (Apr 2015) $59.54/barrel Chart
  • NYMEX Natural gas futures (Apr 2015): $2.711/MMBTU Chart

USA Stock Market Indices Opinion

:-) Yay! The NASDAQ Composite closed above 5,000 today! NBR

Probably most people didn’t think it would hit 5,000 again in their lifetime. The fact that the companies have positive earnings may be why this time could be more constructive.
Jason Cooper, 1st Source Investment Advisors ($2.5 billion) Bloomberg

:-) :-) And a double Yay! for the S&P500 and DJIA – also closed on record highs!

Index Ticker Today Change 31 Dec 14 YTD
S&P 500 SPX (INX) 2,117.39 +0.61% 2,058.90 +2.84%
DJIA INDU 18,288.63 +0.86% 17,823.05 +2.61%
NASDAQ IXIC 5,008.10 +0.90% 4,736.05 +5.74%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 2 Mar 2015 Watch Read

Portfolio

Index values Opinion

:-Underperformed Currency Today Change 31 Dec 14 YTD
Portfolio Index USD 2,010 +0.76% 1.741 +15.45%
Valuation Rate USD/AUD 0.78176 -0.59% 0.82153 -4.84%
Portfolio Index AUD 2.571 +1.36% 2.119 +21.32%

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

The shape of the portfolio today (Chart: Yahoo Finance)

The shape of the portfolio today (Chart: Yahoo Finance)

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 14 YTD
Apple AAPL $129.09 +0.49% $110.38 +16.95%
Amazon AMZN $385.65 +1.45% $310.35 +24.26%
Ebay EBAY $58.38 +0.81% $56.12 +4.03%
Facebook FB $79.75 +0.99% $78.02 +2.22%
Google A GOOGL $575.02 +2.20% $530.66 +8.36%
Google C GOOG $571.34 +2.32% $526.40 +8.54%
Linkedin LNKD $269.42 +0.83% $229.71 +17.29%
VMware VMW $86.59 +1.79% $82.52 +4.93%

FX: USD/AUD

The AUD is down ahead of an RBA interest rate decision (Chart: xe.com)

The AUD is down ahead of an RBA interest rate decision (Chart: xe.com)

Week 23 Feb – 1 Mar 2015

Greece update

The European Central Bank’s Governing Council convenes in Cyprus on Thursday and may take a decision on whether to accept Greek government bonds as collateral for its direct ECB funding, which it stopped doing at the start of February. If the ECB does not – and it most likely will not – it could be forced to prolong the provision of Emergency Liquidity Assistance (ELA) to the Greek central bank.Reuters

The Greek question will be a hot topic. Varoufakis has been saying the country is counting on the ECB for finances over the next few months.
Peter Vanden Houte, Chief Eurozone Economist, ING More

China: PBoC reduces its benchmark one-year lending rate

The People’s Bank of China announced on Saturday a cut of 0.25 percentage points late Saturday in the benchmark one-year lending rate. This was the second reduction in the past four months. This latest effort to boost growth comes as domestic demand, exports and the housing sector continue to struggle. More

China: Official PMI for Feb 2015 contracts, despite marginal improvement

China’s National Bureau of Statistics announced on Sunday that February’s PMI rose slightly to 49.9 from 49.8 in Jan 2015 – an improvement, but Chinese manufacturing remains in contraction. This was just above the median forecast by a Wall Street Journal poll of eight economists.

China’s official non-manufacturing (services) rose to 53.9 in Feb 2015 from 53.7 in Jan 2015. More

Market indices

Index 27 Feb 15 Week 20 Feb 15 Month 30 Jan 15 Year 31 Dec 14
S&P 500 2,104.50 -0.27% 2,110.30 +5.49% 1,994.99 +2.21% 2,058.90
DJIA 18,132.70 -0.04% 18,140.44 +5.64% 17,164.95 +1.74% 17,823.05
NASDAQ 4,963.53 +0.15% 4,955.97 +7.08% 4,635.24 +4.80% 4,736.05

The shape of the month

The market had its best February since 1998. NBR (Note: if you’re watching the NBR, the narrative of February gains is correct, but the table is not correct, showing for example a DJIA gain of 4.29%).

US market indices during Feb 2015 (Chart: Yahoo Finance)

US market indices during Feb 2015 (Chart: Yahoo Finance)

The shape of the week

US market indices this week (Chart: Yahoo Finance)

US market indices this week (Chart: Yahoo Finance)

A week of Nightly Business Reports

Monday Tuesday Wednesday Thursday Friday

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 27 Feb 15 Week 20 Feb 15 Month 30 Jan 15 Year 31 Dec 14
USD Index 1.995 -0.39% 2.003 +9.03% 1.830 +14.48% 1.741
Valuation rate 0.78641 -0.35% 0.78921 +0.40% 0.78324 -4.27% 0.82153
AUD Index 2.537 -0.04% 2.538 +8.59% 2.336 +19.70% 2.119

Portfolio stocks this month

While the market had its best February since 1998, with gains of 5.49% for the S&P 500 through to 7.08% for the NASDAQ Composite, our USD-denominated index outperformed the market, with a gain for the month of 9.03%. Our AUD-denominated index was hurt by an appreciating AUD, but still gained 8.59%.

The shape of portfolio stocks during Feb 2015 (Chart: Yahoo Finance)

The shape of portfolio stocks during Feb 2015 (Chart: Yahoo Finance)

Portfolio stocks this week

The shape of portfolio stocks this week (Chart: Yahoo Finance)

The shape of portfolio stocks this week (Chart: Yahoo Finance)

Portfolio stocks in detail

Apple AAPL -0.80%

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

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

:-) This week Apple achieved our target of $132.42 for 3x our original investment before the price declined. Apple’s market cap is now $748.247 billion … heading for $1 trillion.

Amazon AMZN -0.91%

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

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

Ebay EBAY -0.19%

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

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

Facebook FB -1.15%

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

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

Google Class A GOOGL +3.84%

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

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

Google Class C GOOG +3.61%

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

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

  • Friday close: $558.40 +3.61% from $541.80.
  • P/E (historical): 25.55 Change from 25.63
  • P/E (1 year fwd): 24.38 Change from 23.83
  • Target (1 year): NASDAQ consensus $600, range $580 ↔ $630.
  • Analyst recommendations: 8 strong buy, 3 buy, 1 hold.

Linkedin LNKD -0.16%

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

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

VMware VMW -0.11%

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

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

FX: USD/AUD

USD/AUD during Feb 2015 (Chart: xe.com)

USD/AUD during Feb 2015 (Chart: xe.com)

Fri 27 Feb 2015

News

Regular Items

Germany: CPI – Preliminary Estimate – Feb 2015

Extract

The inflation rate in Germany as measured by the consumer price index is expected to rise 0.1% in February 2015 on a year earlier. Based on the results available so far, the Federal Statistical Office (Destatis) also reports that the consumer prices are expected to increase by 0.9% on January 2015.

Year-on-year change in the consumer price index regarding selected product groups

Index Weight Nov 14 Dec 14 Jan 15 Feb 15 (1)
Overall index 1000.00 +0.6% +0.2% –0.4% +0.1%
Goods 479.77 –0.2% –1.2% –2.0% –1.4%
> including:
> Energy (2) 106.56 –2.5% –6.6% –9.0% –7.3%
> Food 90.52 +0.0% –1.2% –1.3% –0.4%
> Services 520.23 +1.4% +1.4% +1.2% +1.4%
>> including:
>> Rents (3) 209.93 +1.4% +1.4% +1.3% +1.3%

(1) Provisional figure.
(2) Household energy and motor fuels.
(3) Net rents exclusive of heating expenses.

The harmonised consumer price index (HICP) for Germany, which is calculated for European purposes, is expected to be down 0.1% in February 2015 on the same month a year earlier. Compared with January 2015, it is expected to be up 1.0%.

Destatis (Federal Statistical Office), “Business climate indicator for the euro area – Feb 2015“, 27 Feb 2015 More

Eurozone: Deutsche Bundestag vote on extension of Greek MFFA

An unusually large number of lawmakers in Angela Merkel’s bloc dissented in the vote on extending Greece’s credit. Still, the Bundestag approved the four-month extension by a massive margin: 542-32, with 13 abstentions.

Twenty-nine members of Merkel’s Christian Democrats and the Bavarian Christian Social Union alliance voted against extending Greece’s credit plan in the Bundestag – more than had previously signaled that they planned to oppose the plan. Three members of the right-wing faction abstained in Friday’s vote.

“Look at Tsipras, look at Varoufakis,” the dissident Christian Democrat Klaus-Peter Wilsch said in parliament on Friday. “Would you buy a used car from them?” Aid to the financially ailing eurozone nation, he added, “will never end.”

Nevertheless, the dissenters and abstainers barely amounted to 10 percent of the total CDU/CSU representation in parliament, at 311 seats. Wolfgang Bosbach, a veteran CDU parliamentarian and member of the Bundestag committee for interior affairs, was arguably the most prominent party rebel in Friday’s vote. From Bavaria, former Transport Minister Peter Ramsauer also objected.

Five hundred forty-two lawmakers – including all Social Democrats, the junior partners in Merkel’s grand coalition – voted “yes,” 32 opposed the extension, and 13 abstained. Several parliamentarians who spoke ahead of the vote called for approving the extension, although members of the opposition Left party and the Greens took the opportunity to criticize the government.

Finance Minister Wolfgang Schäuble asked parliamentarians to approve the extension despite misgivings over talk of a write-down of Greece’s 240-billion-euro ($272-billion) “bailout” from international creditors. Yanis Varoufakis, Schäuble’s counterpart in Athens, had advocated such a step.

“We’re not talking about new billions for Greece, we’re not talking about any changes to this program,” Schäuble said, “rather it’s about providing or granting extra time to successfully end this program.”

Germans have grown skeptical since Greek Prime Minister Alexis Tsipras took power last month, with a survey this week showing that only 21 percent of those polled backed an extension. The top-selling German daily Bild had staged a front-page campaign for a “NEIN!” in the Bundestag vote, inviting readers to send in photos of themselves with yesterday’s paper and it’s giant “NO!” caption.

Tensions in Germany’s ruling coalition emerged Friday after the Sächsische Zeitung regional newspaper reported that the senior Social Democrat Jörg Asmussen, formerly of the European Central Bank, had secretly reached out to Varoufakis at the beginning of February, keeping the CDU Finance Minister Schäuble out of the loop.

Deutsche Welle, “Schäuble’s Greece vote exposes slight rift in CDU-CSU bloc“, 27 Feb 2015 More

USA: GDP (Second Estimate) – Q4 and Annual 2014 NBR

Extract

FOURTH QUARTER 2014

Real gross domestic product – the value of the production of goods and services in the United States, adjusted for price changes – increased at an annual rate of 2.2 percent in the fourth quarter of 2014, according to the “second” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 5.0 percent.

In the advance estimate, the increase in real GDP was 2.6 percent. With the second estimate for the fourth quarter, private inventory investment increased less than previously estimated, while nonresidential fixed investment increased more.

The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, state and local government spending, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the fourth quarter primarily reflected an upturn in imports, a downturn in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by an acceleration in PCE, an upturn in private inventory investment, and an acceleration in state and local government spending.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 0.1 percent in the fourth quarter, 0.2 percentage point less of a decrease than in the advance estimate; this index increased 1.4 percent in the third quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 0.7 percent, compared with an increase of 1.6 percent.

Real personal consumption expenditures increased 4.2 percent in the fourth quarter, compared with an increase of 3.2 percent in the third. Durable goods increased 6.0 percent, compared with an increase of 9.2 percent. Nondurable goods increased 3.8 percent, compared with an increase of 2.5 percent. Services increased 4.1 percent, compared with an increase of 2.5 percent.

Real nonresidential fixed investment increased 4.8 percent in the fourth quarter, compared with an increase of 8.9 percent in the third. Investment in nonresidential structures increased 5.0 percent, compared with an increase of 4.8 percent. Investment in equipment increased 0.9 percent, compared with an increase of 11.0 percent. Investment in intellectual property products increased 10.9 percent, compared with an increase of 8.8 percent. Real residential fixed investment increased 3.4 percent, compared with an increase of 3.2 percent.

Real exports of goods and services increased 3.2 percent in the fourth quarter, compared with an increase of 4.5 percent in the third.
Real imports of goods and services increased 10.1 percent, in contrast to a decrease of 0.9 percent.

Real federal government consumption expenditures and gross investment decreased 7.5 percent in the fourth quarter, in contrast to an increase of 9.9 percent in the third. National defense decreased 12.4 percent, in contrast to an increase of 16.0 percent. Nondefense increased 1.4 percent, compared with an increase of 0.4 percent. Real state and local government consumption expenditures and gross investment increased 2.0 percent, compared with an increase of 1.1 percent.

The change in real private inventories added 0.12 percentage point to the fourth-quarter change in real GDP after subtracting 0.03 percentage point from the third-quarter change. Private businesses increased inventories $88.4 billion in the fourth quarter, following increases of $82.2 billion in the third quarter and $84.8 billion in the second.

Real final sales of domestic product – GDP less change in private inventories – increased 2.1 percent in the fourth quarter, compared with an increase of 5.0 percent in the third.

ANNUAL 2014

Real GDP increased 2.4 percent in 2014 (that is, from the 2013 annual level to the 2014 annual level), compared with an increase of 2.2 percent in 2013.

The increase in real GDP in 2014 reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, state and local government spending, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP growth in 2014 primarily reflected an acceleration in nonresidential fixed investment, a smaller decrease in federal government spending, and accelerations in PCE, in state and local government spending, and in private inventory investment that were partly offset by an acceleration in imports and a deceleration in residential fixed investment.

The price index for gross domestic purchases increased 1.4 percent in 2014, compared with an increase of 1.3 percent in 2013.

Current-dollar GDP increased 3.9 percent, or $650.2 billion, in 2014 to a level of $17,418.3 billion, compared with an increase of 3.7 percent, or $604.9 billion, in 2013.

During 2014 (that is, measured from the fourth quarter of 2013 to the fourth quarter of 2014), real GDP increased 2.4 percent, compared with an increase of 3.1 percent during 2013. The price index for gross domestic purchases increased 1.1 percent during 2014, compared with an increase of 1.3 percent during 2013.

Bureau of Economic Analysis “Gross Domestic Product: Fourth Quarter and Annual 2014 (Second Estimate)“, 27 Feb 2015 (08:30) More

Comment

The composition of growth is looking much better, we are setting up for a solid quarter for the economy. The first quarter is still work in progress.
Ryan Sweet, Senior Economist, Moody’s Analytics Reuters

USA: University of Michigan Consumer Sentiment Survey (Final) – Feb 2015

Extract

Final Results for February 2015

Feb 2015 Jan 2015 Feb 2014 M-M Y-Y
Index of Consumer Sentiment 95.4 98.1 81.6 -2.8% 16.9%
Current Economic Conditions 106.9 109.3 95.4 -2.2% 12.1%
Index of Consumer Expectations 88 91 72.7 -3.3% 21.0%

University of Michigan “Consumer Sentiment Survey (Final) – Feb 2015“, 27 Feb 2015 More

Comment

A more confident consumer is likely to spend more on big ticket items and other discretionary items, and looking ahead, we expect consumer spending … to outpace 2014.
Kristin Reynolds, Economist, IHS Global Insight Reuters

Apple gets followup patent infringement lawsuit NBR

Extract

Fresh off a $532.9 million jury win against Apple Inc (AAPL.O), a Texas company is again suing the tech giant, this time over the same patents’ use in devices introduced after the original case was underway. Smartflash LLC aims to make Apple pay for using the patent licensing firm’s technology without permission in devices not included in the previous case, such as the iPhone 6 and 6 Plus and the iPad Air 2. The trial covered older Apple devices.

Both Smartflash lawuits say that around 2000, the co-inventor of its patents, Patrick Racz, met with executives of what is now European SIM card maker Gemalto SA (GTO.AS), including Augustin Farrugia, who is now a senior director at Apple.

Smartflash has also filed patent infringement lawsuits against Samsung Electronics Co Ltd (005930.KS), Google Inc (GOOGL.O) and Amazon.com Inc (AMZN.O) over the same patents.

The case is Smartflash LLC et al v. Apple Inc, in the U.S. District Court for the Eastern District of Texas, No. 15-cv-145.Reuters

Oil and Gas Futures

Futures prices

  • NYMEX West Texas Intermediate (WTI) (Apr 2015): $49.76/barrel Chart
  • ICE (London) Brent North Sea Crude (Apr 2015) $62.01/barrel Chart
  • NYMEX Natural gas futures (Mar 2015): $2.715/MMBTU Chart

Icahn Enterprises LP posts first loss since 2008 on oil plunge NBR

Extract

Icahn Enterprises LP (IEP.O) lost $373 million, or $3.08 per depositary unit, in 2014, with much of it due to a loss of $478 million in the fourth quarter. Results were hurt by a halving of oil prices between June and December amid a global supply glut.

The company earned a profit of $1.03 billion in 2013. The company’s loss in the fourth quarter through December of $478 million follows a year-earlier profit of $222 million, as revenue fell 31 percent to $3.37 billion. For all of 2014, Icahn Enterprises posted revenue of $19.2 billion.

Among the stocks in the Icahn portfolio are Chesapeake Energy Corp. (CHK.N), which has dropped nearly 34 percent since January 2014, and Transocean Ltd. (RIG.N), which has dropped nearly 68 percent over the same period.Reuters

Comment

This year’s results were obviously disappointing, with the precipitous decline in oil prices impacting the profitability of many of our segments. I believe a great amount of profit in the next few years will be made by those who hold positions in energy companies. However, I also believe that oil prices will continue to decline in the near term.

Carl Icahn, President, Icahn Enterprises LP, 27 Feb 2015 Reuters

USA Stock Market Indices Opinion

Index Ticker Today Change 31 Dec 14 YTD
S&P 500 SPX (INX) 2,104.50 -0.30% 2,058.90 +2.21%
DJIA INDU 18,132,70 -0.45% 17,823.05 +1.74%
NASDAQ IXIC 4,963.53 -0.49% 4,736.05 +4.80%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 27 Feb 2015 Watch Read
Comment

The GDP number is similar to the rest of what’s been going on this week – as long as it’s nothing negative, the market is unlikely to pull back meaningfully. We’re likely to continue to grind higher, or at worst take a pause from the uptrend.
Michael James, Managing Director of Equity Trading, Wedbush Securities Inc. Bloomberg

Portfolio

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 14 YTD
Portfolio Index USD 1,995 -1.25% 1.741 +14.58%
Valuation Rate USD/AUD 0.78641 +0.29% 0.82153 -4.27%
Portfolio Index AUD 2.537 -1.54% 2.119 +19.70%

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

The shape of the portfolio today (Chart: Yahoo Finance)

The shape of the portfolio today (Chart: Yahoo Finance)

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 14 YTD
Apple AAPL $128.46 -1.50% $110.38 +16.38%
Amazon AMZN $380.16 -1.21% $310.35 +22.49%
Ebay EBAY $57.91 -1.08% $56.12 +3.19%
Facebook FB $78.97 -1.79% $78.02 +1.22%
Google A GOOGL $562.63 +0.60% $530.66 +6.02%
Google C GOOG $558.40 +0.53% $526.40 +6.08%
Linkedin LNKD $267.20 -1.31% $229.71 +16.32%
VMware VMW $85.07 +1.30% $82.52 +3.09%

FX: USD/AUD

The AUD remained around USD0.78 today (Chart: xe.com)

The AUD remained around USD0.78 today (Chart: xe.com)

Thu 26 Feb 2015

News

Regular Items

Eurozone: Business climate indicator for the euro area – Feb 2015

Extract
Business Climate Indicator for the Euro Area

Business Climate Indicator for the Euro Area

In February 2015 the Business Climate Indicator (BCI) for the euro area decreased slightly (by 0.05 points to +0.07). Managers’ production expectations, as well as their views on the level of past production and overall order books worsened; by contrast, their assessment of stocks of finished products was revised upwards, while views on export order books remained broadly unchanged.

European Commission, Economic and Financial Affairs DG “Business climate indicator for the euro area – Feb 2015“, 26 Feb 2015 More

Eurozone: Monetary developments in the euro area – Jan 2015

Extract

The annual growth rate of the broad monetary aggregate M3 increased to 4.1% in January 2015, from 3.8% in December 2014. The three-month average of the annual growth rates of M3 in the period from November 2014 to January 2015 increased to 3.6%, from 3.1% in the period from October 2014 to December 2014.

European Central Bank “Monetary developments in the euro area – Jan 2015“, 26 Feb 2015 More

USA: Consumer Price Index (CPI) – Jan 2015 NBR

Extract

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.7 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index decreased 0.1 percent before seasonal adjustment.

12-month percent change in CPI-U, not seasonally adjusted, Jan14 - Jan 15

12-month percent change in CPI-U, not seasonally adjusted, Jan14 – Jan 15

The energy index fell 9.7 percent as the gasoline index fell 18.7 percent in January, the sharpest in a series of seven consecutive declines. The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1 percent had the gasoline index been unchanged. The fuel oil index also fell sharply, and the index for natural gas turned down, although the electricity index rose. The food index was unchanged in January, with the food at home index falling for the first time since May 2013.

The index for all items less food and energy rose 0.2 percent in January. The shelter index rose 0.3 percent, and the indexes for personal care, for apparel, and for recreation increased as well. The medical care index was unchanged, while an array of indexes declined in January, including those for household furnishings and operations, alcoholic beverages, new vehicles, used cars and trucks, airline fares, and tobacco.

The all items index declined 0.1 percent over the last 12 months, the first negative 12-month change since the period ending October 2009. The energy index fell 19.6 percent over the span, with the gasoline index down 35.4 percent. The food index rose 3.2 percent, and the index for all items less food and energy increased 1.6 percent.

Bureau of Labor Statistics “Consumer Price Index (CPI) – Jan 2015“, 26 Feb 2015 More

USA: Real Earnings – Jan 2015

Extract

Real average hourly earnings for all employees rose 1.2 percent from December to January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from a 0.5 percent increase in average hourly earnings combined with a 0.7 percent decrease in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings increased by 1.2 percent over the month due to the increase in real average hourly earnings combined with no change in the average workweek.

Monthly change in real average hourly earnings for all employees (SA) Jan 14 – Jan 15

Monthly change in real average hourly earnings for all employees (SA) Jan 14 – Jan 15

Real average hourly earnings increased by 2.4 percent, seasonally adjusted, from January 2014 to January 2015. This increase in real average hourly earnings, combined with a 0.6 percent increase in the average workweek, resulted in a 3.0 percent increase in real average weekly earnings over this period.

Bureau of Labor Statistics “Real Earnings – Jan 2015“, 26 Feb 2015 More

USA: Unemployment Insurance Weekly Claims Report – Week to 21 Feb 2015 NBR

Extract

ui_20150226

In the week ending February 21, the advance figure for seasonally adjusted initial claims was 313,000, an increase of 31,000 from the previous week’s revised level. The previous week’s level was revised down by 1,000 from 283,000 to 282,000. The 4-week moving average was 294,500, an increase of 11,500 from the previous week’s revised average. The previous week’s average was revised down by 250 from 283,250 to 283,000.

ue_20150226

The advance seasonally adjusted insured unemployment rate was 1.8 percent for the week ending February 14, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending February 14 was 2,401,000, a decrease of 21,000 from the previous week’s revised level. The previous week’s level was revised down by 3,000 from 2,425,000 to 2,422,000. The 4-week moving average was 2,399,000, an increase of 1,750 from the previous week’s revised average. The previous week’s average was revised down by 750 from 2,398,000 to 2,397,250.

Employment and Training Administration, “Unemployment Insurance Weekly Claims Report – Week to 21 Feb 2015“, 26 Feb 2015 (08:30) More

Apple expected to launch Watch on 9 Mar 2015 Opinion

Apple has issued invites for a new media event on March 9, with the tagline “Spring Forward,” which likely refers to time, hence the Apple Watch is a good guess for the star of the show. The event kicks off at the Yerba Buena Center for the Arts in San Francisco beginning at 10 a.m. on Monday, March 9, and we should get more details regarding the April launch window for Apple’s first wearable, which Tim Cook alluded to in Apple’s most recent earnings call.

The Apple Watch is the most likely candidate for discussion here, as Apple has also reportedly been inviting select Apple Watch app developers to Cupertino for special sessions in preparation for a device launch showcase of sorts. Other potential announcements could include MacBook Air or iPad developments, based on recent rumors, though it seems likely that Apple wants to highlight its very first wearable, which broke cover at the September iPhone launch event, and it might not want other devices to share the stage. Note also that Daylight Savings Time begins on March 8, the day before this event.

TechCrunch, “Apple Sends Out Invites For March 9 Event, Likely For Apple Watch“, 26 Feb 2015 More

Oil and Gas Futures NBR

  • NYMEX West Texas Intermediate (WTI) (Apr 2015): $48.17/barrel Chart
  • ICE (London) Brent North Sea Crude (Apr 2015) $60.05/barrel Chart
  • NYMEX Natural gas futures (Mar 2015): $2.700/MMBTU Chart

USA Stock Market Indices Opinion NBR

Index Ticker Today Change 31 Dec 14 YTD
S&P 500 SPX (INX) 2,110.74 -0.15% 2,058.90 +2.52%
DJIA INDU 18,214.42 -0.06% 17,823.05 +2.20%
NASDAQ IXIC 4,987.89 +0.42% 4,736.05 +5.32%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 26 Feb 2015 Watch Read

Portfolio

Index values Opinion

:-) Outperformed Currency Today Change 31 Dec 14 YTD
Portfolio Index USD 2.020 +1.19% 1.741 +16.03%
Valuation Rate USD/AUD 0.78413 -1.24% 0.82153 -4.55%
Portfolio Index AUD 2.576 +2.45% 2.119 +21.56%

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

The shape of the portfolio today (Chart: Yahoo Finance)

The shape of the portfolio today (Chart: Yahoo Finance)

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 14 YTD
Apple AAPL $130.41 +1.26% $110.38 +18.15%
Amazon AMZN $384.80 -0.15% $310.35 +23.99%
Ebay EBAY $58.54 +0.33% $56.12 +4.31%
Facebook FB $80.41 +1.07% $78.02 +3.06%
Google A GOOGL $559.29 +2.19% $530.66 +5.40%
Google C GOOG $555.48 +2.13% $526.40 +5.52%
Linkedin LNKD $270.76 +0.65% $229.71 +17.87%
VMware VMW $83.98 -0.62% $82.52 +1.77%

FX: USD/AUD

The AUD returned to its range centered on USD0.78  (Chart: xe.com)

The AUD returned to its USD0.78 entered range (Chart: xe.com)

Wed 25 Feb 2015

News

Regular Items

Greece update

Timetable

  • 26 Feb 2015: German ruling parties hold a special meeting in Berlin to discuss the Greek proposal.
  • 27 Feb 2015: Latest date for German Bundestag to vote on an extension of the current (or other) aid program. Bloomberg
  • 28 Feb 2015: Current Master Financial Assistance Facility Agreement (MFFA) expires.

Doubts in Germany

The German parliament is considering whether Greece’s list of reform measures can be trusted as they prepare for a special meeting in Berlin on Thursday morning and a parliamentary vote on Friday that would approve the extension of Greece’s bailout program if passed.

Responding to criticism within Greece about privatisation in the list of reforms, Greece’s Finance Minister Yanis Varoufakis said today that the list of policy measures contained “constructive ambiguity” on the issue of privatizations.

German Finance Minister Wolfgang Schäuble said it was “not easy” for him to let Greece have the extension, considering how there was “much doubt in Germany” as to whether Athens will pay back the more than 40 billion euros it owes Berlin. Greece’s proposed reforms must be “substantiated with numbers,” Schäuble told German media on Wednesday, otherwise they “don’t count.”

Chancellor Angela Merkel said, “There is still a lot of work ahead of us.”

She struck a more positive note than Schäuble, however, by saying she believes her government and its Greek counterpart had found a good starting point for negotiations.

Deutsche Welle, “Varoufakis: ‘Bloodletting’ of Greece must stop“, 25 Feb 2015 More

Doubts in IMF and ECB

The IMF and ECB expressed some concerns about Greece’s list of reforms to Jeroen Dijsselbloem, Chairman of the Eurogroup:

  • IMF: Christine Lagarde, Managing DirectorThe proposals are not conveying clear assurances that the government intends to undertake the reforms envisaged … There are neither clear commitments to design and implement the envisaged comprehensive pension and VAT policy reforms, nor unequivocal undertakings to continue already agreed policies for opening up closed sectors, for privatization and for labor market reforms.
  • ECB: Mario Draghi, President: “Our initial impression is that the document covers a wide range of reform areas … but we note that the commitments outlined by the authorities differ from existing program commitments.

HSBC Flash China Manufacturing PMI Opinion

Extract

markit_china_pmi_20150225

Key points:

  • Flash China Manufacturing PMI at 50.1 in February (49.7 in January). Four-month high.
  • Flash China Manufacturing Output Index at 50.8 in February (50.3 in January). Five-month high.

Markit Economics, “Flash China Manufacturing PMI – Feb 2015“, 25 Feb 2015 More

Apple to pay $533 million for patent infringement Opinion

Apple Inc has been ordered to pay $532.9 million after a federal jury in Texas found that its iTunes software infringed three patents owned by patent licensing firm Smartflash LLC.

Though Smartflash had been asking for $852 million in damages, Tuesday night’s verdict was still a blow to Apple.

The jury, which deliberated for eight hours, determined Apple had not only used Smartflash’s patents without permission, but did so willfully.

Apple has said it will appeal the decision.Reuters

Chinese government drops US brands from procurement lists Opinion NBR

China has dropped some of the world’s leading technology brands from its approved state purchase lists, while approving thousands more locally made products, in what some say is a response to revelations of widespread Western cybersurveillance. Others put the shift down to a protectionist impulse to shield China’s domestic technology industry from competition. The Central Government Procurement Center’s (CGPC) list, which details products by brand and type, is approved by China’s Ministry of Finance. The CGPC list does not bind local government or state-owned enterprises, nor the military, which runs its own system of procurement approval.Reuters

US suppliers dropped from the CGPC list include:

  • Cisco Systems, which in 2012 counted 60 products on the CGPC, but by late 2014 had none
  • Apple Inc
  • Intel Corp’s security software firm McAfee
  • Citrix Systems.

Janet Yellen’s testimony to the House Finance Committee Opinion NBR

Chair of the Federal Reserve, Janet Yellen, addressed the House Finance Committee today (after yesterday’s testimony to the Senate Committee). The key point in her conclusion was that the FOMC is not considering higher U.S. rates until the 2% inflation target is reached, despite improvements in the job market. NASDAQ

Oil and Gas Futures NBR

  • NYMEX West Texas Intermediate (WTI) (Apr 2015): $50.99/barrel Chart
  • ICE (London) Brent North Sea Crude (Apr 2015) $61.74/barrel Chart
  • NYMEX Natural gas futures (Mar 2015): $2.865/MMBTU Chart

USA Stock Market Indices Opinion

:-) The DJIA closed on a record high today. NBR

Index Ticker Today Change 31 Dec 14 YTD
S&P 500 SPX (INX) 2,113.86 -0.08% 2,058.90 +2.67%
DJIA INDU 18,224.57 +0.08% 17,823.05 +2.25%
NASDAQ IXIC 4,967.14 -0.02% 4,736.05 +4.88%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 25 Feb 2015 Watch Read

Portfolio

Index values Opinion

Our indices have been substantially hurt today by a 2.56% fall in Apple’s share price and an increase in the AUD against the USD. Apple’s share price has been hurt by an adverse Court decision and China’s blocking of some western suppliers from its government procurement list.

:-( Underperformed Currency Today Change 31 Dec 14 YTD
Portfolio Index USD 1.997 -1.61% 1.741 +14.67%
Valuation Rate USD/AUD 0.79396 +0.74% 0.82153 -3.36%
Portfolio Index AUD 2.515 -2.32% 2.119 +18.65%

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

The shape of the portfolio today (Chart: Yahoo Finance)

The shape of the portfolio today (Chart: Yahoo Finance)

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 14 YTD
Apple AAPL $128.79 -2.56% $110.38 +16.68%
Amazon AMZN $385.37 +1.79% $310.35 +24.17%
Ebay EBAY $58.35 -0.09% $56.12 +3.97%
Facebook FB $79.56 +1.41% $78.02 +1.97%
Google A GOOGL $547.33 +1.61% $530.66 +3.14%
Google C GOOG $543.87 +1.45% $526.40 +3.32%
Linkedin LNKD $269.00 +1.79% $229.71 +17.10%
VMware VMW $84.50 +1.32% $82.52 +2.40%

FX: USD/AUD

The AUD rose against the USD as a result of:

  • Federal Reserve Chair Janet Yellen’s testimony, reducing expectations of a near-term interest rate rise.
  • A minor improvement in China’s PMI, from 49.7 (contraction) to 50.1 (expansion), suggesting an increase in demand for Australian commodities.
The AUD has strengthened against the USD today (Chart: xe.com)

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

Tue 24 Feb 2015

News

Regular Items

Greece update

Timetable

  • Today: Another extraordinary Eurogroup meeting (by teleconference): Greece to present to the Eurogroup a first list of reform measures, based on the current arrangement, as a basis for finalising an extension of the aid program.
  • 27 Feb 2015: Latest date for German Bundestag to vote on an extension of the current (or other) aid program. Bloomberg
  • 28 Feb 2015: Current Master Financial Assistance Facility Agreement (MFFA) expires.

Background to the European Debt Crisis

At the heart of the European debt crisis is the euro, the currency that tied together 18 countries in an intimate manner. So when one country teeters on the brink of financial collapse, the entire continent is at risk. How did such a flawed system come to be?” This 12 minute documentary presents a visual explanation of the crisis: Bloomberg

Greece’s statement of reforms

There’s a risk in our record of the Greece situation. When we see an article “Greece sends comprehensive reform plan to lendersReuters, we hope we are reporting today’s news, rather than yesterday’s news.

Anyway, it seems that Greece sent its proposed list of reforms to the European Commission and International Monetary Fund at midnight Monday. Here t’is – there’s a handsome prize for anyone who finds measurable targets in the proposal:

Dear President of the Eurogroup,

In the Eurogroup of 20 February 2015 the Greek government was invited to present to the institutions, by Monday 23rd February 2015, a first comprehensive list of reform measures it is envisaging, to be further specified and agreed by the end of April 2015.

In addition to codifying its reform agenda, in accordance with PM Tsipras’ programmatic statement to Greece’s Parliament, the Greek government also committed to working in close agreement with European partners and institutions, as well as with the International Monetary Fund, and take actions that strengthen fiscal sustainability, guarantee financial stability and promote economic recovery.

The first comprehensive list of reform measures follows below, as envisaged by the Greek government. It is our intention to implement them while drawing upon available technical assistance and financing from the European Structural and Investment Funds.

Truly

Yanis Varoufakis
Minister of Finance
Hellenic Republic

I. FISCAL STRUCTURAL POLICIES

Tax policies

Tax policies – Greece commits to:

• Reform VAT policy, administration and enforcement. Robust efforts will be made to improve collection and fight evasion making full use of electronic means and other technological innovations. VAT policy will be rationalized in relation to rates that will be streamlined in a manner that maximizes actual revenues without a negative impact on social justice, and with a view to limiting exemptions while eliminating unreasonable discounts.

• Modify the taxation of collective investment and income tax expenditures which will be integrated in the income tax code.

• Broaden definition of tax fraud and evasion while disbanding tax immunity.

• Modernizing the income tax code and eliminating from it tax code exemptions and replacing them, when necessary, with social justice enhancing measures.

• Resolutely enforce and improve legislation on transfer pricing.

• Work toward creating a new culture of tax compliance to ensure that all sections of society, and especially the well-off, contribute fairly to the financing of public policies. In this context, establish with the assistance of European and international partners, a wealth database that assists the tax authorities in gauging the veracity of previous income tax returns.

Public Finance Management

Greece will:

• Adopt amendments to the Organic Budget Law and take steps to improve public finance management. Budget implementation will be improved and clarified as will control and reporting responsibilities. Payment procedures will be modernized and accelerated while providing a higher degree of financial and budgetary flexibility and accountability for independent and/or regulatory entities.

• Devise and implement a strategy on the clearance of arrears, tax refunds and pension claims.

• Turn the already established (though hitherto dormant) Fiscal Council into a fully operational entity.

Revenue administration

Greece will modernise the tax and custom administrations benefiting from available technical assistance. To this end Greece will:

• Enhance the openness, transparency and international reach of the process by which the General Secretary of the General Secretariat of Public Revenues is appointed, monitored in terms of performance, and replaced.

• Strengthen the independence of the General Secretariat of Public Revenues (GSPR), if necessary through further legislation, from all sorts of interference (political or otherwise) while guaranteeing full accountability and transparency of its operations. To this end, the government and the GSPR will make full use of available technical assistance.

• Staff adequately, both quantitatively and qualitatively, the GSPR and in particular the high wealth and large debtors units of the revenue administration and ensure that it has strong investigative/prosecution powers, and resources building on SDOE’s capacities, so as to target effectively tax fraud by, and tax arrears of, high income social groups. Consider the merits of integrating SDOE into GSPR.

• Augment inspections, risk-based audits, and collection capacities while seeking to integrate the functions of revenue and social security collection across the general government.

Public spending

The Greek authorities will:

• Review and control spending in every area of government spending (e.g. education, defense, transport, local government, social benefits)

• Work toward drastically improving the efficiency of central and local government administered departments and units by targeting budgetary processes, management restructuring, and reallocation of poorly deployed resources.

• Identify cost saving measures through a thorough spending review of every Ministry and rationalization of non-salary and non-pension expenditures which, at present, account for an astounding 56% of total public expenditure.

• Implement legislation (currently in draft form at the General Accounts Office – GAO) to review non-wage benefits expenditure across the public sector.

• Validate benefits through cross checks within the relevant authorities and registries (e.g. Tax Number Registry, AMKA registry) that will help identify non-eligible beneficiaries.

• Control health expenditure and improve the provision and quality of medical services, while granting universal access. In this context, the government intends to table specific proposals in collaboration with European and international institutions, including the OECD.

Social security reform

Greece is committed to continue modernising the pension system. The authorities will:

• Continue to work on administrative measures to unify and streamline pension policies and eliminate loopholes and incentives that give rise to an excessive rate of early retirements throughout the economy and, more specifically, in the banking and public sectors.

• Consolidate pension funds to achieve savings.

• Phase out charges on behalf of ‘third parties’ (nuisance charges) in a fiscally neutral manner.

• Establish a closer link between pension contributions and income, streamline benefits, strengthen incentives to declare paid work, and provide targeted assistance to employees between 50 and 65, including through a Guaranteed Basic Income scheme, so as to eliminate the social and political pressure for early retirement which over-burdens the pension funds.

Public administration & corruption – Greece wants a modern public administration. It will:

• Turn the fight against corruption into a national priority and operationalize fully the National Plan Against Corruption.

• Target fuel and tobacco products’ smuggling, monitor prices of imported goods (to prevent revenue losses during the importation process), and tackle money laundering. The government intends immediately to set itself ambitious revenue targets, in these areas, to be pursued under the coordination of the newly established position of Minister of State.

• Reduce (a) the number of Ministries (from 16 to 10), (b) the number of ‘special advisors’ in general government; and (c) fringe benefits of ministers, Members of Parliament and top officials (e.g. cars, travel expenses, allowances)

• Tighten the legislation concerning the funding of political parties and include maximum levels of borrowing from financial and other institutions.

• Activate immediately the current (though dormant) legislation that regulates the revenues of media (press and electronic), ensuring (through appropriately designed auctions) that they pay the state market prices for frequencies used, and prohibits the continued operation of permanently loss-making media outlets (without a transparent process of recapitalization)

• Establish a transparent, electronic, real time institutional framework for public tenders/procurement – re-establishing DIAVGEIA (a side-lined online public registry of activities relating to public procurement)

• Reform the public sector wage grid with a view to decompressing the wage distribution through productivity gains and appropriate recruitment policies without reducing the current wage floors but safeguarding that the public sector’s wage bill will not increase

• Rationalize non-wage benefits, to reduce overall expenditure, without imperilling the functioning of the public sector and in accordance with EU good practices

• Promote measures to: improve recruitment mechanisms, encourage merit-based managerial appointments, base staff appraisals on genuine evaluation, and establish fair processes for maximizing mobility of human and other resources within the public sector.

II. FINANCIAL STABILITY

Instalment Schemes

Greece commits to:

• Improve swiftly, in agreement with the institutions, the legislation for repayments of tax and social security arrears

• Calibrate installment schemes in a manner that helps discriminate efficiently between: (a) strategic default/non-payment and (b) inability to pay; targeting case (a) individuals/firms by means of civil and criminal procedures (especially amongst high income groups) while offering case (b) individuals/firms repayment terms in a manner that enables potentially solvent enterprises to survive, averts free-riding, annuls moral hazard, and reinforces social responsibility as well as a proper re-payment culture.

• Decriminalize lower income debtors with small liabilities

• Step up enforcement methods and procedures, including the legal framework for collecting unpaid taxes and effectively implement collection tools.

Banking and Non-Performing loans

Greece is committed to:

• Banks that are run on sound commercial/banking principles

• Utilize fully the Hellenic Financial Stability Fund and ensure, in collaboration with the SSM, the ECB and the European Commission, that it plays well its key role of securing the banking sector’s stability and its lending on commercial basis while complying with EU competition rules.

• Dealing with non-performing loans in a manner that considers fully the banks’ capitalization (taking into account the adopted Code of Conduct for Banks), the functioning of the judiciary system, the state of the real estate market, social justice issues, and any adverse impact on the government’s fiscal position.

• Collaborating with the banks’ management and the institutions to avoid, in the forthcoming period, auctions of the main residence of households below a certain income threshold, while punishing strategic defaulters, with a view to: (a) maintaining society’s support for the government’s broad reform program, (b) preventing a further fall in real estate asset prices (that would have an adverse effect on the banks’ own portfolio), (c) minimizing the fiscal impact of greater homelessness, and (d) promoting a strong payment culture. Measures will be taken to support the most vulnerable households who are unable to service their loans

• Align the out-of-court workout law with the installment schemes after their amendment, to limit risks to public finances and the payment culture, while facilitating private debt restructuring.

• Modernize bankruptcy law and address the backlog of cases.

III. POLICIES TO PROMOTE GROWTH

Privatisation and public asset management

To attract investment in key sectors and utilise the state’s assets efficiently, the Greek authorities will:

• Commit not to roll back privatizations that have been completed. Where the tender process has been launched the government will respect the process, according to the law.

• Safeguard the provision of basic public goods and services by privatized firms/industries in line with national policy goals and in compliance with EU legislation.

• Review privatizations that have not yet been launched, with a view to improving the terms so as to maximize the state’s long term benefits, generate revenues, enhance competition in the local economies, promote national economic recovery, and stimulate long term growth prospects.

• Adopt, henceforth, an approach whereby each new case will be examined separately and on its merits, with an emphasis on long leases, joint ventures (private-public collaboration) and contracts that maximize not only government revenues but also prospective levels of private investment.

• Unify (HRDAF) with various public asset management agencies (which are currently scattered across the public sector) with a view to developing state assets and enhancing their value through microeconomic and property rights’ reforms.

Labor market reforms

Greece commits to: 

• Achieve EU best practice across the range of labor market legislation through a process of consultation with the social partners while benefiting from the expertise and existing input of the ILO, the OECD and the available technical assistance.

• Expand and develop the existing scheme that provides temporary employment for the unemployed, in agreement with partners and when fiscal space permits and improve the active labor market policy programs with the aim to updating the skills of the long term unemployed.

• Phasing in a new ‘smart’ approach to collective wage bargaining that balances the needs for flexibility with fairness. This includes the ambition to streamline and over time raise minimum wages in a manner that safeguards competiveness and employment prospects. The scope and timing of changes to the minimum wage will be made in consultation with social partners and the European and international institutions, including the ILO, and take full account of advice from a new independent body on whether changes in wages are in line with productivity developments and competitiveness.

Product market reforms and a better business environment

As part of a new reform agenda, Greece remains committed to: 

• Removing barriers to competition based on input from the OECD.

• Strengthen the Hellenic Competition Commission.

• Introduce actions to reduce the burdens of administrative burden of bureaucracy in line with the OECD’s input, including legislation that bans public sector units from requesting (from citizens and business) documents certifying information that the state already possesses (within the same or some other unit).

• Better land use management, including policies related to spatial planning, land use, and the finalization of a proper Land Registry

• Pursue efforts to lift disproportionate and unjustified restrictions in regulated professions as part of the overall strategy to tackle vested interests.

• Align gas and electricity market regulation with EU good practices and legislation

Reform of the judicial system

• Improve the organization of courts through greater specialization and, in this context, adopt a new Code of Civil Procedure.

• Promote the digitization of legal codes and the electronic submission system, and governance, of the judicial system.

Statistics

The Greek government reaffirms its readiness to:

• Honor fully the Commitment on Confidence in Statistics, and in particular the institutional independence of ELSTAT, ensuring that ELSTAT has the necessary resources to implement its work program.

• Guarantee the transparency and propriety of the process of appointment of the ELSTAT President in September 2015, in cooperation with EUROSTAT.

IV. HUMANITARIAN CRISIS

The Greek government affirms its plan to: 

• Address needs arising from the recent rise in absolute poverty (inadequate access to nourishment, shelter, health services and basic energy provision) by means of highly targeted non-pecuniary measures (e.g. food stamps).

• Do so in a manner that is helpful to the reforming of public administration and the fight against bureaucracy/corruption (e.g. the issuance of a Citizen Smart Card that can be used as an ID card, in the Health System, as well as for gaining access to the food stamp program etc.).

• Evaluate the pilot Minimum Guaranteed Income scheme with a view to extending it nationwide.

• Ensure that its fight against the humanitarian crisis has no negative fiscal effect.

REACTION

Peter Kažimír, Slovakian Finance Minister's reaction to the Greek proposal

Peter Kažimír, Slovakian Finance Minister’s reaction to the Greek proposal

OUTCOME

Eurogroup

It was discussed, and finally the Eurogroup gave in, with this statement:

The Eurogroup today discussed the first list of reform measures presented by the Greek authorities, based on the current arrangement, which will be further specified and then agreed with the institutions at the latest by the end of April. The institutions provided us with their first view that they consider this list of measures to be sufficiently comprehensive to be a valid starting point for a successful conclusion of the review.

We call on the Greek authorities to further develop and broaden the list of reform measures, based on the current arrangement, in close coordination with the institutions in order to allow for a speedy and successful conclusion of the review.

Eurogroup, “Eurogroup statement on Greece“, 24 Feb 2015 Statement

International Monetary Fund

While the Eurogroup finance ministers were getting ready to get back to their own countries’ issues, Christine Lagarde of the IMF (also a lender to Greece) wrote to Jeroen Dijsselbloem:
Whilst the authorities list is comprehensive, it is not very specific, which is perhaps to be expected considered the government is new in office … We note in particular that there are neither clear commitments to design and implement the envisaged comprehensive pension and VAT policy reforms nor unequivocal undertakings to continue already-agreed policies for opening up closed sectors, for administrative reforms, for privatisation, and for labour market reforms.

European Central Bank

Mario Draghi also wrote to wrote to Jeroen Dijsselbloem:

Dear Jeroen,

My Staff has reviewed the list of measures which the Greek authorities submitted yesterday evening. Our initial impression is that the document covers a wide range of reform areas and in this sense, it is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. However, as we expected it was not possible for the authorities to elaborate on concrete proposals and commitments that can be assessed by the institutions in respect to growth, public finances and financial stability. Given the very limited time available, this is understandable.

I assume that it is clear that the basis for concluding the current review, and also for any future arrangements, will be the existing commitments in the current Memorandum of Understanding and the Memorandum of Economic and Financial Policies (MEFP). In this context we note that the commitments outlined by the authorities differ from existing programme commitments in a number of areas. In such cases, we will have to assess during the review whether measures which are not accepted by the authorities are replaced with measures of equal or better quality in terms of achieving the objectives of the programme.

I would also again urge the Greek authorities to act swiftly to stabilise the payment culture and refrain from any unilateral action to the contrary.

With best regards,

[signed] Mario Draghi

Markit Flash U.S. Services PMI – Feb 2015 Opinion

Extract

Service sector activity growth rebounds during February, driven by fastest rise in new work for four months

markit_usa_psi_20150224

Key points:

  • Strongest rise in service sector business activity for four months
  • Increased services payroll numbers in February marks five years of sustained jobs growth
  • Service sector input cost inflation remains only modest.

Markit Economics, “Markit Flash U.S. Services PMI – Feb 2015“, 24 Feb 2015 More

Janet Yellen’s testimony to Senate Banking Committee Bloomberg NBR

In her testimony to Senate Banking Committee, Federal Reserve Chair Janet Yellen “struck an upbeat note in her assessment of the economy, saying the job market is improving and household finances are stronger. Stocks and Treasuries initially fell, then rallied as investors focused on her comments that inflation and wage growth remain too low.Bloomberg

Update On Wed 25 Feb 2015 addressed the House Finance Committee. The key point in her conclusion was that the FOMC is not considering higher U.S. rates until the 2% inflation target is reached, despite improvements in the job market. NASDAQ

Oil and Gas Futures NBR

  • NYMEX West Texas Intermediate (WTI) (Apr 2015): $49.13/barrel Chart
  • ICE (London) Brent North Sea Crude (Apr 2015) $58.63/barrel Chart
  • NYMEX Natural gas futures (Mar 2015): $2.900/MMBTU Chart

USA Stock Market Indices Opinion

:-) The S&P 500 and DJIA hit new records today, and the NASDAQ Composite moved closer to its 2001 record. NBR

Index Ticker Today Change 31 Dec 14 YTD
S&P 500 SPX (INX) 2,115.48 +0.28% 2,058.90 +2.75%
DJIA INDU 18,209.19 +0.51% 17,823.05 +2.17%
NASDAQ IXIC 4,968.12 +0.14% 4,736.05 +4.90%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 24 Feb 2015 Watch Read

Portfolio

Index values Opinion

:-) Our AUD-denominated index pushed through 2.600 today, but fell back below that level during the NASDAQ/NYSE trading session. It first passed through 2.500 just 12 days ago (12 Feb 2015).

:-( Underperformed Currency Today Change 31 Dec 14 YTD
Portfolio Index USD 2.115 +0.28% 1.741 +2.75%
Valuation Rate USD/AUD 0.78816 +0.37% 0.82153 -4.06%
Portfolio Index AUD 2.575 -0.82% 2.119 +21.47%

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

 The shape of the portfolio today (Chart: Yahoo Finance)


The shape of the portfolio today (Chart: Yahoo Finance)

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 14 YTD
Apple AAPL $132.17 -0.62% $110.38 +19.74%
Amazon AMZN $378.59 -0.41% $310.35 +21.99%
Ebay EBAY $58.40 +0.57% $56.12 +4.06%
Facebook FB $78.45 -0.49% $78.02 +0.55%
Google A GOOGL $538.65 +0.68% $530.66 +1.51%
Google C GOOG $536.09 +0.79% $526.40 +1.84%
Linkedin LNKD $264.26 +0.02% $229.71 +15.04%
VMware VMW $83.40 +0.12% $82.52 +1.07%

Mon 23 Feb 2015

News

Regular Items

Greece update

Timetable

  • Today: Extraordinary Eurogroup meeting: Greece to present to the Eurogroup a first list of reform measures, based on the current arrangement, as a basis for finalising an extension of the aid program. Eurogroup
  • 24 Feb 2015: Another extraordinary Eurogroup meeting (by teleconference): Greece to present to the Eurogroup a first list of reform measures, based on the current arrangement, as a basis for finalising an extension of the aid program … yes, the same list.
  • 27 Feb 2015: Latest date for German Bundestag to vote on an extension of the current (or other) aid program. Bloomberg
  • 28 Feb 2015: Current Master Financial Assistance Facility Agreement (MFFA) expires.

The list of reform measures – sort of … NBR

Greece has offered a 6-page list of reform measures – however it seems the Eurogroup gave Greece more time to work on the list.

Greece will submit a list of reforms to the Eurogroup of euro zone finance ministers on Tuesday morning, a Greek government official said on Monday. The Eurogroup had set a Monday deadline for Athens to supply the list, which is a condition for securing a four-month extension to the country’s bailout programme. The official said the Eurogroup had agreed that the submission could be made on Tuesday. The official outlined what the list would contain, but gave no reason for the delay. The list of reforms will be sent to the finance ministers of the Eurogroup on Tuesday morning, while a teleconference will take place in the afternoon.Reuters

Today’s list … a bunch of thoughts, but not what was expected

There are no numeric targets in the list offered today. The key points, translated and summarised by Eurozone crisis expert Yannis Koursomitis, are:

  • Incentives for tax arrears up 100 installments – provisions to avoid moral hazard
  • Plan for NPLs – Banks capital protection – social justice – protection of primary residences from foreclosures
  • Labor law: Reforms according to EU ‘best practices’
  • Pension funds: Measures for viability of pension funds without strict timetables – no commitments for no deficits
  • Privatizations: Respect of done deals – Protection of national key interests
  • Enhancing competition: Adoption of OECD proposals
  • Reforms in state institutions – no rehires of laid-offs
  • Measures for the poor according to Thessaloniki proposals
  • Reform tax collection authority
Tweet from Simon Nixon, Wall Street Journal

Tweet from Simon Nixon, Wall Street Journal

The list of reform measures – reaction …

There are rising concerns within Syria and its coalition partner ANEL about the status of negotiations with the Eurogroup. One Syriza MEP (Sophia Sakorafa) has said “The people gave a mandate to cancel the memorandum. We don’t have any political legitimacy to act otherwise.

Germany: Martin Jaeger, Finance Ministry spokesman: “The institutions (ECB, European Commission and IMF) will look at this list first, as agreed on Friday, and then give their opinion on it and on this basis there will be a discussion among the Eurogroup ministers and according to current plans, this will be in the form of a telephone conference.Reuters

The Greek finance ministry has announced that a teleconference will take place between the Greek finance minister and euro group on Tuesday 24 Feb 2015.

IMF: Christine Lagarde – Greece should not leave the Eurozone. “This is not on the cards, and it is not being discussed. Last week was a triggering point where there was a collective determination to listen, to build trust, and to do the best to stay together.

European Investment Bank sees no more investment in Greece

The European Investment Bank released its 2014 annual report today Press Release

EIB President Werner Hoyer commented, in relation to new investment in Greece: “For the moment, I do not see any new projects in Greece … ” adding that it is “a ‘no-go area for this bank to go into weak projects.Ekathimerini

Hoyer followed up his comments with a separate press release, which included the comment that: “The EIB Group has a very strong track record of lending in Greece. Since the crisis the EIB has provided funding amounting to over € 11 billion. As of today, outstanding loans (the EIB’s exposure) in Greece amount to over € 16.9bn, equivalent to around 9.4% of Greece’s GDP. The EIB has been and will remain strongly committed to financing projects in Greece.EIB

Oil and Gas Futures NBR

  • NYMEX West Texas Intermediate (WTI) (Apr 2015): $49.45/barrel Chart
  • ICE (London) Brent North Sea Crude (Apr 2015) $58.90/barrel Chart
  • NYMEX Natural gas futures (Mar 2015): $2.871/MMBTU Chart

USA Stock Market Indices Opinion

Index Ticker Today Change 31 Dec 14 YTD
S&P 500 SPX (INX) 2,109.66 -0.03% 2,058.90 +2.47%
DJIA INDU 18,116.90 -0.13% 17,823.05 +1.65%
NASDAQ IXIC 4,960.97 +0.10% 4,736.05 +4.75%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 23 Feb 2015 Watch Read

Portfolio

Index values Opinion

:-) New records for both of our indices today!

:-) Outperformed Currency Today Change 31 Dec 14 YTD
Portfolio Index USD 2.038 +1.77% 1.741 +17.07%
Valuation Rate USD/AUD 0.78525 -0.50% 0.82153 -4.42%
Portfolio Index AUD 2.596 +2.28% 2.119 +22.47%

52-week performance Opinion

:-) Our AUD-denominated index has achieved growth of 73.56% over the past 52 weeks, of which 51.13% is in growth in the underlying USD-denominated portfolio, and the remainder is depreciation of the AUD against the USD.

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

The shape of the portfolio today (Chart: Yahoo Finance)

The shape of the portfolio today (Chart: Yahoo Finance)

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

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

Portfolio stock prices

:-) A new record close price for Apple today. At $133.00 Apple achieved 3x on our initial investment.

Stock Ticker Today Change 31 Dec 14 YTD
Apple AAPL $133.00 +2.71% $110.38 +20.49%
Amazon AMZN $380.14 -0.92% $310.35 +22.49%
Ebay EBAY $58.07 +0.09% $56.12 +3.47%
Facebook FB $78.84 -1.32% $78.02 +1.05%
Google A GOOGL $535.00 -1.26% $530.66 +0.82%
Google C GOOG $531.91 -1.31% $526.40 +1.05%
Linkedin LNKD $264.21 -1.28% $229.71 +15.02%
VMware VMW $83.30 -2.18% $82.52 +0.95%

Week: 16 – 22 Feb 2015

Greece update

Syriza’s political problem

After yesterday’s in principle agreement with the Eurogroup (European Commission) to extend the Master Financial Assistance Facility Agreement (MFFA) the Greek government has some explaining to do.

Less than a month ago (on 25 Jan 2015) the Greek people voted Alexis Tsipras and his Syriza-led coalition into office to end austerity and let the good times roll. ““Greece leaves behind catastrophic austerity, it leaves behind fear and authoritarianism, it leaves behind five years of humiliation and anguish.Reuters

Tsipras’ election campaign included commitments to “immediately raise the minimum salary (by almost 30%) from EUR 580 to EUR 751 (USD 650 to USD 840) a month. People working and those already retired would have a ’13th month’ of pension restored if their monthly pension is less than EUR 700. Coupons for food and electricity would be given to at least 300,000 households and peoples’ primary places of residence would be protected from repossession. Other SYRIZA priorities include guaranteed access to free medical care and scrapping tax on heating fuel. The party believes the ‘emergency’ plan will cost EUR 12 billion (USD 13.5 billion) which they say they will raise from securing reduced repayments on the national debt, by re-directing EU funds, and by cutting tax fraud and smuggling.Ekathimerini

Tsipras also committed to More:

  • end cooperate with the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) troika – “The troika for Greece is the thing of the past
  • ignore commitments required to release last scheduled eurozone bailout tranche of around EUR 7 billion in Feb 2015 – these commitments include fiscal cuts, public sector pay structure, pensions and severance pay, and sales (privatisation) of some infrastructure assets
  • demand that its EC-ECB-IMF creditors, who have lent Greece EUR 240 billion, write-off some or all of their share of Greece’s EUR 323 billion debt.

In his discussion of Friday’s agreement on Greek TV on Saturday 22 Feb 2015 Tsipras said “Yesterday we took a decisive step, leaving (behind) austerity, the bailouts and the troika. We won a battle, not the war. The difficulties, the real difficulties …are ahead of us. Yesterday’s agreement with the Eurogroup … cancels the commitments of the previous government for cuts to wages and pensions, for firings in the public sector, for VAT rises on food, medicine.Reuters

The politically uncomfortable truth

Tsipras’ comments on Saturday require “creative reconciliation” to the terms of Friday’s Eurogroup statement Statement. The immediate focus for Tsipras and Finance Minister Yanis Varoufakis is that by Monday 23 Feb 2015 Greece needs to present to the Eurogroup a first list of its proposed economic and fiscal reform measures, based on the current MFFA arrangement. This list needs to be sufficiently comprehensive to be a valid starting point for a successful conclusion of the negotiations. This list will be further specified and then agreed with the institutions by the end of April. Ekathimerini

Ireland: Michael Noonan, Finance Minister – “Their political problem is that this a reversal of (Greece’s) election position. There is absolutely nothing on the table that could be considered a concession (to Greece). They’re now compromising and compromising quite significantly. The biggest threat to Greece was that their banking system would go belly up next Wednesday.Reuters

Reuters “Greece blinked in loan battle …

Greece’s new government was never in any shape to make the demands it did. Now, if its U-turn is genuine, it has the chance to do what should have been its first posture: to draw the EU partners into a cooperative effort to tackle not just the debt, but the underlying issues of corruption and public sector reform, changes which must be made over an extended period if the state is to get real and sustainable growth in the future. With such an effort, it could find — Christine Lagarde, head of the IMF stressed it at the press conference — flexibility and understanding. Instead, it has wasted a month in posturing.

And therein lies the largest reason why this all may fail. Syriza, deliberately and cynically, raised high the hopes of a population badly battered by austerity, unemployment and public service cuts — and now must return to that electorate to say that the promises mean very little. How far it will be able to keep the trust of its supporters and of the population as a whole while striving to win that of its European partners is the central question of the next days, in which it must commit itself to continuing, hard reform. The patch has been prepared. But it may not stick.Reuters

Timetable

It all happens this week:

  • Monday 23 Feb 2015: Greece to present to the Eurogroup a first list of reform measures, based on the current arrangement, as a basis for finalising an extension of the aid program. Eurogroup On Saturday, Finance Minister Yanis Varoufakis said the reform promises would be ready on Sunday and submitted to Greece’s EU and IMF partners in good time. “We are very confident that the list is going to be approved by the institutions and therefore we are embarking upon a new phase of stabilization and growth.Reuters
  • Friday: 27 Feb 2015: Latest date for German Bundestag to vote on an extension of the current (or other) aid program. Bloomberg
  • Saturday: 28 Feb 2015: Current aid program expires.

… or else, if no financial aid program is agreed:

  • Mar 2015: The Greek government and Greek banks are expected to run out of money within weeks. Reuters
  • Mar 2015: The Greek government may be forced to introduce an alternative, parallel currency as it, and Greece’s banks, faces a shortage of German and other Eurozone taxpayers’ money – or it may be forced to leave the Eurozone. Some proposals include paying pensions with government IOUs.

Has the price of oil bottomed, and if so, what does this mean for a tech investor?

Charts

WTI futures over the last 12 months (Chart: NASDAQ)

WTI futures over the last 12 months (Chart: NASDAQ)

There seems to be an established base in the charts … but there are conflicting predictions. We’re inclined to give some weight to the idea that we’ve seen the bottom here.

Brent futures over the last 12 months (Chart: NASDAQ)

Brent futures over the last 12 months (Chart: NASDAQ)

Rig counts

We’ve been seeing reports of reduced production in USA. Rig numbers are at their lowest count in 3 years:

U.S. drillers idled 94 rigs last week, the most in data going back to 1987, according to Baker Hughes. In the past eight weeks, 352 rigs were idled. BP on Tuesday said it will reduce spending to $20 billion this year, compared with previous guidance of as much as $26 billion. The cuts bring renewed focus to rig counts and raise questions about how low prices can go and still sustain the U.S. oil boom. ” Bloomberg, 4 Feb 2015 More

And we’re also seeing reductions in refinery production, but this may be caused in part by maintenance and recent strikes:

U.S. refineries ran at 88.7 percent of capacity in the week ended Feb. 13, down from 90 percent a week earlier, EIA data show … Refineries across the country, from Shell’s Anacortes plant in Washington to Philadelphia Energy Solutions’ Philadelphia refinery, have meanwhile shut units for maintenance, according to the Louisville, Kentucky-based energy data provider Genscape Inc.” Bloomberg, 22 Feb 2015 Bloomberg, 4 Feb 2015

The average price of regular gasoline at U.S. pumps rose for the second time since June, climbing 13.23 cents in the past two weeks to $2.3286 a gallon, according to Lundberg Survey Inc. The survey covers the period ended Feb. 20 and is based on information obtained at about 2,500 filling stations by the Camarillo, California-based company. Prices are still $1.0825 lower than a year ago.

The rise in pump prices is due to strikes at U.S. refineries, in combination with the Feb. 18 explosion at Exxon Mobil Corp.’s Torrance refinery in Southern California, according to Trilby Lundberg, the president of Lundberg Survey. The rebound marks an end to the unprecedented decline in retail gasoline that brought $2 gasoline back to filling stations across the U.S. last year.” Bloomberg, 22 Feb 2015 Bloomberg, 4 Feb 2015

Implications

Gasoline prices over the last 12 months (Chart: NASDAQ)

Gasoline futures over the last 12 months (Chart: NASDAQ)

There is no lag between oil and gasoline price rises, and so we expect to see the rebound of oil prices have an immediate impact on consumers and industries that have benefitted from lower energy costs.

This will feed into GDP, CPI and real wage numbers and may lead the Federal Reserve to update its view of monetary policy.

We need the take a retrospective view of all of the impacts of the oil price fall as a guide to the potential impacts of an oil price rise on the macro economic environment, and then track that into tech stock prices. There’s a brief summary of those impacts in the Wall Street Journal, 1 Dec 2014 More

USA market indices Impact

:-) The S&P 500 and DJIA indices closed the week at record levels, and the NASDAQ Composite is just 1.8% below its 15-year old record of 5,048.62, achieved on 10 Mar 2000 – the peak of the dotcom boom.

Index 20 Feb 15 Week 13 Feb 15 Month 30 Jan 15 Year 31 Dec 14
S&P 500 2,110.30 +0.63% 2,096.99 +5.78% 1,994.99 +2.50% 2,058.90
DJIA 18,140.44 +0.67% 18,019.35 +5.68% 17,164.95 +1.78% 17,823.05
NASDAQ 4,955.97 +1.27% 4,893.84 +6.92% 4,635.24 +4.64% 4,736.05

The shape of the week

US market indices this week (Chart: Yahoo Finance)

US market indices this week (Chart: Yahoo Finance)

A week of Nightly Business Reports

Monday Tuesday Wednesday Thursday Friday

PORTFOLIO

Long term (52-week) performance Impact

:-) Both our USD-denominated and AUD-denominated indices closed on record highs this week.
:-) Our USD-denominated index closed above 2.000 for the first time.

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 20 Feb 15 Week 13 Feb 15 Month 30 Jan 15 Year 31 Dec 14
USD Index 2.003 +1.55% 1.972 +9.46% 1.830 +15.03% 1.741
Valuation rate 0.78921 +0.96% 0.78168 +0.76% 0.78324 -3.93% 0.82153
AUD Index 2.538 +0.58% 2.523 +8.63% 2.336 +19.74% 2.119

Portfolio stocks

The shape of portfolio stocks this week (Chart: Yahoo Finance)

The shape of portfolio stocks this week (Chart: Yahoo Finance)

Apple AAPL +1.90%

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

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

Amazon AMZN +0.48%

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

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

Ebay EBAY +2.74%

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

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

Facebook FB +5.48%

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

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

Google Class A GOOGL -1.70%

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

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

Google Class C GOOG -1.83%

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

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

  • Friday close: $541.80 -1.83% from $549.01.
  • P/E (historical): 25.63 Change from 26.11
  • P/E (1 year fwd): 23.83 unchanged from 23.83
  • Target (1 year): NASDAQ consensus $600, range $580 ↔ $630.
  • Analyst recommendations: 8 strong buy, 3 buy, 1 hold.

Linkedin LNKD -0.51%

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

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

VMware VMW +0.57%

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

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

FX: USD/AUD

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

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