Week: 28 Jul – 3 Aug 2014

USA

US market indices Impact

Index 1 Aug 2014 Week 25 Jul 2014 Month 31 Jul 2014 Year 31 Dec 13
S&P 500 1,925.15 -2.69% 1,978.34 -0.29% 1,930.67 +4.15% 1,848.36
DJIA 16,493.37 -2.75% 16,960.57 -0.42% 16,563.30 -0.50% 16,576.66
NASDAQ 4,449.56 -2.18% 4,449.56 -0.39% 4,369.77 +4.22% 4,176.59

The shape of the week

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

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

PORTFOLIO

Bunting portfolio indices Impact

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

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

This week’s performance Impact

Index 1 Aug 2014 Week 25 Jul 2014 Month 31 Jul 2014 Year 31 Dec 13
USD Index 1.580 -1.77% 1.609 +0.37% 1.574 +12.95% 1.399
Trading USD/AUD 0.93615 -0.89% 0.94458 +0.21% 0.93423 +4.26% 0.89789
AUD Index 1.688 -0.88% 1.703 +0.17% 1.685 +8.33% 1.558

Portfolio stocks

Apple AAPL -1.58%

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

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

Amazon AMZN -5.23%

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

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

  • Friday close: $307.06 -5.23% from $324.01
  • P/E (historical): 808 Change from 853
  • P/E (1 year fwd): 978 Change from 301
  • Target (1 year): NASDAQ consensus $400, range $330 ↔ $500.
    Consensus dropped from $420.
  • Analyst recommendations: 17 (-2) strong buy, 2 (-1) buy, 9 (+4) hold.
  • SEC filings (CIK 0001018724): Edgar Search (New, Beta)
  • Press releases: Amazon

Ebay EBAY -0.42%

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

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

Facebook FB -3.76%

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

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

  • Friday close: $72.36 -3.76% from $75.19
  • P/E (historical): 78.65 Change from 81.73
  • P/E (1 year fwd): 55.04 Change from 64.09
  • Target (1 year): NASDAQ consensus $85, range $72 ↔ $100.
    Consensus raised from $84, Lower limit raised from $50.
  • Analyst recommendations: 27 (-1) strong buy, 3 buy, 2 hold.
  • SEC filings (CIK 0001326801): Edgar Search (New, Beta)

Google Class A GOOGL -4.09%

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

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

  • Friday close: $573.60 -4.09% from $598.08.
  • P/E (historical): 29.64 Change from 30.90
  • P/E (1 year fwd): 26.30 Change from 27.36
  • Target (1 year): NASDAQ consensus $655.5 range $600 ↔ $750.
  • SEC filings (CIK 0001288776): Edgar Search (New, Beta)

Google Class C GOOG -3.90%

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

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

  • Friday close: $566.07 -3.90% from $589.02.
  • P/E (historical): 19.74 Change from 20.54
  • P/E (1 year fwd): N/A
  • Analyst recommendations: 6 strong buy, 3 buy, 0 hold.

Linkedin LNKD +13.72%

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

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

VMware VMW +1.13%

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

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

USD/AUD

USD/AUD this week (Chart: xe.com)

USD/AUD this week (Chart: xe.com)

Friday 1 Aug 2014

JAPAN

Economy

Markit / JMMA Japan Manufacturing PMI – Jul 2014 Opinion

Extract

Latest data signalled that operating conditions in Japan‟s manufacturing sector improved only slightly in July. Output contracted at a fractional pace, while new orders grew for the second month running but only modestly. Subdued client demand due to the rise in the sales tax was linked by panellists to relatively weak market conditions. In contrast, new export orders rose for the first time in four months in July, with a number of companies citing new overseas project wins. Payroll numbers remained in growth territory for the twelfth month running, although the rate of expansion was marginal.

The headline seasonally adjusted Markit/JMMA Purchasing Managers‟ IndexTM (PMITM) – a composite indicator designed to provide a single- figure snapshot of the performance of the manufacturing economy – posted at 50.5, down from 51.5 in June, signalling a weaker rate of improvement in overall operating conditions.

Manufacturers in Japan reported a fall in output from a previous month of growth during July. That said, the rate of contraction was only fractional. According to panellists, the increase in the sales tax was still having a detrimental effect on production levels.

Data suggested that muted domestic demand hindered overall new work wins, as new export orders rose for the first time since March. The pace of increase, however, was weak with the majority of surveyed companies (more than three-quarters) observing no-change in export levels in comparison to June. Total new work continued to increase, but at a slower and modest pace compared to June. Those firms which noted a rise in new orders attributed this partly to the launch of new products.

Markit Economics, “Markit / JMMA Japan Manufacturing PMI – Jul 2014“, 1 Aug 2014 More

CHINA

Economy

HSBC China Manufacturing PMI – Jul 2014 Opinion

Extract

Latest data signalled a second successive monthly improvement in overall operating conditions faced by Chinese manufacturers in July. Output and total new orders both rose at the strongest rates since March 2013, while new export work increased at the second- fastest pace in over three-and-a-half years. In response to stronger inflows of new work, purchasing activity rose solidly while job shedding eased for the second successive month and was only slight. Meanwhile, input price inflation accelerated to the strongest since last November.

After adjusting for seasonal factors, the HSBC Purchasing Managers’ IndexTM (PMITM) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted at 51.7 in July, down slightly from the earlier flash reading and up from 50.7 in June, and signalled a further improvement in the health of China‟s manufacturing sector. Furthermore, it was the strongest rate of improvement for a year-and-a-half.

Chinese manufacturers signalled a second consecutive monthly rise in production during July. The rate of output growth accelerated from June to the quickest in 16 months. A number of panellists suggested that production rose in line with greater volumes of new work, which was highlighted by a solid increase in total new business placed at Chinese goods producers. New work from abroad also rose at a faster pace in July, with the latest expansion of new export order books the second-strongest in 44 months.

Purchasing activity increased for the third month running in July. Furthermore, the rate of increase accelerated to the fastest since last October. Anecdotal evidence suggested that input buying rose in line with stronger inflows of new work and subsequent plans to raise productive capacity. As a result, stocks of purchases increased, albeit marginally, following no change in June.

Encouragingly, job shedding at Chinese manufacturing companies eased in July, with the latest fall in workforce numbers the weakest since March. Meanwhile, capacity pressures persisted, as signalled by a second successive monthly increase in backlogs of work. That said, the rate of accumulation was similar to that recorded in June and only slight.

Latest survey data pointed to the fastest rise in average cost burdens since last November in July. Companies partly passed on their higher cost burdens to clients by raising their output charges slightly over the month.

Markit Economics, “HSBC China Manufacturing PMI – Jul 2014“, 1 Aug 2014 More

Comment

The government has been putting a lot of emphasis on the targeted easing measures, tailoring to the small-medium enterprises. Growth seems to be stabilizing and the government would be able to focus more of its energy on the reform agenda in the second half of this year.
Chang Jian, Chief China Economist, Barclays Plc (HK) More

EUROPE

Economy

Markit Eurozone Manufacturing PMI – Jul 2014 Opinion

Extract

July saw the Eurozone Manufacturing PMI hold steady at June’s seven-month low of 51.8, as the ongoing expansions in Germany and outside of the big-two economies were partly offset by a deeper downturn at French manufacturers.

The final seasonally adjusted Markit Eurozone Manufacturing PMI® has nonetheless signalled an improvement in operating conditions for 13 successive months. Ireland registered the sharpest rate of expansion in July followed by Spain, where the rate of growth stayed close to June’s seven- year record.

The Netherlands saw a modest acceleration in its rate of improvement, as did Germany and Austria, and the upturn in Italy continued despite the pace of expansion easing to an eight-month low. In contrast, France and Greece reported deeper contractions, the sharpest for seven and nine months respectively.

The performance disparity between Germany and France also widened, with the gap between the German and French PMI readings the greatest since February.

Eurozone manufacturers reported further growth of output, new orders and new exports. However, the rates of expansion all remained weaker than the highs seen at the start of the year.

Markit Economics, “Eurozone Manufacturing PMI – Jul 2014“, 1 Aug 2014 More

USA

Economy

Employment Situation (Unemployment Report) – Jul 2014 Opinion

Extract

Total nonfarm payroll employment increased by 209,000 in July, and the unemployment rate was little changed at 6.2 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, manufacturing, retail trade, and construction.

Household Survey Data

Both the unemployment rate (6.2 percent) and the number of unemployed persons (9.7 million) changed little in July. Over the past 12 months, the unemployment rate and the number of unemployed persons have declined by 1.1 percentage points and 1.7 million, respectively.

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 3.2 million in July. These individuals accounted for 32.9 percent of the unemployed. Over the past 12 months, the number of long-term unemployed has declined by 1.1 million.

The civilian labor force participation rate, at 62.9 percent, changed little in July. The participation rate has been essentially unchanged since April. The employment-population ratio, at 59.0 percent, was unchanged over the month but has edged up by 0.3 percentage point over the past 12 months.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 7.5 million, was unchanged in July. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

In July, 2.2 million persons were marginally attached to the labor force, down by 236,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 741,000 discouraged workers in July, down by 247,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force in July had not searched for work for reasons such as school attendance or family responsibilities.

Establishment Survey Data

Total nonfarm payroll employment increased by 209,000 in July, the same as its average monthly gain over the prior 12 months. In July, employment grew in professional and business services, manufacturing, retail trade, and construction.

Professional and business services added 47,000 jobs in July and has added 648,000 jobs over the past 12 months. In July, employment continued to trend up across much of the industry, including a gain of 9,000 jobs in architectural and engineering services. Employment in temporary help services changed little over the month.

Manufacturing added 28,000 jobs in July. Job gains occurred in motor vehicles and parts (+15,000) and in furniture and related products (+3,000). Over the prior 12 months, manufacturing had added an average of 12,000 jobs per month, primarily in durable goods industries.

In July, retail trade employment rose by 27,000. Employment continued to trend up in automobile dealers, food and beverage stores, and general merchandise stores. Over the past year, retail trade has added 298,000 jobs.

Employment in construction increased by 22,000 in July. Within the industry, employment continued to trend up in residential building and in residential specialty trade contractors. Over the year, construction has added 211,000 jobs.

Social assistance added 18,000 jobs over the month and 110,000 over the year. (The social assistance industry includes child day care and services for the elderly and persons with disabilities.) Employment in health care changed little over the month, with job gains in ambulatory health care services (+21,000) largely offset by losses in hospitals (-7,000) and nursing care facilities (-6,000).

Mining added 8,000 jobs in July, with the bulk of the increase occurring in support activities for mining (+6,000). Over the year, mining employment has risen by 46,000.

Employment in leisure and hospitality changed little in July but has added 375,000 jobs over the year, primarily in food services and drinking places.

Employment in other major industries, including wholesale trade, transportation and warehousing, information, financial activities, and government, showed little change in July.

In July, the average workweek for all employees on private nonfarm payrolls was 34.5 hours for the fifth straight month. The manufacturing workweek decreased by 0.2 hour in July to 40.9 hours, and factory overtime edged down by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was 33.7 hours for the fifth consecutive month.

In July, average hourly earnings for all employees on private nonfarm payrolls edged up by 1 cent to $24.45. Over the past 12 months, average hourly earnings have risen by 2.0 percent. In July, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $20.61.

The change in total nonfarm payroll employment for May was revised from +224,000 to +229,000, and the change for June was revised from +288,000 to +298,000. With these revisions, employment gains in May and June were 15,000 higher than previously reported.

Bureau of Labor Statistics, “Employment Situation Summary – Jul 2014“, 1 Aug 2014 (08:30am) More

Comment

It’s a goldilocks report for an economy that is steadily expanding but not lifting off. It will reinforce for now the Federal Reserve’s commitment to a gradualist policy approach.
Mohamed El-Erian, Chief Economic Advisor, Allianz More

You now have six straight months of greater-than-200,000 job gains. The labor force rose, and the labor force rises typically when people are feeling better about the backdrop.
Tom Porcelli, Chief U.S. Economist,t RBC Capital Markets LLC More

It still points to a job market and an economy that is improving, but we also have the absence of wage pressures building, which is becoming another concern for investors.
Sean Lynch, Managing Director of Global Equity and Research Strategy, Wells Fargo Private Bank More

It was in line (with expectations) and it didn’t give the market any reason to sell off any further. No new scare was given in terms of the wage component. It was enough for the moment to not make it worse for the market.
Bill Schultz, Chief Investment Officer, McQueen, Ball & Associates ($1.2bn) More

Personal income and outlays – Jun 2014 Opinion

Extract

Personal income increased $56.7 billion, or 0.4 percent, and disposable personal income (DPI) increased $51.5 billion, or 0.4 percent, in June, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $51.7 billion, or 0.4 percent. In May, personal income increased $57.4 billion, or 0.4 percent, DPI increased $55.0 billion, or 0.4 percent, and PCE increased $39.8 billion, or 0.3 percent, based on revised estimates.

Real DPI increased 0.2 percent in June, the same increase as in May. Real PCE increased 0.2 percent in June, compared with an increase of 0.1 percent in May.

Bureau of Economic Analysis, “Personal income and outlays – Jun 2014“, 1 Aug 2014 (08:30am) More

Markit US Manufacturing PMI – Jul 2014 Opinion

Extract

July data pointed to continued strong growth of production levels and incoming new business across the U.S. manufacturing sector, although the latest survey indicated some loss of momentum since the previous month. Employment growth also moderated during July, and was the weakest in the current 13- month period of workforce expansion. However, latest data signalled a robust rise in input buying and renewed efforts to boost pre-production inventories, which survey respondents attributed to sharp increases in overall new business volumes.

Adjusted for seasonal influences, the final Markit U.S. Manufacturing PMI registered 55.8 in July, down from a 49-month high of 57.3 in June. Although the latest reading was the lowest since April, the index remained well above the neutral 50.0 value and signalled a robust improvement in overall business conditions across the manufacturing sector.

Production volumes increased sharply in July, although the pace of expansion moderated after hitting its fastest for over four years in June. Higher levels of output were linked to improving domestic economic conditions and strong client demand.

In line with the trend for production, new business growth held close to its fastest for over four years, despite the pace of expansion slowing since June. Survey respondents mainly cited the launch of new products and greater spending among domestic clients. Meanwhile, latest data suggested that export sales continued to weigh on overall new business growth, with the latest rise only marginal and the slowest in the current six-month period of expansion.

Higher levels of new work contributed to a solid increase in outstanding business in July, although the rate of backlog accumulation slipped to a four- month low. Pressures on operating capacity contributed to another rise in payroll numbers. However, the latest increase in employment was the weakest for over a year, which some firms attributed to the non-replacement of voluntary leavers.

Meanwhile, input cost inflation eased for the first time since April and remained subdued in comparison to the average seen since the survey began. Factory gate charges nonetheless increased at a solid pace in July, with the latest rise the fastest seen in 2014 so far.

Markit Economics, “Markit US Manufacturing PMI – Jul 2014“, 1 Aug 2014 (09:45am) More

ISM July 2014 Manufacturing Opinion

Extract

The July PMI® registered 57.1 percent, an increase of 1.8 percentage points from June’s reading of 55.3 percent, indicating expansion in manufacturing for the 14th consecutive month. The New Orders Index registered 63.4 percent, an increase of 4.5 percentage points from the 58.9 percent reading in June, indicating growth in new orders for the 14th consecutive month. The Production Index registered 61.2 percent, 1.2 percentage points above the June reading of 60 percent. Employment grew for the 13th consecutive month, registering 58.2 percent, an increase of 5.4 percentage points over the June reading of 52.8 percent. Inventories of raw materials registered 48.5 percent, a decrease of 4.5 percentage points from the June reading of 53 percent, contracting after five months of consecutive growth. Comments from the panel are generally positive, while some indicate concern over global geopolitical situations.

Institute for Supply Management, “July 2014 Manufacturing ISM® Report On Business® – PMI® at 57.1%“, 1 Aug 2014 (10:00am) More

Consumer confidence – Final – Jul 2014 Opinion

Reuters Report

The Thomson Reuters/University of Michigan’s final July reading on the overall index on consumer sentiment came in at 81.8, a touch below the 82.0 estimate and down from the final June reading of 82.5.

The survey’s barometer of current economic conditions rose to 97.4 from 96.6, compared with a forecast of 97.1.

The survey’s gauge of consumer expectations fell for a third straight month, to 71.8 from 73.5. The subindex was slightly above an expected 71.5.

The survey’s one-year inflation expectation edged up to 3.3 percent from 3.1 percent, while the survey’s five-to-10-year inflation outlook was at 2.7 percent, down from the prior month’s 2.9 percent.

Thomson Reuters-University of Michigan, “Consumer confidence – Final – Jul 2014“, 1 Aug 2014 More

Stock market indices Opinion

The stock market continued its fall today, with the S&P500 experiencing its worst fall since Jun 2012. The DJIA is 0.50% below its opening price for the year.

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX 1,925.15 -0.29% 1,848.36 +4.15%
DJIA INDU 16,493.37 -0.42% 16,576.66 -0.50%
NASDAQ IXIC 4,352.64 -0.39% 4,176.59 +4.22%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Comment

Whether it’s the Portuguese bank, Argentina or continued unrest in the Middle East, these things are seemingly mattering more to investors now. All of a sudden, geopolitical things that didn’t matter a few weeks ago are starting to be more relevant concerns, and they’re serving as catalysts to sell. Investors are getting more risk-averse.
Matt McCormick, Fund Manager, Bahl & Gaynor Inc. ($11bn) More

PORTFOLIO

Index values Opinion

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.580 +0.37% 1.399 +12.95%
Valuation Rate USD/AUD 0.93615 +0.21% 0.89789 +4.26%
Portfolio Index AUD 1.688 +0.17% 1.558 +8.33%

52-week performance Opinion

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

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

Stock price movements

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

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

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $96.13 +0.55% $80.1457 +19.94%
Amazon AMZN $307.06 -1.89% $398.79 -23.00%
Ebay EBAY $52.53 -0.57% $54.865 -4.26%
Facebook FB $72.36 -0.40% $54.649 +32.41%
Google A GOOGL $573.60 -1.03% $560.365 +2.36%
Google C GOOG $566.07 -0.97% $560.365 +1.02%
Linkedin LNKD $201.78 +11.70% $216.83 -6.94%
VMware VMW $98.33 -1.04% $89.71 +9.61%

AUSTRALIA

Economy

Ai Group Australian PMI – Jul 2014 Opinion

Extract

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) moved into positive territory this month, following eight months of contraction between November 2013 and June 2014. The index increased by 1.7 points, to 50.7 points (seasonally adjusted), indicating broadly stable conditions across the manufacturing sector. The three- month-moving-average also edged higher in July, to 49.6 points, indicating very mild contraction.

Many respondents to the Australian PMI® expressed renewed concern about the stronger Australian dollar, which has increased import competition and lowered demand and selling prices for locally made products again this month. Meanwhile, wages and input costs continued to grow, placing extra pressure on manufacturing businesses’ margins.

Across the eight manufacturing sub-sectors in the Australian PMI®, only the large food and beverages (51.7 points) and the smaller wood and paper products (67.2 points) sub-sectors expanded in July. The metal products, machinery and equipment, and petroleum, coal, chemicals and rubber products sub-sectors continued to contract (i.e. below 50 points).

Four of the five activity sub-indexes were above 50 points in July, but they were only pointing towards a stabilisation or very mild expansion in conditions at best. Both the stocks and sales sub-indexes remained in contraction this month (i.e. below 50 points). More positively for the outlook, the new orders sub-index of the Australian PMI® stayed above 50 points (i.e. expansion) for the third month in July. Conditions deteriorated for manufacturing exports, reflecting the ongoing strength in the Australian dollar, which currently sits at around US$0.94.

Markit Economics, “Ai Group Australian PMI – Jul 2014“, 1 Aug 2014 More

Thursday 31 Jul 2014

EUROPE

Economy

Eurozone inflation – Jul 2014 Opinion

Extract

Euro area annual inflation is expected to be 0.4% in July 2014, down from 0.5% in June, 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 July (1.3%, stable compared with June), followed by non-energy industrial goods (0.0%, compared with -0.1% in June), food, alcohol & tobacco (-0.3%, compared with -0.2% in June) and energy (-1.0%, compared with 0.1% in June).

Eurostat “Euro area annual inflation down to 0.4%“, 31 Jul 2014 More

Eurozone unemployment – Jun 2014 Opinion

Extract

The euro area (EA18) seasonally-adjusted unemployment rate was 11.5% in June 2014, down from 11.6% in May 2014, and from 12.0% in June 2013. This is the lowest rate recorded since September 2012. The EU28 unemployment rate was 10.2% in June 2014, down from 10.3% in May 2014, and from 10.9% in June 2013. This is the lowest rate recorded since March 2012.

Eurostat estimates that 25.005 million men and women in the EU28, of whom 18.412 million were in the euro area, were unemployed in June 2014. Compared with May 2014, the number of persons unemployed decreased by 198 000 in the EU28 and by 152 000 in the euro area. Compared with June 2013, unemployment fell by 1.537 million in the EU28 and by 783 000 in the euro area.

Eurostat “Euro area unemployment rate at 11.5%, EU28 at 10.2%“, 31 Jul 2014 More

USA

Economy

Unemployment Insurance Weekly Claims Report: Week to 26 Jul 2014 Opinion

Unemployment insurance claims rose to 302,000 in the week ended 26 Jul 2014, in line with expectations of 300,000.

Extract

In the week ending July 26, the advance figure for seasonally adjusted initial claims was 302,000, an increase of 23,000 from the previous week’s revised level. The previous week’s level was revised down by 5,000 from 284,000 to 279,000. The 4-week moving average was 297,250, a decrease of 3,500 from the previous week’s revised average. This is the lowest level for this average since April 15, 2006 when it was 296,000. The previous week’s average was revised down by 1,250 from 302,000 to 300,750.

The advance seasonally adjusted insured unemployment rate was 1.9 percent for the week ending Ju;y 19, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending July 19 was 2,539,000, an increase of 31,000 from the previous week’s revised level. The previous week’s level was revised up 8,000 from 2,500,000 to 2,508,000. The 4-week moving average was 2,535,250, a decrease of 9,000 from the previous week’s revised average. This is the lowest level for this average since October 13, 2007 when it was 2,527,500. The previous week’s average was revised up by 2,000 from 2,542,250 to 2,544,250.

U.S. Employment and Training Administration, “Unemployment Insurance Weekly Claims Report – Week to 26 Jul 2014“, 31 Jul 2014 (08:30am) More

Employment cost index – Jun 2014 quarter Opinion

Extract

Compensation costs for civilian workers increased 0.7 percent, seasonally adjusted, for the 3-month period ending June 2014, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.6 percent, and benefits (which make up the remaining 30 percent of compensation) increased 1.0 percent.

U.S. Bureau of Labor Statistics, “Employment cost index – Jun 2014“, 31 Jul 2014 (08:30am) More

Consumer confidence Opinion

Extract

The Bloomberg Consumer Comfort Index fell to 36.3 in the period ended July 27, the lowest June 8, from 37.6 the week before. A gauge of households’ financial well-being dropped by the most since mid-May after reaching an 11-week high.

Consumers were also less enthusiastic about the buying climate, a reflection of stagnant paychecks. Even with the setback in sentiment, the weekly measure is holding close to its high of the year as a pickup in employment opportunities persists and stocks trade near a record.

Bloomberg, “Consumer Confidence Declines in U.S. to Lowest Since June“, 31 Jul 2014 More

Comment

Employment, usually a strong correlate of consumer sentiment, is better, and stocks, another strong correlate, have been on a tear. But slow wage growth is a persistent concern.

Gary Langer, President, Langer Research Associates LLC More

Stock market Opinion

Geopolitical concerns (e.g. Ukraine) and flow-on implications of sanctions on Russia, the Israeli shelling of civilians in Gaza, Argentina’s default, falling Eurozone inflation, weakness in Portugal’s financial sector, and some disappointment in today’s US unemployment claims and wage costs, and concerns about Fed monetary policy (especially timing of an interest rate rise next year) caused investors to take profits on the last day of the month. There just too much of a spread of bad news for even the most optimistic investors to ignore.

July hasn't been a great month for the market (Chart: Yahoo Finance)

July hasn’t been a great month for the market (Chart: Yahoo Finance)

Market indices were down in July:

  • S&P 500: down 1.51% from 1,960.23 to 1,930.67
  • DJIA: down 1.56% from 16,826.60 to 16,563.30 (below its 16,576.66 starting point for the year)
  • NASDAQ: down 0.87% from 4,408.18 to 4369.77

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX 1,930.67 -2.00% 1,848.36 +4.45%
DJIA INDU 16,563.30 -1.88% 16,576.66 -0.08%
NASDAQ IXIC 4,369.77 -2.09% 4,176.59 +4.63%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Comment

People want to take some profit off the table. Earnings overall have been tracking slightly higher than expected. Next quarter may disappoint because earnings have been rising on a comparative basis. Argentina may well have an impact on sentiment.
Nick Skiming, Fund Manager, Ashburton (Jersey) Limited ($10bn) More

The Fed is stepping out of the way and the market’s valuation is high enough that people are quick to take profit. You are going to get more days like today, where investors are more trigger happy, quicker to liquidate. Everybody knows a correction is coming and it will come.
Wayne Wilbanks, Chief Investment Officer, Wilbanks, Smith & Thomas Asset Management LLC ($2.5bn) More

Lloyd says: It’s also the end of the month, and a good opportunity to move some of July’s gain into August.

PORTFOLIO

:-) Despite today’s selloff, our portfolio has had a better month than the market – not brilliant, but better than the market:

  • USD index: up 2.27% from 1.539 on 30 Jun 2014 to 1.574 on 31 Jul 2014.
  • AUD index: up 3.88% from 1.622 on 30 Jun 2014 to 1.685 on 31 Jul 2014.

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.574 -2.63% 1.399 +12.53%
Valuation Rate USD/AUD 0.93423 -0.36% 0.89789 +4.05%
Portfolio Index AUD 1.685 -2.27% 1.558 +8.15%

52-week performance Opinion

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

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

Stock price movements

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

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

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $95.60 -2.60% $80.1457 +19.28%
Amazon AMZN $312.99 -2.95% $398.79 -21.52%
Ebay EBAY $52.83 -0.75% $54.865 -3.71%
Facebook FB $72.65 -2.71% $54.649 +32.94%
Google A GOOGL $579.55 -2.67% $560.365 +3.42%
Google C GOOG $571.60 -2.69% $560.365 +2.00%
Linkedin LNKD $180.64 -3.55% $216.83 -16.69%
VMware VMW $99.36 -2.43% $89.71 +10.76%

Wednesday 30 Jul 2014

EUROPE

Economy

Eurozone: Business and consumer survey – Jul 2014

Extract

In July the Economic Sentiment Indicator (ESI) remained broadly stable in the euro area (+0.1 points at 102.2),1 while it decreased slightly in the EU (by 0.6 points to 105.8).

Euro area developments

The virtually flat euro area outcome perpetuates the sideways movement observed in recent months. It resulted from confidence improvements in industry and construction which were offset by decreases in services, retail trade and among consumers. Amongst the largest euro area economies, the ESI eased in Germany (-0.5) and Spain (-0.6), while it increased in the Netherlands (+0.4), France (+0.5) and Italy (+1.6).

The rise in industry confidence (+0.5) resulted from managers’ more optimistic views on expected production and, to a lesser extent, the current level of overall order books, while their assessment of stocks of finished products remained broadly unchanged. Of the questions not included in the confidence indicator, the assessment of past production worsened, while views on export order books remained stable. The decline in services confidence (-0.8) was caused by managers’ significantly lower demand expectations and more muted assessments of the past business situation which more than outweighed a more positive stance on past demand. Consumer confidence slid (-0.9) owing to markedly more pessimistic assessments of future unemployment and the future general economic situation, which were only partly offset by a moderate improvement in consumers’ assessment of their future savings. Views on the expected financial situation remained broadly unchanged. The decline in retail trade confidence (-0.6) reflects more pessimistic views on the expected business situation and the adequacy of the volume of stocks, while managers’ assessment of the present business situation remained broadly stable. The rise in construction confidence (+3.5) was fuelled by a marked upward revision of employment expectations and, to a lesser extent, managers’ improved assessment of the level of order books. The deterioration (-2.2) in financial services confidence (not included in the ESI) resulted from less positive appraisals of past and expected demand, while managers’ assessments of the past business situation remained broadly stable.

Employment plans saw a marked upward revision in construction, while they remained broadly unchanged in industry and decreased significantly in services and, to some extent, retail trade. Selling price expectations remained broadly stable in industry and retail trade while they declined in services and construction. Consumer price expectations remained broadly unchanged compared to June.

EU developments

The headline indicator for the EU decreased slightly (-0.6), owing to worsening sentiment in the two largest non- euro area EU economies, the UK (-3.3) and Poland (-0.9). At the sector level, the worse outcome in EU sentiment was mainly due to virtually unchanged confidence in industry (as opposed to the improvement in the euro area). Apart from this, sector developments were largely in line with those in the euro area. Some differences were observable at question level, notably concerning managers’ employment and price expectations: EU managers revised their employment plans upwards across all business sectors and expected to increase selling prices in industry, services and retail trade. Price expectations were unchanged only in construction.

European Commission “Business and Consumer Survey Results – July 2014“, 30 Jul 2014 More

ARGENTINA

Economy

Argentina’s grace period for a USD539m interest payment on USD13bn of restructured bonds runs out today. Axel Kicillof, Argentina’s Minister of Economy, is scheduled to hold a press conference in New York at 17:15 ET.

Standard & Poor’s has already dropped Argentina’s bond rating from CCC- to default. However it has said: “If and when Argentina cures the payment default on the Discount Bonds, we could revise our ratings on Argentina depending on our assessment at that time of Argentina’s residual litigation risk, its access to international debt markets, and its overall credit profile.More

Argentina’s President Cristina Fernández de Kirchner has said the country is not in default because it has sent the $539m payment to a trustee bank. More

Any contagion from an Argentinian default is likely to be insignificant, unlike the European situation some years ago.

Comment

An Argentina default is expected to be short-lived at this point and shouldn’t have any major implication for the country. There’s the expectation that a deal with holdouts will be worked out soon.
Mauro Roca, Senior Latin America Economist, Goldman Sachs More

USA

Economy

ADP National Employment Report – Jul 2014 Opinion

ADP reports 218,000 private sector jobs were created during Jun 2014, down from 281,000 jobs created during Jun 2014, and below the expected level of 230,000 jobs.

Extract

Private sector employment increased by 218,000 jobs from June to July according to the July ADP National Employment Report®.

Goods-producing employment rose by 16,000 jobs in July, down from 43,000 jobs gained in June. The construction industry added 12,000 jobs over the month, less than half last month’s gain. Meanwhile, manufacturing added 3,000 jobs in July, less than one-third the number of jobs added in June.

Service-providing employment rose by 202,000 jobs in July, down from 238,000 in June. The ADP National Employment Report indicates that professional/ business services contributed 61,000 jobs in July, down from 79,000 in June. Expansion in trade/transportation/utilities grew by 52,000, down slightly from June’s 56,000. The 9,000 new jobs added in financial activities was down 25% from last month’s number.

ADP Payrolls, “National Employment Report: Private Sector Employment Increased by 218,000 Jobs in July“, 30 Jul 2014 (08:15am) More

Comment

The July employment gain was softer than June, but remains consistent with a steadily improving job market. If current trends continue, the economy will return to full employment by late 2016.
Mark Zandi, Chief Economist, Moody’s Analytics Inc. More

It’s job growth that’s going to fuel further gains for the economy via its benefit to consumer spending, and thus I see pretty good prospects for the second half of the year. The economy rebounded strongly in the second quarter and we’re seeing strong employment growth continue into the third quarter.
Russell Price, Senior Economist, Ameriprise Financial Inc. More

Gross Domestic Product (GDP) – Advance – Jun quarter Opinion

Real GDP increased during Q2 at an annualised rate of 4%, recovering from the 2.1% fall in Q1, and better than the expected growth of 3%.

Extract

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 4.0 percent in the second quarter of 2014, according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 2.1 percent (revised).

The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

Bureau of Economic Analysis, “National Income and Product Accounts – Gross Domestic Product: Second Quarter 2014 (Advance Estimate)“, 30 Jul 2014 (08:30am) More

Comment

The economy is looking pretty darned good. The momentum for the second half is solid. The labor market is driving this growth, which means companies are looking for workers. The big picture looks a lot brighter and is probably more accurate than the first-quarter GDP reading suggests.
Stuart Hoffman, Chief Economist, PNC Financial Services Group Inc. More

Metropolitan area employment and unemployment – Jun 2014 Opinion

Extract

Unemployment rates were lower in June than a year earlier in 359 of the 372 metropolitan areas, higher in 10 areas, and unchanged in 3 areas, the U.S. Bureau of Labor Statistics reported today. Ten areas had jobless rates of at least 10.0 percent and 74 areas had rates of less than 5.0 percent. Nonfarm payroll employment increased over the year in 307 metropolitan areas, decreased in 55 areas, and was unchanged in 10 areas. The national unemployment rate in June was 6.3 percent, not seasonally adjusted, down from 7.8 percent a year earlier.

Bureau of Labor Statistics, “Metropolitan Area Employment and Unemployment Summary – Jun 2014“, 30 Jul 2014 (10:00am) More

Federal Open Market Committee meeting: 29-30 Jul 2014 Opinion

The Federal Reserve has decided to reduce its monthly asset buying (quantitative easing) program by $10 billion to $25 billion resulting in a record balance sheet of $4.41 trillion. It has also left its federal funds rate at 0% to 0.25%. Of most concern to investors at present are indicators of a rise in interest rates. With job growth rising and GDP growth at 4% analysts are expecting a rate rise in the second half of next year, possibly earlier in that half than previously expected.

Statement extract

Growth in economic activity rebounded in the second quarter. Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to the Committee’s longer-run objective. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Federal Reserve, “FOMC Policy Statement“, 30 Jul 2014 More

Comment

The GDP print this morning had given the market some pause as to how hawkish the Fed might be. Now it seems like they were not as hawkish as feared.
Stacey Nutt, Chief Investment Officer, ClariVest Asset Management LLC ($4bn) More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX 1,970.07 +0.01% 1,848.36 +6.58%
DJIA INDU 16,880.36 -0.19% 16,576.66 +1.83%
NASDAQ IXIC 4,462.90 +0.45% 4,176.59 6.86%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Comment

You’re seeing some relief from the market that there is really no major surprise from the FOMC statement. The GDP number was important in building confidence.
Brad Friedlander, Managing Partner and Co-Founder, Angel Oak Capital Advisors LLC ($4bn) More

PORTFOLIO

Index values Opinion

:-| About square Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.617 +0.15% 1.399 +15.56%
Valuation Rate USD/AUD 0.93765 -0.59% 0.89789 +4.43%
Portfolio Index AUD 1.724 +0.75% 1.558 +10.66%

52-week performance Opinion

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

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

Stock price movements

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

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

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $98.15 -0.23% $80.1457 +22.46%
Amazon AMZN $322.51 +0.78% $398.79 -19.13%
Ebay EBAY $53.23 +0.04% $54.865 -2.98%
Facebook FB $74.68 +1.31% $54.649 +36.65%
Google A GOOGL $595.44 +0.25% $560.365 +6.26%
Google C GOOG $587.42 +0.31% $560.365 +4.83%
Linkedin LNKD $187.29 +4.20% $216.83 -13.62%
VMware VMW $101.83 +3.27% $89.71 +13.51%

Tuesday 29 Jul 2014

USA

Economy

S&P/Case-Shiller 20-City Composite House Price Index – May 2014 Opinion

Extract

Data through May 2014, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show the Composite Indices increased at a slower pace. The 10-City Composite gained 9.4% year-over-year and the 20-City 9.3%, down significantly from the +10.9% and +10.8% returns reported last month. All cities with the exception of Charlotte and Tampa saw their annual rates decelerate.

In the month of May, the 10- and 20-City Composites posted gains of 1.1%. For the second consecutive month, all twenty cities posted increases. Charlotte posted its highest monthly increase of 1.4% in over a year. Tampa gained 1.8%, followed by San Francisco at +1.6% and Chicago at +1.5%. Phoenix and San Diego were the only cities to gain less than one percent with increases of 0.4% and 0.5%, respectively.

S&P/Case-Shiller, “Home Price Gains Continue to Moderate According to the S&P/Case-Shiller Home Price Indices“, 29 Jul 2014 (09:00am) More

Comment

It’s a healthy slowdown for the housing market. The sooner we correct to a more sustainable growth rate, the better it is for the price outlook in the medium-term.
Aneta Markowska, Chief U.S. Economist, Societe Generale More

The slowdown in price appears to be indicative of the weakening in housing activity more generally, particularly after the very slow start to the spring selling season. However, while we are not particularly alarmed by the surprising drop in home prices, this report adds to a growing list of housing indicators that are beginning to point in the wrong direction, which could be a early warning signal that all may not be well in this crucial segment of the economy.
Millan Mulraine, Deputy Chief Economist, TD Securities More

Housing vacancies and home ownership – Jun 2014 quarter

Extract

National vacancy rates in the second quarter 2014 were 7.5 percent for rental housing and 1.9 percent for homeowner housing, the Department of Commerce’s Census Bureau announced today. The rental vacancy rate of 7.5 percent was 0.7 percentage points (+/-0.4) lower than the rate in the second quarter 2013 and 0.8 percentage points (+/-0.3) lower than the rate last quarter. The homeowner vacancy rate of 1.9 percent was approximately the same as the rate in the second quarter 2013 (+/-0.1) and 0.1 percentage point lower than the rate last quarter (+/-0.1).

The homeownership rate of 64.7 percent was 0.3 percentage points (+/-0.4) lower than the second quarter 2013 rate (65.0 percent) and 0.1 percentage point (+/-0.4) lower than the rate last quarter (64.8 percent).

US Census Bureau, “Residential Vacancies and Homeownership in the Second Quarter 2014“, 29 Jul 2014 (10:00am) More

Consumer confidence – Jul 2014 Opinion

Extract

The Conference Board Consumer Confidence Index®, which had improved in June, increased in July. The Index now stands at 90.9 (1985=100), up from 86.4 in June. The Present Situation Index increased to 88.3 from 86.3, while the Expectations Index rose to 92.7 from 86.4 in June.

Conference Board, “The Conference Board Consumer Confidence Index® Improves Again“, 29 Jul 2014 (10:00am) More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX 1,969.95 -0.45% 1,848.36 +6.58%
DJIA INDU 16,912.11 -0.42% 16,576.66 +2.02%
NASDAQ IXIC 4,442.70 -0.05% 4,176.59 +6.37%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Comment

Earnings have been coming in better than expected. We’re not expecting a massive move within the financial markets. Potentially, you’ll continue to see a melt up in equity prices in part because the Fed will continue to be dovish.
Chad Morganlander, Money Manager, Stifel, Nicolaus & Co ($160bn) More

Geopolitical risk remains a risk. What ultimately makes stocks go higher is earning and earnings are supporting higher valuations in the market.
Dan Veru, Chief Investment Officer, Palisade Capital Management ($5bn) More

Nightly Business Report: 29 Jul 2014 More

PORTFOLIO

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.614 -0.59% 1.399 +15.39%
Valuation Rate USD/AUD 0.94321 -0.29% 0.89789 +5.05%
Portfolio Index AUD 1.712 -0.29% 1.558 +9.84%

52-week performance Opinion

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

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

Portfolio stock news

Apple AAPL has updated the Macbook Pro with Retina Display and cut the Pro’s price by $100.

Stock price movements

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

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

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $98.38 -0.65% $80.1457 +22.75%
Amazon AMZN $320.00 -0.13% $398.79 -19.75%
Ebay EBAY $53.21 +0.53% $54.865 -3.02%
Facebook FB $73.71 -1.62% $54.649 +34.88%
Google A GOOGL $593.95 -0.85% $560.365 +5.99%
Google C GOOG $585.61 -0.84% $560.365 +4.51%
Linkedin LNKD $179.74 +0.98% $216.83 -17.11%
VMware VMW $98.61 +1.14% $89.71 +9.92%

Monday 28 Jul 2014

USA

Economy

Markit Flash US Services PMI – Jul 2014 Opinion

Extract

The seasonally adjusted Markit Flash U.S. Services PMI Business Activity Index – which is based on approximately 85% of usual monthly replies – registered 61.0 in July, above the neutral 50.0 threshold and an unchanged reading from June‟s survey-record high.

July‟s survey therefore suggests a strong expansion of U.S. service sector business activity so far this summer, and a continued rebound in business conditions after snow disruptions at the start of the year. That said, service providers indicated a moderation in new business growth and weaker job creation than the highs registered in June.

New business growth eased for the first time in four months during July, after reaching its fastest in almost five years of data collection. The latest survey also pointed to a renewed reduction in backlogs of work across the service sector, with some firms citing reduced pressure on operating capacity at their units. A slight drop in unfinished work in July contrasted with a moderate increase in backlogs during the previous two months.

Service providers indicated an overall rise in payroll numbers during July, continuing the upward trend recorded for almost four-and-a-half years. However, the rate of job creation eased markedly from the survey-record high seen in June. Companies that boosted their staffing levels generally commented on sustained increases in their volumes of new work. However, some survey respondents noted a degree of caution about the business outlook.

Markit Economics, “Markit Flash US Services PMI – Jul 2014“, 28 Jul 2014 (09:45am) More

Pending home sales – Jun 2014 Opinion

Extract

After three consecutive months of solid gains, pending home sales slowed modestly in June, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 1.1 percent to 102.7 in June from 103.8 in May, and is 7.3 percent below June 2013 (110.8). Despite June’s decrease, the index is above 100 – considered an average level of contract activity – for the second consecutive month after failing to reach the mark since November 2013 (100.7).

National Association of Realtors, “Pending Home Sales Slip in June“, 28 Jul 2014 (10:00am) More

Comment

Home sales are a disappointment. The one portion of the economy that isn’t happening as expected is housing, as other sectors show signs of rebounding. Things are moving at a more glacier-like pace than expected.
Wilmer Stith, Money Manager, Wilmington Trust Investment Managers ($14bn) More

Unfortunately, I don’t see much of an acceleration in housing demand going forward until we get a significant improvement in the labor market and the income part of it in particular. An uneven recovery in the housing market is really one of the biggest concerns of the Fed.
Yelena Shulyatyeva, U.S. Economist, BNP Paribas More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX 1,978.91 +0.03% 1,848.36 +7.08%
DJIA INDU 16,982.59 +0.13% 16,576.66 +2.45%
NASDAQ IXIC 4,444.91 -0.10% 4,176.59 +6.42%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Comment

The market has been very benign. You got a little bit of geopolitical fear out there. We’re still on track and as long as wars in the rest of the world don’t upset the upper card, the second half of this year continues to look like it’s going to be a gradually improving year.
Sam Wardwell, Investment Strategist, Pioneer Investments ($250bn) More

I wouldn’t say that we’re putting on our cowboy hats and saying this is an unstoppable bull, but you have a lot of factors going in the right direction. We’re seeing continued upward momentum in the economy. You’ve got the earnings that have been coming in fairly well, and you’ve got the mergers and acquisitions.
Patricia Edwards, Managing Director of Investments – Private Clients, U.S. Bank Wealth Management More

Nightly Business Report: 28 Jul 2014 More

PORTFOLIO

Index values Opinion

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.624 +0.95% 1.399 +16.07%
Valuation Rate USD/AUD 0.94600 +0.15% 0.89789 +5.36%
Portfolio Index AUD 1.717 +0.79% 1.558 +10.16%

52-week performance Opinion

USD and AUD denominated indices (Chart: Bunting)

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

Stock price movements

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

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

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $99.02 +1.38% $80.1457 +23.55%
Amazon AMZN $320.41 -1.11% $398.79 -19.65%
Ebay EBAY $52.93 +0.34% $54.865 -3.53%
Facebook FB $74.92 -0.36% $54.649 +37.09%
Google A GOOGL $599.02 +0.16% $560.365 +6.90%
Google C GOOG $590.60 +0.27% $560.365 +5.40%
Linkedin LNKD $178.00 +0.32% $216.83 -17.91%
VMware VMW $97.50 +0.28% $89.71 +8.68%

Week: 21 – 27 Jul 2014

PMYC Sunday sailing school: "Gentlemen, man your boats!"

Port Melbourne Yacht Club’s “Discover Sailing” school: “Gentlemen, man your boats!”

USA

US market indices

Index 25 Jul 2014 Week 18 Jul 2014 Month 30 Jun 2014 Year 31 Dec 13
S&P 500 1,978.34 +0.01% 1,978.22 +0.92% 1,923.57 +7.03% 1,848.36
DJIA 16,960.57 -0.82% 17,100.18 +0.80% 16,717.17 +2.32% 16,576.66
NASDAQ 4,449.56 +0.39% 4,432.15 +0.94% 4,242.62 +6.64% 4,176.59

The shape of the week

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

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

PORTFOLIO

Bunting portfolio indices

Weekly index values for the last 52 weeks (Chart: Bunting Pty Ltd)

Weekly USD and AUD index values for the last 52 weeks (Chart: Bunting)

This week’s performance Impact

Index 25 Jul 2014 Week 18 Jul 2014 Month 30 Jun 2014 Year 31 Dec 13
USD Index 1.609 +2.37% 1.572 +4.56% 1.539 +14.98% 1.399
Trading USD/AUD 0.94458 +0.03% 0.94429 -0.39% 0.94828 +5.20% 0.89789
AUD Index 1.703 +2.33% 1.664 +4.97% 1.622 +9.30% 1.558

Portfolio stocks

Apple AAPL +3.43%

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

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

  • Friday close: $97.671 +3.43% from $94.43.
  • P/E (historical): 15.78 Change from 15.79
  • P/E (1 year fwd): 15.35 Change from 14.78
  • Target (1 year): NASDAQ consensus $105, range $75 ↔ $135.
    Consensus raised from $102, upper limit raised from $115
  • Analyst recommendations: 25 (+1) strong buy, 6 buy, 8 hold.
  • SEC filings (CIK 0000320193): Edgar Search (New, Beta)
  • Press releases: Apple

Amazon AMZN -9.66%

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

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

Ebay EBAY +2.47%

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

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

Facebook FB +9.89%

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

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

  • Friday close: $75.19 +9.89% from $68.4199
  • P/E (historical): 81.73 Change from 91.23
  • P/E (1 year fwd): 64.09 Change from 56.76
  • Target (1 year): NASDAQ consensus $84, range $50 ↔ $100.
    Consensus raised from $79, upper limit raised from $90.
  • Analyst recommendations: 28 strong buy, 3 buy, 2 hold.
  • SEC filings (CIK 0001326801): Edgar Search (New, Beta)

Google Class A GOOGL -1.16%

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

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

  • Friday close: $598.08 -1.16% from $605.11.
  • P/E (historical): 30.90 Change from 31.26
  • P/E (1 year fwd): 27.36 Change from 25.95
  • Target (1 year): NASDAQ consensus $655.5 range $600 ↔ $750.
    Consensus raised from $647.5, upper limit raised from $700.
  • SEC filings (CIK 0001288776): Edgar Search (New, Beta)

Google Class C GOOG -1.02%

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

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

  • Friday close: $589.02 -1.02% from $595.08.
  • P/E (historical): 20.54 Change from 20.75
  • P/E (1 year fwd): N/A
  • Analyst recommendations: 6 (+1) strong buy, 3 (+1) buy, 0 hold.

Linkedin LNKD +10.91%

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

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

VMware VMW +2.01%

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

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

  • Friday close: $97.23 +2.01% from $95.31.
  • P/E (historical): 43.80 Change from 39.55
  • P/E (1 year fwd): 39.43 Change from 38.01
  • Target (1 year): NASDAQ consensus $115, range $85 ↔ $126.
    Target raised from $114.5
  • Analyst recommendations: 14 strong buy, 2 (-1) buy, 8 hold.
  • SEC filings (CIK 0001124610): Edgar Search (New, Beta)

USD/AUD

USD/AUD this week (Chart: xe.com)

USD/AUD this week (Chart: xe.com)

RICH ROLLCALL

Facebook’s price rise this week has lifted founder Mark Zuckerberg (aged 29) to the status of 15th richest person (net worth $33.4bn), above Google founders Larry Page (#16 at net worth $32.9bn) and Sergei Brin (#19 at net worth $32.6bn).

So let’s call out the top 15 billionaires More:

  1. Bill Gates, Microsoft: $84.6bn
  2. Carlos Slim, America Movil: $79.1bn
  3. Amancio Ortega, Inditex (incl Zara): $63.9bn
  4. Warren Buffett, Berkshire Hathaway: $62.6bn
  5. Charles Koch, Koch Industries: $52.0bn
  6. David Koch, Koch Industries: $52.0bn
  7. Larry Ellison, Oracle: $44.9bn
  8. Ingvar Kamprad, Ikea: $44.3bn
  9. Christy Walton, Wal-Mart: $38.4bn
  10. Jim Walton, Wal-Mart: $36.6bn
  11. Rob Walton, Wal-Mart: $35.7bn
  12. Alice Walton, Wal-Mart: $35.0bn
  13. Sheldon Adelson, Las Vegas Sands: $34.6bn
  14. Liliane Bettencourt, L’Oreal: $33.5bn
  15. Mark Zuckerberg, Facebook: $33.4bn

We’re betting that Zuck will be pressuring the Waltons’ ranks by year’s end.

Friday 25 Jul 2014

UKRAINE

Ukrainian Prime Minister Arseniy Yatsenyuk has resigned after the Svoboda and Udar parties withdrew from the majority coalition in parliament and President Petro Poroshenko signaled his support for early elections.

USA

Economy

Advance report on durable goods – Jun 2014 Opinion

Extract

New Orders

New orders for manufactured durable goods in June increased $1.8 billion or 0.7 percent to $239.9 billion, the U.S. Census Bureau announced today. This increase, up four of the last five months, followed a 1.0 percent May decrease. Excluding transportation, new orders increased 0.8 percent. Excluding defense, new orders increased 0.7 percent. Machinery, up following two consecutive monthly decreases, led the increase, $0.9 billion or 2.4 percent to $37.3 billion.

Shipments

Shipments of manufactured durable goods in June, up four of the last five months, increased $0.3 billion or 0.1 percent to $238.2 billion. This followed a 0.1 percent May decrease. Transportation equipment, up following two consecutive monthly decreases, drove the increase, $0.5 billion or 0.7 percent to $70.2 billion.

Unfilled Orders

Unfilled orders for manufactured durable goods in June, up fourteen of the last fifteen months, increased $8.7 billion or 0.8 percent to $1,096.8 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.7 percent May increase.
Transportation equipment, up nine of the last ten months, led the increase, $4.9 billion or 0.7 percent to $681.0 billion.

Inventories

Inventories of manufactured durable goods in June, up fourteen of the last fifteen months, increased $1.6 billion or 0.4 percent to $399.7 billion. This was at the highest level since the series was first published on a NAICS basis and followed a 1.0 percent May increase.
Transportation equipment, also up fourteen of the last fifteen months, led the increase, $0.9 billion or 0.7 percent to $128.8 billion.

Capital Goods

Nondefense new orders for capital goods in June increased $1.5 billion or 1.8 percent to $82.3 billion. Shipments increased $0.9 billion or 1.2 percent to $76.6 billion. Unfilled orders increased $5.6 billion or 0.8 percent to $667.2 billion. Inventories increased $0.1 billion or 0.1 percent to $181.8 billion.
Defense new orders for capital goods in June increased $0.2 billion or 2.5 percent to $9.7 billion. Shipments decreased $0.1 billion or 0.6 percent to $9.4 billion. Unfilled orders increased $0.3 billion or 0.2 percent to $159.8 billion. Inventories increased $0.5 billion or 2.1 percent to $24.1 billion.

US Census Bureau, “Advance report on durable goods – Jun 2014“, 25 Jul 2014 (08:30am) More

Comment

We’re seeing a continuation of the pattern we’ve seen (before), which has been relatively subdued growth in capital goods and equipment spending, Businesses have been a bit more willing to increase their workforce this year, but capital investment decisions are based on longer-term expectations for final demand. Businesses are probably going to remain cautious.
Ryan Wang, Economist, HSBC Securities USA Inc More

Durable goods orders continue to be anemic relative to where they should be in the capex cycle, CEOs in America are very cautious about reinvesting in capital expenditures because they understand the underlying economy continues to be lacklustre.
Lincoln Ellis, Managing Director, Green Square Capital Management LLC More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX 1,978.34 -0.48% 1,848.36 +7.03%
DJIA INDU 16,960.57 -0.72% 16,576.66 +2.32%
NASDAQ IXIC 4,449.56 -0.50% 4,176.59 +6.54%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 25 Jul 2014 Watch

PORTFOLIO

Share price movements

Facebook achieved a new record high, but Amazon was trashed after reporting a worse than expected loss for Q2 2014. In the scheme of things, a loss of $126m from revenue of $19.34bn ought to be no big deal, but investors look at the price and the EPS and wonder if and when Jeff Bezos will balance “Get big fast” and “invest for the long term” with recognition of investors’ need to see profit. NBR Report

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

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

Bunting portfolio indices Opinion

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.609 -0.26% 1.399 +14.98%
Valuation Rate USD/AUD 0.94458 -0.27% 0.89789 +5.20%
Portfolio Index AUD 1.703 +0.01% 1.558 +9.30%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $97.671 +0.66% $80.1457 +21.87%
Amazon AMZN $324.01 -9.65% $398.79 -18.75%
Ebay EBAY $52.75 -0.90% $54.865 -3.85%
Facebook FB $75.19 +0.28% $54.649 +37.59%
Google A GOOGL $598.08 -0.82% $560.365 +6.73%
Google C GOOG $589.02 -0.73% $560.365 +5.11%
Linkedin LNKD $177.44 -0.34% $216.83 -18.17%
VMware VMW $97.23 +0.64% $89.71 +8.38%

Thursday 24 Jul 2014

EUROZONE

Economy

Manufacturing PMI (Flash) – Jul 2014 Opinion

Extract

The Markit Flash Eurozone Manufacturing PMI – typically based on around 85%-90% of final survey responses – ticked higher to 51.9 in July, up from June’s seven-month low of 51.8. The headline PMI has signalled an improvement in operating conditions for 13 straight months.

Eurozone manufacturers reported further growth of production, new orders and new exports. However, rates of expansion remained weaker than the highs scaled towards the start of the year, further highlighting the ongoing fragility of the current recovery.

Based on its historical relationship against the official Eurostat industrial production index, the Flash Eurozone Manufacturing Output Index reading of 53.0 in July is consistent with production rising at a quarterly pace of around 0.3%, down from 0.8% in January.

Job creation was recorded for the seventh successive month in July. However, with inflows of new business still relatively subdued and work-in-hand falling for a third successive month, the rate of increase in payroll numbers remained only slight.

On the prices front, average selling prices and input costs both rose during July. Selling prices rose only slightly, however, as modest increases in Germany and (on average) outside of the big-two economies were offset by a reduction in France.

Average input costs, meanwhile, rose at the quickest pace seen in the year-to-date. Purchase price inflation hit a seven-month high in France and strengthened to a 21-month peak outside of the big-two nations. In contrast, a further reduction in input costs was registered by Germany.

Markit Economics, “Eurozone Manufacturing – Manufacturing expansion continues at start of third quarter“, 24 Jul 2014 More

CHINA

Economy

Manufacturing PMI (Flash) – Jul 2014 Opinion

Extract

Growth of China’s manufacturing economy accelerated to the fastest for a year and a half in July, according to the first PMI-based snapshot of business conditions. An upturn in export growth signalled by the survey also suggests that global economic growth is reviving as we move into the second half of 2014, providing a welcome accompaniment to signs of an ongoing improvement in domestic demand within China.

The manufacturing PMI rose from 50.7 in June to 52.0 in July, its highest since January 2013, according to the flash reading produced by Markit for HSBC. July was the second successive month in which an improvement in business conditions has been signalled, following five months of decline.

The flash estimate is based on approximately 85% of usual monthly replies and acts as a reliable guide to the final data, which will be next published on 1 August.

The improvement will fuel hopes that the government is on course to meet its 7.5% growth target for 2014. At 49.4, the average PMI reading for the second quarter was up from 48.7 in the first quarter, an improvement that was later confirmed by official data showing growth of gross domestic product accelerating from an annual rate of 7.4% in the first three months of the year to 7.5% in the second quarter. The latest reading of 52.0 therefore points to a further acceleration of growth at the start of the third quarter.

The upturn in the headline PMI was driven by faster rates of increase for both output and new orders, as well as a reduction in the rate of job losses compared to prior months.

Markit Economics, “China manufacturing – Robust start to third quarter as flash PMI hits one-and-a-half year high“, 24 Jul 2014 More

JAPAN

Economy

Manufacturing PMI (Flash) – Jul 2014 Opinion

Extract

Japan’s economy looks set to avoid a downturn following April’s sales tax rise, but the pace of growth remains well below that seen at the start of the year, suggesting the upturn is fragile and vulnerable to renewed weakness.

At 50.8, the flash Markit/JMMA Manufacturing PMI held above the 50 ‘no change’ level in July for a second successive month. However, in falling from 51.5 in June, the latest reading also signalled an easing in the rate of expansion.

The survey data suggest that GDP grew at a much reduced rate in the second quarter and at the start of the third quarter compared to the 1.6% expansion seen in the first three months of the year. The first quarter had seen the highest quarterly PMI average for eight years, in part due to companies and households bringing forward purchases before the tax rise. Recent data have signalled GDP growth in the region of 0.5% on average since the sales tax rise took place. Manufacturing output merely stagnated in July, with growth stalling after the revival seen in June.

On the one hand, Japan’s policymakers will be heartened by signs that, contrary to pessimistic views, the hiking of the country’s sales tax from 5% to 8% on April 1st has not driven the economy back into recession. On the other hand, the renewed fall in the PMI will fuel fears that the economy has failed to rebound solidly after the initial impact of the tax hike, and remains dependent on rising overseas demand to offset the weakness of domestic sales.

The July PMI survey showed that a return to growth of exports contrasted with a slower increase in overall orders (which includes domestic sales), the latter most likely resulting from the tax rise. Export orders returned to growth after three months of marginal declines, albeit growing at a rate markedly lower than in the first quarter. Growth of total order books, which includes both domestic and export orders, meanwhile slowed to show only a very modest increase compared with June.

Markit Economics, “Japan flash manufacturing PMI – Flash manufacturing PMI points to subdued growth since sales tax rise“, 24 Jul 2014 More

USA

Economy

Unemployment Insurance Weekly Claims Report: Week to 19 Jul 2014 Opinion

Extract

In the week ending July 19, the advance figure for seasonally adjusted initial claims was 284,000, a decrease of 19,000 from the previous week’s revised level. This is the lowest level for initial claims since February 18, 2006 when they were 283,000. The previous week’s level was revised up by 1,000 from 302,000 to 303,000. The 4-week moving average was 302,000, a decrease of 7,250 from the previous week’s revised average. This is the lowest level for this average since May 19, 2007 when it was 302,000. The previous week’s average was revised up by 250 from 309,000 to 309,250.

The advance seasonally adjusted insured unemployment rate was 1.9 percent for the week ending July 12, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending July 12 was 2,500,000, a decrease of 8,000 from the previous week’s revised level. This is the lowest level for insured unemployment since June 16, 2007 when it was 2,453,000. The previous week’s level was revised up 1,000 from 2,507,000 to 2,508,000. The 4-week moving average was 2,542,250, a decrease of 17,000 from the previous week’s revised average. This is the lowest level for this average since October 13, 2007 when it was 2,527,500. The previous week’s average was revised up by 250 from 2,559,000 to 2,559,250.

U.S. Employment and Training Administration, “Unemployment Insurance Weekly Claims Report – Week to 19 Jul 2014“, 24 Jul 2014 (08:30am) More

Comment

Today’s jobless claims data likely informs us more about production than employment. Auto production is in overdrive at a time when factories are normally shutdown to retool for new makes and models. We would expect a significant pick-up in motor vehicle production and manufacturing employment in July.
Neil Dutta, Head of U.S. Economics, Renaissance Macro Research LLC More

This is consistent with another solid payroll reading for July.
Sam Bullard, Senior Economist, Wells Fargo Securities More

Make no mistake – the broader trend is definitely one for improvement. But there’s an asterisk that needs to be assigned to this number, and that’s broadly true for claims in July.
Tom Porcelli, Chief U.S. Economist, RBC Capital Markets More

Manufacturing PMI (Flash) – Jul 2014 Opinion

Extract

At 56.3 in July, down from 57.3 in June, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ IndexTM (PMITM)1 signalled the slowest improvement in overall manufacturing business conditions for three months. PMI readings above 50.0 signal an improvement in business conditions, while readings below 50.0 signal deterioration.

The latest survey indicated that manufacturing production growth eased in July, after reaching its strongest pace for over four years in June. Nonetheless, the output index reading in July (60.4) was well above the 50.0 no-change mark and still pointed to an historically strong rate of growth.

Companies that reported higher levels of production generally cited stronger demand from domestic markets and the launch of new products at their plants. July data signalled a steep pace of overall new business growth across the manufacturing sector, albeit a softer expansion than in the previous month. Meanwhile, new export order growth remained relatively subdued, with the latest index reading unchanged from June‟s five-month low and only slightly above the neutral 50.0 value.

Manufacturers indicated a rise in payroll numbers for the thirteenth successive month in July. Anecdotal evidence cited increased new business inflows and greater backlogs of work. However, the rate of employment growth eased for the first time since April and was the least marked for 10 months. Reports from survey respondents suggested that slower payroll growth reflected a combination of natural wastage and more cautious hiring policies amid slower output growth in July.

Markit Economics, “Markit Flash U.S. Manufacturing PMI – Manufacturing growth holds close to four-year peak“, 24 Jul 2014 (09:45am) More

Usual Weekly Earnings of Wage and Salary Workers – Second Quarter 2014 Opinion

Extract

Median weekly earnings of the nation’s 106.6 million full-time wage and salary workers were $780 in the second quarter of 2014 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported today. This was essentially unchanged from a year earlier, compared with a gain of 2.1 percent in the Consumer Price Index for All Urban Consumers (CPI-U) over the same period.

Bureau of Labor Statistics, “Usual Weekly Earnings of Wage and Salary Workers – Second Quarter 2014“, 24 Jul 2014 (10:00am) More

New Residential Sales in Jun 2014 Opinion

Extract

Sales of new single-family houses in June 2014 were at a seasonally adjusted annual rate of 406,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 8.1 percent (±12.3%) below the revised May rate of 442,000 and is 11.5 percent (±14.4%) below the June 2013 estimate of 459,000.

The median sales price of new houses sold in June 2014 was $273,500; the average sales price was $331,400. The seasonally adjusted estimate of new houses for sale at the end of June was 197,000. This represents a supply of 5.8 months at the current sales rate.

U.S. Department of Housing and Urban Development and Department of Commerce, “New Residential Sales in Jun 2014“, 24 Jul 2014 (10:00am) More

Comment

The economy is doing better. You really cannot put too much (stock) in the ups and downs in new home sales. I don’t think it suggests that housing is heading south.
Ryan Sweet, Senior Economist, Moody’s Analytics More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX 1,987.98 +0.05% 1,848.36 +7.55%
DJIA INDU 17,083.80 -0.02% 16,576.66 +3.06%
NASDAQ IXIC 4,472.11 -0.04% 4,176.59 +7.08%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 24 Jul 2014 Watch
Comment

I don’t think the market can go much higher in the short term because it’s overbought, but I don’t expect any meaningful correction. I’m quite impressed with the results I’ve seen till now. In most cases, we’ve had companies beating on revenues and earnings, and posting positive outlooks.
Pierre Mouton, Co-Founder and Senior Vice President, Messidor Finance SA. (Geneva) ($8bn) More

Earnings are coming in better than expected and the market has taken a queue from that but the economy overall is kind of a mixed bag. Housing isn’t coming back and I think there was some hope for more improvement there.
John Kvantas, Director of Equity Research, USAA Investments ($63bn) More

Tech reporting season: Jun 2014 quarter

Opinion Amazon AMZN +0.13% Press release

AMZN today: sold off on larger than expected loss.

AMZN was sold off after the bell on reporting a larger than expected loss.

Key numbers

For the Jun 2014 quarter:

  • Revenue increased 23% to $19.34bn, in line with expectations of $19.3bn.
  • Loss was $126m, down from $7m for the same period in 2013.
  • EPS was -$0.27, down from -$0.02, and worse than expectations of -$0.15.

PORTFOLIO

Share price movements

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

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

Bunting portfolio indices Opinion

Our AUD-denominated  index passed 1.7  today for the first time.

Our AUD-denominated index passed 1.7 today for the first time (Chart: Bunting)

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.613 +0.22% 1.399 +15.28%
Valuation Rate USD/AUD 0.94711 -0.38% 0.89789 +5.48%
Portfolio Index AUD 1.703 +0.61% 1.558 +9.28%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $97.03 -0.16% $80.1457 +21.07%
Amazon AMZN $358.61 +0.13% $398.79 -10.08%
Ebay EBAY $53.23 +1.08% $54.865 -2.98%
Facebook FB $74.98 +5.18% $54.649 +37.20%
Google A GOOGL $603.01 -0.36% $560.365 +7.61%
Google C GOOG $593.35 -0.44% $560.365 +5.89%
Linkedin LNKD $178.05 +3.65% $216.83 -17.88%
VMware VMW $96.61 +2.21% $89.71 +7.69%

NEW ZEALAND

Economy

Official cash rate

The Reserve Bank of New Zealand has raised its Official Cash Rate by 25 basis points for the fourth month in a row, raising the OCR from 2.5% to 3.5%.

Extract

The Reserve Bank today increased the Official Cash Rate (OCR) by 25 basis points to 3.5 percent.

New Zealand’s economy is expected to grow at an annual pace of 3.7 percent over 2014. Global financial conditions remain very accommodative and are reflected in low interest rates, narrow risk spreads, and low financial market volatility. Economic growth among New Zealand’s trading partners has eased slightly in the first half of 2014, but this appears to be due to temporary factors.

Reserve Bank of New Zealand, “RBNZ raises OCR to 3.5 percent“, 24 Jul 2014 More

AUSTRALIA

Economy

Economists are concerned about the effects of continuing record low interest rates (especially for housing loans) and the risks building in the Australian economy More. Key points include:

  • Australian interest rates remain at record lows, based on the Reserve Bank’s Official Cash Rate of 2.5%. Competition between banks for home mortgage business has led to recent falls in medium term fixed-rate home mortgage interest rates to below 5% (4.99%: CBA and WBC, 4.94%: ANZ and NAB). More A 4.94% mortgage rate is just 244bp above the 2.50% OCR, and just 194bp above the current 3.00% CPI growth rate.
  • It is likely that affordable finance will increase demand, and therefore house prices, already rising because of domestic and overseas investor demand. A rise in interest rates may trigger a fall in house prices and raise loan-valuation ratios (LVR).
  • Unemployment in Australia has been rising, and wage growth has eased. The aged-unemployed workforce demographic is increasing.
  • Increasing household debt (including size of mortgage loans), and risk to households’ ability to service debt when interest rates rise. Credit Suisse analysts predict that a phased rise in the OCR from 2.5% to 3.5%, as has happened in New Zealand, would lift debt servicing to an unsustainable level.
  • Some areas of Australia’s economy are hurt by a high AUD, but lowering the OCR is unlikely. Rather a rise in the OCR is more likely (given the points above) and that will most likely increase the AUD even more.
  • Some alleviation of upward pressure on the AUD may come from relaxation of monetary stimulus measures in major economies as growth in those economies increases – but that is at least a year away. New Zealand’s recent monetary policy is an example of what we may see in other strengthening economies. The US Federal Reserve is expected to raise interest rates some time between Jun 2015 (53% chance), Jul 2015 (75% chance) and the last quarter of 2015 – provided the economy continues to strengthen and targets, such as CPI at or above 2% are met. Such policies will reduce the differential between AUD bond yields and other currency yields.
Comment

Fixed rates are normally higher. Average inflation tells me the RBA will not stay at the current rate. A rate rise is likely to be about nine months away, around the June quarter next year. The banks are offering this deal because they can. Costs of borrowing have dropped and are consistent with Australian bond yields falling. A combination of economic factors including improvements in the global capital market with lower spreads have resulted in the cheaper cost of money. Last year some mortgage providers were already doing 5 per cent. So to avoid losing market share, the big banks have joined in.

Shane Oliver, Chief Economist, AMP Capital More

Currency: USD/AUD
The AUD has weakened against the USD (Chart: xe.com)

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

Wednesday 23 Jul 2014

USA

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX 1,987.01 +0.18% 1,848.36 +7.50%
DJIA INDU 17,086.63 -0.16% 16,576.66 +3.08%
NASDAQ IXIC 4,473.70 +0.40% 4,176.59 +7.11%

The shape of the day

Market indices today (Chart: Yahoo Finance)

Market indices today (Chart: Yahoo Finance)

Nightly Business Report: 23 Jul 2014 Watch
Comment

There may be some times when the geopolitical landscape hogs the spotlight but it’s always about earnings, and they’re coming in better than expected. People say we’re at all-time highs and that we have to come down, but we’re not out of the ball park with valuations yet.
Karyn Cavanaugh, Senior Market Strategist, Voya Investment Management LLC ($220bn) More

The general tone of earnings has been positive not just on the bottom line but also top-line, and we’ve seen inflation numbers that gave comfort to those who believe the market will be supported by the Fed.
Russ Koesterich, Chief Investment Strategist, BlackRock Inc. More

PORTFOLIO

Share price movements

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

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

Bunting portfolio indices Opinion

Our USD-denominated index passed 1.6 today  for the first time

Our USD-denominated index passed 1.6 today for the first time (Chart: Bunting)

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.609 +2.00% 1.399 +15.02%
Valuation Rate USD/AUD 0.95076 +0.67% 0.89789 +5.89%
Portfolio Index AUD 1.693 +1.32% 1.558 +8.62%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $97.19 +2.61% $80.1457 +21.27%
Amazon AMZN $358.14 -0.75% $398.79 -10.19%
Ebay EBAY $52.66 +1.17% $54.865 -4.02%
Facebook FB $71.29 +2.92% $54.649 +30.45%
Google A GOOGL $605.19 +0.27% $560.365 +8.00%
Google C GOOG $595.98 +0.21% $560.365 +6.36%
Linkedin LNKD $171.78 +3.79% $216.83 -20.78%
VMware VMW $94.52 -1.57% $89.71 +5.36%

Portfolio stock price proximity to record highs

After reporting its Q2 earnings, FB achieved a record high in after hours trading

After reporting its Q2 earnings, FB achieved a record high in after hours trading

In after hours trading, after reporting its Q2 revenue up 60.5% and earnings exceeding expectations, Facebook rose to a peak of $75.35, exceeding its record high of $72.03 NBR Report. Some other portfolio stocks are also approaching their record highs: Google and Apple are within a few percent of their record highs. Online retailers Amazon and Ebay are about 11.5% below their records. VMware and Linkedin remain well below their record highs.

Stock Ticker Today % Below Record Date
Apple (Undiluted) AAPL $680.33 -3.10% $702.10 19 Sep 2012
Amazon AMZN $358.14 -11.43% $404.39 26 Dec 2013
Ebay EBAY $52.66 -11.50% $59.50 6 Mar 2014
Facebook FB $71.29 -1.03% $72.03 10 Mar 2014
Google A+B GOOGL $1,201.17 -1.56% $1,220.17 26 Feb 2014
Linkedin LNKD $171.78 -32.94% $256.14 11 Sep 2013
VMware VMW $94.52 -17.47% $114.53 3 Apr 2012

AUSTRALIA

Economy

Inflation (CPI)

Extract

The Consumer Price Index (CPI) rose 0.5% in the June quarter 2014, following a rise of 0.6% in the March quarter 2014.

The most significant price rises this quarter were for medical and hospital services (+4.6%), new dwelling purchase by owner-occupiers (+1.6%) and tobacco (+3.1%). These rises were partially offset by falls in domestic holiday travel and accommodation (-3.8%), automotive fuel (-2.7%) and telecommunication equipment and services (-1.6%).

The CPI rose 3.0% through the year to the June quarter 2014, following a rise of 2.9% through the year to the March quarter 2014.

Australian Bureau of Statistics, “6401.0 – Consumer Price Index, Australia, Jun 2014 – Rises 0.5%“, 23 Jul 2014 More

USD/AUD

The CPI rise announced today produced a jump in the value of the AUD as investors raised their expectations of a rise in Australia’s Official Cash Rate.

The AUD rose on the RBA's CPI announcement (Chart: xe.com)

The AUD rose on the RBA’s CPI announcement (Chart: xe.com)

Comment

“With inflation rates at the upper end of the scale, a credible attempt from the RBA to try and jawbone the currency in the near future seems unlikely. The lack of jawboning this week and Wednesday’s inflation outcome has seen the Aussie perform well on a number of crosses. But whether that’s enough to break the shackles that have tethered us so closely to this US94¢ mark is another story. The argument for the Aussie continuing in the range between US93.50¢ and US94.50¢ for the short term is fairly compelling.
Robert Rennie, Chief Currency Strategist, Westpac More