Wed 29 Mar 2017

Almost 77 years after Dunkirk, Britain again initiates a costly withdrawal from Europe

Almost 77 years after Dunkirk, Britain again initiates a costly withdrawal from Europe
“We must be very careful not to assign to this deliverance the attributes of a victory. Wars are not won by evacuations.” British Prime Minister Winston Churchill, House of Commons, 4 Jun 1940

In Portfolioticker today

Today at the stock market NBR

bull/bearU.S. stocks advanced as crude rallied on government data that eased concerns that supplies were bulging. Treasuries rose and the dollar slipped as the Trump administration battled to revive its legislative agenda, while the U.K. formally triggered the Brexit process.

  • The S&P 500 added 0.1% to 2,361.15 as of 4 p.m. in New York. The index rallied 0.7% Tuesday, with banks surging. Energy producers added 1.1% Wednesday. The equity benchmark is up 5.5% in the first 3 months of the year, on track for a 6th straight quarterly advance.
  • The Stoxx Europe 600 Index rose 0.3% to trade at the highest level since 2 Dec 2016. The gauge is higher by 4.7% in the first quarter, the 3rd straight advance.
  • The MSCI Emerging Market Index gained 0.2%, pushing its advance in March toward 4%. The measure has gained 13% in the quarter, its best in 4 years.

Crude rose above $49.50/barrel as oil stockpiles rose less than forecast.

10-year Treasury yields slid below 2.40%, while Mexico’s MXP strengthened as investors assessed the prospects for Republican tax reform.Bloomberg

Market indices

Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,361.13 +0.10% 2,238.83 +5.46%
DJIA INDU 20,659.32 -0.21% 19,762.60 +4.53%
NASDAQ IXIC 5,897.55 +0.38% 5,383.12 +9.55%

The portfolio today

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

:-) Our USD-denominated index closed on a record high of 2.536, beating yesterday’s record of 2.523.
:-) Our AUD-denominated index closed on a record high of 3.286, beating yesterday’s record of 3.285.

Index values

Index Currency Today Change 31 Dec 16 YTD
USD-denominated Index USD 2.536 +0.52% 2.105 +20.49%
Valuation Rate USD/AUD 0.77219 +0.49% 0.72663 +6.27%
AUD-denominated Index AUD 3.286 +0.04% 2.895 +13.50%

Portfolio stock prices

:-) Apple closed on a record high of $144.12, beating its previous record of $143.80 set yesterday.
:-) Amazon closed on a record high of $874.32, beating its previous record of $856.66 set on 20 Mar 2017.
:-) Facebook closed on a record high of $142.65, beating its previous record of $141.76 set yesterday.

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $849.87 +1.10% $792.45 +7.24%
Alphabet C GOOG $831.41 +1.28% $771.82 +7.72%
Apple AAPL $144.12 +0.22% $115.82 +24.43%
Amazon AMZN $874.32 +2.14% $749.87 +16.59%
Ebay EBAY $33.65 +0.36% $29.69 +13.33%
Facebook FB $142.65 +0.63% $115.05 +23.98%
PayPal PYPL $43.24 +0.21% $39.47 +9.55%
Twitter TWTR $15.04 +0.67% $16.30 -7.74%
Visa V $89.18 +0.07% $78.02 +14.30%
VMware VMW $91.84 -0.33% $78.73 +16.65%

FX: USD/AUD

USD

DXY movements
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg

The Bloomberg Dollar Spot Index (DXY) slipped 0.1% after surging 0.5% Tuesday.
Britain’s GBP fell 0.1% to USD 1.2441, while the EUR weakened 0.4%t to USD 1.0769.
Mexico’s MXP rallied as the prospects weakened for a border adjustment tax that would likely harm the U.S.’s southern neighbour.
Bloomberg

AUD

AUD movements
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com

Oil and Gas Futures

Futures prices

West-Texas Intermediate crude oil rose 2.3% to settle at $49.51 a barrel. Crude stockpiles climbed by a less-than-anticipated 867,000 barrels to 534 million, the highest in weekly data going back to 1982.Bloomberg

Prices are as at 15:49 ET

  • NYMEX West Texas Intermediate (WTI): $49.39/barrel +2.11% Chart
  • ICE (London) Brent North Sea Crude: $52.30/barrel +1.89% Chart
  • NYMEX Natural gas futures: $3.18/MMBTU +2.55% Chart

flag_europe Europe: UK Formally Notifies EU of Article 50 Declaration.

Background to an Unhappy Relationship

  • 25 Mar 1957: European Economic Community formed by the Treaty of Rome, signed by Belgium, France, West Germany, Italy, Luxembourg and the Netherlands.
  • 10 Aug 1961: UK applied to be a member of the EEC Guardian. The application was vetoed by French President Charles de Gaulle in 1963 with the comment “l’Angleterre, ce n’est plus grand chose” (“England is not much any more”). Guardian
  • 10 May 1967: UK applied to be a member of the EEC – however French President Charles de Gaulle said he would again veto the application, accusing the UK of a “deep-seated hostility” towards European construction. The UK application was supported by Belgium, Germany, Italy, Luxembourg and the Netherlands. BBC
  • 1972: EEC countries agree to maintain stable exchange rates by preventing exchange rate fluctuations of more than 2.25% (the European “currency snake”)
  • 1 Jan 1973: UK joins the EEC.
  • 13 Mar 1979: European Exchange Rate Mechanism (ERM) introduced. UK Chancellor of the Exchequer Denis Healey reportedly chose not to join the ERM in 1979 owing to concerns that it would benefit the German economy by preventing the Deutsche mark from appreciating, at the expense of the economies of other countries. Wikipedia
  • 8 Oct 1990: UK joins the ERM Wikipedia
  • 16 Sep 1992 (Black Wednesday): UK is forced to exit the ERM Wikipedia BBC Documentary
  • 1 Jan 1999: Euro Area (Eurozone) established with 11 members: EEC founders (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) plus Austria, Finland, Ireland, Portugal and Spain.Wikipedia
  • Jan 2013: During his election campaign, David Cameron promised that, should his Conservative Party win a parliamentary majority at the 2015 general election, the UK government would negotiate more favourable arrangements for continuing UK membership of the EU, before holding a referendum on whether the UK should remain in or leave the EU.
  • 23 Jun 2016: Brexit referendum:
    • Pro “Leave” Documentary Watch
    • Spectator Debate: “Should Britain Leave the EU?”, 28 Apr 2016: For Brexit: Dan Hannan, Nigel Farage and Kate Hoey. Against Brexit: Nick Clegg, Liz Kendall and Chuka Umunna. Chair: Andrew Neil Watch
    • ITV Debate: “Should Britain Leave the EU?”, 10 Jun 2016: For Brexit: Boris Johnson (Tory), Andrea Leadsom (Tory) and Gisela Stuart (Labour). Against Brexit: Amber Rudd (Tory), Nicola Sturgeon (SNP) and Angela Eagle (Labour). Watch
  • 13 Jul 2016: Theresa May replaces David Cameron as Prime Minister
  • 24 Mar 2017: European Commission President Jean-Claude Juncker told the BBC that the UK will be required to pay EUR 60 billion (GBP 52 billion) if it leaves the EU. “It will be a bill reflecting former commitments by the British government and by the British parliament. There will be no sanctions, no punishment, nothing of that kind.” The Guardian
  • 29 Mar 2017: UK formally notifies the European Council of its declaration to leave the EU under Article 50 of the Treaty on European Union in accordance with Article 49A of the Treaty of Lisbon. This will set in train a 2-year process of negotiation leading to the reduction of the EU from 28 to 27 members in Mar 2019.
    • BBC Documentary, 23 Feb 2017 Watch
    • BBC Documentary, 10 Mar 2017 Watch

UK Initiates Brexit with an Article 50 Statement

UK Prime Minister May signs her Article 50 letter which has been delivered to EC President Tusk

UK Prime Minister May signs her Article 50 letter which has been delivered to EC President Tusk

Europe’s First Response

The European Parliament has drafted a resolution on negotiations with the United Kingdom following its notification that it intends to withdraw from the European Union.

European Parliament resolution on negotiations with the United Kingdom following its notification that it intends to withdraw from the European Union“, 29 Mar 2017 Draft Resolution

flag_usa Pending Home Sales. Feb 2017

Press Release Extract [ser_15]

Pending home sales rebounded sharply in February to their highest level in nearly a year and second-highest level in over a decade, according to the National Association of Realtors®. All major regions saw a notable hike in contract activity last month.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, jumped 5.5 percent to 112.3 in February from 106.4 in January. Last month’s index reading is 2.6 percent above a year ago, is the highest since last April (113.6) and the second highest since May 2006 (112.5).

Lawrence Yun, NAR chief economist, says February’s convincing bump in pending sales is proof that demand is rising with spring on the doorstep. “Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” he said. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.”

Added Yun, “Last month being the warmest February in decades also played a role in kick-starting prospective buyers’ house hunt.”

Looking ahead to the busy spring months, Yun expects to see continued ebbs and flows in activity as new supply struggles to replace listings that are going under contract at a very quick pace. This is especially the case at the lower- and mid-market price ranges, where choices are minimal and prices are being bid higher by multiple offers.

“The homes most buyers are in the market for are unfortunately the most difficult to find and ultimately buy,” said Yun. “The country’s healthy labor market is translating to greater job security, but affordability is not improving because home prices in some areas are still outpacing incomes by three times or more because of tight supply. How much new and existing inventory there is on the market this spring will determine if sales can reach their full potential and finally start reversing the nation’s low homeownership rate.”

Existing-home sales are forecast to be around 5.57 million this year, an increase of 2.3 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 4 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

The PHSI in the Northeast rose 3.4 percent to 102.1 in February, and is now 6.6 percent above a year ago. In the Midwest the index jumped 11.4 percent to 110.8 in February, but is still 0.6 percent lower than February 2016.

Pending home sales in the South climbed 4.3 percent to an index of 127.8 in February and are now 4.2 percent above last February. The index in the West increased 3.1 percent in February to 97.5, but is still 0.2 percent higher than a year ago.

National Association of Realtors, “US: Pending Home Sales. Feb 2017“, 29 Mar 2017 (10:00) More

flag_japan Japan update

Currency: USD/JPY

JPY movements
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

Stockmarket: Nikkei 225

N225 movements
^ Nikkei N225 movements over the past week Chart: Google Finance

flag_china China update

Currency: USD/CNY

CNY movements
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

Stockmarket: CSI300

CSI300 movements
^ Shanghai CSI300 movements over the past week Chart: Google Finance