Weekly Review: 18 May 2012

OUTLOOK

Europe: Greece

Government

The Greeks go to an election again in a month’s time (17 Jun 2012) – declared (e.g. by German Foreign Minister Guido Westerwelle and Finance Minister Wolfgang Schäuble) as a referendum on whether Greece is prepared to accept the austerity measures necessary to remain in the eurozone and continue to receive bailout support, or a disastrous exit from the eurozone. The real contest will be between the New Democracy Party and Syriza. These parties won 58:52 seats in the last election and are equal in opinion polls conducted this weekend [More]. Any government will be a coalition led by one of these parties, with opposition to the terms of the IMF bailout package, but a demand for funding support and continued membership of the eurozone.

Eurozone exit

Greece is gambling that the EU fears of the repercussions of a Greek failure or departure from the eurozone would ensure its support whatever the outcome of the election. However EU Trade Commissioner Karel de Gucht (Belgium) has said that the EU stands ready to cope with the impacts of a Greek departure from the eurozone. Rainer Brüderle, leader of Germany’s co-ruling Free Democrats has said “It would cost a lot of money, if Greece were to leave the club, but it would be manageable.” [More].

The impact of a Greek exit should already have been priced into US equity markets – a Bloomberg Global Poll of 1,253 investors, analysts and traders found more than 50% expect a Greek exit during 2012 [More].

Flight of bank deposits

Deposits continue to flow from Greek banks, leading credit rating agencies Moody’s and Fitch to downgrade Greek banks [More]. A similar draw of bank deposits is occurring in Belgium, France, Italy and Spain [More]. Making matters worse is the quality of bank assets, with Spanish banks seeing a rise in bad loans (from 8.3% in Feb 2012 to 8.7% in Mar 2012) [More]. Moodys last week reduced its credit ratings for major Spanish banks.

G8 summit

G8 leaders (Canada [Harper], France [Hollande], Germany [Merkel], Italy [Monti], Japan [Noda], Russia [Medvedev], UK [Cameron], USA [Obama]) and Presidents of the European Council [Van Rompuy] and Commission [Barroso] met at Camp David in Maryland USA this weekend to discuss the European debt crisis – and other threats, such as Middle East instability [More]. Their draft communique expressed support for Greece remaining in the eurozone, with some support for growth, without being specific about who funds that support, and without letting Greece off the hook in relation to its IMF commitments: “We agree on the importance of a strong and cohesive euro zone for global stability and recovery, and we affirm our interest in Greece remaining in the euro zone while respecting its commitments” [More].

Europe: Spain

Spain has revised its fiscal deficit result for 2011 upwards from 8.5% of GDP to 8.9% of GDP, increasing the breach of its eurozone target (6% of GDP) [More].

USA MARKET

Economy

  • Public debt (17 May 2012): $15.713 trillion, up from $15.675 trillion (10 May 2012). The statutory borrowing limit is $16.4 trillion.
  • Treasury yields:
    • 30-year: 2.80%
    • 10-year: 1.72%
    • 5-year: 0.75%
  • Gold Futures (Jun): $1,592/oz up $8 from $1,584/oz last Friday.
  • Oil Futures (WTI LSC Jun): $91.48/barrel down $4.65 from $96.13/barrel last Friday.

US market indices

  • S+P 500: 1,295 – down 4.4% from 1,354. Down 5/5 days
  • DJIA: 12,369 – down 3.5% from 12,821. Down 5/5 days
  • NASDAQ: 2,779 – down 5.3% from 2,934. Down 5/5 days

Mark Zuckerberg’s week

  • Mark started the week with his 28th birthday.
  • Mark rang NASDAQ’s opening bell on the day Facebook commenced trading, with an IPO valuation of $104bn.
  • Mark finished the week by marrying Pricilla Chan, his girlfriend from Harvard.
  • Mark is now one of the top 30 richest people, worth $19bn.

PORTFOLIO

Apple

  • Friday close: $530.38, down 6.41% from $566.71.
  • Market value: $495bn down 6.67% from $528bn
  • P/E (historical): 12.93, down from 13.82
  • P/E (1 year fwd): 11.26, down from 12.24
  • Target (1 year): consensus $740, range $500 – $910.

Amazon

  • Friday close: $213.85, down 6.07% from $227.68.
  • Market value: $97.3bn, down 6.08% from $103.6bn – Amazon is now worth less than Facebook
  • P/E (historical): 177, down from 188
  • P/E (1 year fwd): 184, down from 189
  • Target (1 year): consensus $250, range $210 – $285.

Google

  • Friday close: $600.40, down 0.8% from $605.23.
  • Market value: $155bn, down 0.6% from $156bn
  • P/E (historical): 18.22, down from 18.36
  • P/E (1 year fwd): 16.73, up from 16.47
  • Target (1 year): consensus $750, range $645 – $850.

LinkedIn

  • Friday close: $99.02 down 7.66% from $107.23.
  • Market value: $6.17bn, down 7.78% from $6.69bn
  • P/E (historical): 825 down from 894,
  • P/E (1 year fwd): 525, down from 555
  • Target (1 year): consensus $132.5, range $92 – $145.

VMware

  • Friday close: $97.90, down 4.32% from $102.32.
  • Market value: $12.5bn, down 4.58% from $13.1bn
  • P/E (historical): 53.79, down from 56.22
  • P/E (1 year fwd): 50.74, down from 51.89
  • Target (1 year): consensus $123, range $95 – $135. Consensus increased from $122.

USD/AUD

  • The rate for valuation of the portfolio was AUD 1.00 = USD 0.9943, down from USD 1.0059 on 11 May 2012.
  • Outlook: About 80% of Australian government bonds is owned by foreign investors [More]. As a consequence, RBA interest rates have the potential to influence AUD cross rates. Some expect the RBA to reduce interest rates by about 50 basis points in Jun 2012. This may compound the pressure of risk avoidance during the European crisis and Asian slowdown on the AUD.

Friday 18 May 2012

USA MARKET

Commodities

  • Gold Futures (Jun): up $17.00 to $1,592/oz
  • Oil Futures (WTI LSC Jun): down $1.08 to $91.48/barrel

Treasury yields

  • 30-year: 2.80%
  • 10-year: 1.72%
  • 5-year: 0.75%

Share market indices

  • S+P 500: 1,295 -0.74%
  • DJIA: 12,369 -0.59%
  • NASDAQ: 2,779 -1.24%

Tech stock news

Facebook [NASDAQ:FB] launched (later than expected) today at about 11:30am, topping out at $43.02 before nosediving to its IPO price of $38.00 within 15 minutes. Greenshoe support kicked in and FB traded between its $42.00 opening price and its $38.00 IPO price until about 3:30pm, when underwriter greenshoe support again kept it above its IPO price. FB closed its first day just 23 cents above its IPO price [More].

There are many who would feel vindicated in their criticism of FB’s price, but the context is that equity markets have experienced a horrific May this year, and few investors are feeling brave (see the tech stock price movements below). There was also a problem on NASDAQ with the start of FB trading. [More]

Facebook’s IPO buzz earlier in the week saw a rise in web companies with recent IPOs such as Groupon, LinkedIn, Pandora, Yelp, Zynga. However that “sucker rally” ended today, and they were all sold down strongly.

At 11:30am, when it was evident that Facebook did not have strong buyer support, Zynga [NASDAQ:ZNGA] crashed down 13.3% to $7.17 before NASDAQ stopped trading in ZNGA from 11:37am to 12:27pm. Trading resumed for 2 minutes before it was stopped again until 13:35pm [More]. Zynga closed down 13.42% at $7.16.

Tech stock price movements

  • Substantial rises (more than 2.0%)
    • Salesforce [NYSE:CRM]: up 8.8% to $145.58
    • Yahoo! [NASDAQ:YHOO]: up 3.70% to $15.42
  • Substantial falls (more than 2.0%)
    • Zynga [NASDAQ:ZNGA]: down 13.42% to $7.16
    • Yelp [NYSE:YELP]: down 12.36% to $18.64
    • Pandora [P]: down 7.1% to $9.77
    • Groupon [NASDAQ:GRPN]: down 6.69% to $11.58
    • LinkedIn [NYSE:LNKD]: down 5.65% to $99.02
    • Micron Technology [NASDAQ:MU]: down 5.46% to $5.63
    • Zillow [NASDAQ:Z]: down 5.26% to $36.73
    • Rackspace [NYSE:RAX]: down 4.10% to $48.63
    • Google [NASDAQ:GOOG]: down 3.64% to $600.40
    • RIM [NASDAQ:RIMM]: down 3.43% to $10.99
    • Netflix [NASDAQ:NFLX]: down 2.79% to $69.96
    • Hewlett-Packard [NYSE:HPQ]: down 2.72% to $21.46
    • Oracle [NASDAQ:ORCL]: down 2.44% to $25.61
    • Amazon [NASDAQ:AMZN]: down 2.07% to $213.85

PORTFOLIO

NASDAQ

  • Apple [AAPL] $530.38 +0.05%
  • Amazon [AMZN] $213.85 -2.07%
  • Google [GOOG] $600.40 -3.04%

NYSE

  • Linkedin [LNKD] $99.16 -5.52%
  • VMware [VMW] $97.94 -1.02%

AUSTRALIAN CURRENCY

Portfolio valuation rate: AUD1.00 = USD 0.9943

Australian exchange rates

Date Time AEST USD/AUD EUR/AUD GBP/AUD CAD/AUD
19 May 2012 08:35 0.98435 0.77020 0.62238 1.00625
19 May 2012 02:45 0.98405 0.77288 0.62288 1.00367
18 May 2012 19:15 0.98409 0.77592 0.62319 1.00210

Thursday 17 May 2012

EUROPE

Spain

Government borrowing costs rose, 16 banks had their ratings reduced. These events, along with the uncertainty in Greece, led to a selloff in world markets. The pain in Spain goes mainly against the grain.

USA MARKET

Commodities

  • Gold Futures (Jun): up $48.30 to $1,575/oz
  • Oil Futures (WTI LSC Jun): down $0.25 to $92.56/barrel

Treasury yields

The money flowed out of all investments with an element of risk and back into Treasuries today – yields were sharply down:

  • 30-year: 2.78%
  • 10-year: 1.69%
  • 5-year: 0.73%

Share market indices

  • S+P 500: 1,305 -1.50%
  • DJIA: 12,443 -1.24%
  • NASDAQ: 2,814 -2.10%

Tech stock news

Facebook [NASDAQ:FB] has set the IPO price for its shares at $38, the upper end of its price range. FB commences trading on the NASDAQ tomorrow.

Tech stock price movements

  • Substantial rises (more than 2.0%)
    • RIM [NASDAQ:RIMM]: up 3.27% to $11.38
  • Substantial falls (more than 2.0%)
    • LinkedIn [NYSE:LNKD]: down 7.52% to $104.95
    • Groupon [NASDAQ:GRPN]: down 4.90% to $12.41
    • Rackspace [NYSE:RAX]: down 4.27% to $50.71
    • Advanced Micro Devices [NYSE:AMD]: down 4.07% to $6.13
    • Zillow [NASDAQ:Z]: down 3.80% to $38.77
    • Qualcomm [NASDAQ:QCOM]: down 3.3% to $57.16
    • Micron Technology [NASDAQ:MU]: down 3.25% to $5.95
    • NetFlix [NASDAQ:NFLX]: down 3.01% to $71.97
    • Apple [NASDAQ:AAPL]: down 2.92% to $530.12
    • Yahoo! [NASDAQ:YHOO]: down 2.68% to $14.87
    • Amazon [NASDAQ:AMZN]: down 2.54% to $218.36
    • CSC [NYSE:CSC]: down 2.46% to $25.77
    • Ebay [NASDAQ:EBAY]: down 2.08% to $39.03
    • Salesforce [NYSE:CRM]: down 2.04% to $133.08 – however CRM rose strongly in after hours trading (up around 7%) after forecasting a good sales outlook.

PORTFOLIO

NASDAQ

  • Apple [AAPL] $530.12 -2.92%
  • Amazon [AMZN] $218.36 -2.54%
  • Google [GOOG] $623.05 -0.93%

NYSE

  • Linkedin [LNKD] $104.95 -7.52%
  • VMware [VMW] $98.95 -0.63%

AUSTRALIAN CURRENCY

Portfolio valuation rate: AUD1.00 = USD 0.9943

Australian market (18 May 2012)

  • All ordinaries index: down 2.7% to 4,099
  • S&P/ASX 200 Industrials: down 2.8% to 3,384
  • S&P/ASX 200 Materials: down 3.2% to 9,599

Australian exchange rates

Date Time AEST USD/AUD EUR/AUD GBP/AUD CAD/AUD
18 May 2012 19:15 0.98409 0.77592 0.62319 1.00210
18 May 2012 06:55 0.98953 0.77960 0.62658 1.00869
17 May 2012 20:55 0.99214 0.78117 0.62556 1.00546
17 May 2012 06:50 0.99062 0.77910 0.62261 1.00319

Wednesday 16 May 2012

EUROPE

Greece

Greece will run another election on 17 Jun 2012. In the meantime Greece will be run by a caretaker government headed by a judge. [More]

German Finance Minister Wolfgang Schäuble has warned that this election will be a referendum on whether Greece remains in the eurozone.

Most analysts agree that as the likelihood of an exit increases, there will be a run on banks and a complete failure of the Greek banking system. Greek depositors aren’t waiting – last Monday (14 May 2012) George Provopoulos, head of Greece’s central bank, reported that depositors have withdrawn around EUR700m (USD891n) from Greek banks since the last election. [More]. Depositors’ funds have been leaving Greece for more than 2 years: an average of EUR4bn (USD5.1bn) has flowed out of Greece every month since 2009. The largest run occurred last year when the Greek government held a referendum was held on whether to accept a critical bailout package. [More]

USA MARKET

Commodities

  • Gold Futures (Jun): down $20.50 to $1,537/oz
  • Oil Futures (WTI LSC Jun): down $1.17 to $92.81/barrel (lowest level in 6 months). The cost of gas (petrol) is now down to $3.73/gallon.

Treasury yields

  • 30-year: 2.90%
  • 10-year: 1.76%
  • 5-year: 0.74%

Market moving news

  • The Federal Reserve is concerned that the US is headed for a fiscal cliff, and mentioned that it would consider additional purchases of securities (QE3) “if the economic recovery lost momentum or downside risks to the forecast became great enough”. Beyond Europe (esp Greece), a key year-end risk is the ability of Congress to agree a fiscal strategy to address the debt and the statutory borrowing limit shortly after the Nov 2012 Presidential election. This concern, expressed at the Federal Open Markets Committee (FOMC) drove markets down.
  • Housing starts rose 717,000 in Apr 2012, up 2.6% from 699,000 in Mar 2012.

Share market indices

  • S+P 500: 1,325 -0.44%
  • DJIA: 12,599 -0.26%
  • NASDAQ: 2,874 -0.68%

Tech stock price movements

  • Substantial rises (more than 2.0%)
    • Groupon [NASDAQ:GRPN]: up 7.23% to $13.05
    • Yelp [NYSE:YELP]: up 3.85% to $21.60
    • Google [NASDAQ:GOOG]: up 2.92% to $628.93
    • LinkedIn [NYSE:LNKD]: up 2.65% to $113.49
    • Micron Technology [NASDAQ:MU]: up 2.16% to $6.15
  • Substantial falls (more than 2.0%)
    • NetFlix [NASDAQ:NFLX]: down 4.23% to $74.20
    • Zynga [NASDAQ:ZNGA]: down 3.97% to $8.22
    • Advanced Micro Devices [NYSE:AMD]: down 3.18% to $6.39
    • VMware [NYSE:VMW]: down 2.14% to $99.58

PORTFOLIO

NASDAQ

  • Apple [AAPL] $546.08 -1.28%
  • Amazon [AMZN] $224.06 -0.15%
  • Google [GOOG] $628.93 +2.92%

NYSE

  • Linkedin [LNKD] $113.49 +2.65%
  • VMware [VMW] $99.58 -2.14%

AUSTRALIAN CURRENCY

Portfolio valuation rate: AUD1.00 = USD 0.9963

Australian exchange rates

Date Time AEST USD/AUD EUR/AUD GBP/AUD CAD/AUD
17 May 2012 06:50 0.99062 0.77910 0.62261 1.00319
16 May 2012 22:40 0.99509 0.78031 0.62473 1.00172
16 May 2012 18:25 0.99047 0.77808 0.62037 1.00089
16 May 2012 16:55 0.98921 0.77953 0.61979 1.00092

Tuesday 15 May 2012

EUROPE

Greece

Well, it looks like Greece will go to another election around 17 Jun 2012. In the meantime Greece will be managed by a caretaker government. German Chancellor Angela Merkel and new French President Francois Hollande have agreed to work on something to help Greece, provided that Greece remains committed to the austerity program. [More]

In the meantime Greece has EUR436m ($562m) of 10 year bonds due for repayment today (or some time within the next 30 day grace period), and has to decide whether or not to repay or renege on that debt (or a bit of both). This money is owed to those investors who did not agree to the 70% PSI write down. The complicating factor is that the PSI investors who did agree to the 70% write down would consider full repayment to the other investors as unfair, and repayment of anything less as a default. [More]

USA MARKET

In 2012 May is living up to its reputation as an awful month for investors. So far this month:

  • The S+P500 has fallen on 10/12 days, from 1,398 on 30 Apr 2012 to 1,332 – down 4.7%
  • The DJIA has fallen on 11/12 days, from 13,214 on 30 Apr 2012 to 12,632 – down 4.4% (582 points)
  • The NASDAQ Composite has fallen on 9/12 days, from 3,046 on 30 Apr 2012 to 2,894 – down 5.0%

Commodities

  • Gold Futures (Jun): down $3.90 to $1,557/oz
  • Oil Futures (WTI LSC Jun): down $0.80 to $93.98/barrel

Treasury yields

  • 30-year: 2.92%
  • 10-year: 1.77%
  • 5-year: 0.73%

Share market indices

  • S+P 500: 1,332 -0.49%
  • DJIA: 12,632 -0.50%
  • NASDAQ: 2,894 -0.30%

Tech stock news

Facebook [NASDAQ:FB] is increasing the number of shares on offer at Friday’s IPO from 337.4m to 421m. It has also increased the price range from $28-$35 to $34-$38.

Tech stock price movements

Social media companies are doing well in the leadup to Friday’s IPO of Facebook.

  • Substantial rises (more than 2.0%)
    • Zynga [NASDAQ:ZNGA]: up 7.67% to $8.56
    • Yelp [NYSE:YELP]: up 3.79% to $20.80
    • Groupon [NASDAQ:GRPN]: up 3.71% to $12.17
    • RackSpace [NYSE:RAX]: up 2.92% to $52.91
  • Substantial falls (more than 2.0%)
    • RIM [NASDAQ:RIMM]: down 5.93% to $11.10
    • Clearwire [NASDAQ:CLWR]: down 3.3% to $1.19
    • Micron Technology [NASDAQ:MU]: down 3.06% to $6.02
    • Hewlett-Packard [NYSE:HPQ]: down 2.46% to $22.40
    • Zillow [NASDAQ:Z]: down 2.42% to $40.78
    • Advanced Micro Devices [NYSE:AMD]: down 2.22% to $6.60

PORTFOLIO

NASDAQ

  • Apple [AAPL] $553.17 -0.90%
  • Amazon [AMZN] $224.39 +0.65%/li>
  • Google [GOOG] $611.11 +1.18%

NYSE

  • Linkedin [LNKD] $110.56 +0.05%
  • VMware [VMW] $101.76 +1.08%

AUSTRALIAN CURRENCY

Portfolio valuation rate: AUD1.00 = USD 0.9988

Australian market (16 May 2012)

  • All ordinaries index: down 2.4%
  • S&P/ASX 200 Industrials: down 3.3%
  • S&P/ASX 200 Materials: down 4.0%

Australian exchange rates

Date Time AEST USD/AUD EUR/AUD GBP/AUD CAD/AUD
16 May 2012 16:55 0.98921 0.77953 0.61979 1.00092
16 May 2012 15:30 0.99123 0.77925 0.62067 1.00097
16 May 2012 05:55 0.99260 0.77981 0.62059 0.999447
15 May 2012 20:00 0.99957 0.77811 0.62182 1.00154

Monday 14 May 2012

EUROPE

Greece: Government

The meeting of major parties convened by President Karolos Papoulias did not produce an agreement yesterday. Papoulias proposed another round of coalition talks today, but the Syriza party has said that it will not attend, preferring to go directly to another election, which polls suggest it could win. Nevertheless, Syriza would need to form a coalition with at least one other party (probably Pasok) to form government. While Syriza rejected such a coalition last week, it probably has its eye on the 50 bonus seats currently held by the New Democracy party. [More]

The outcome of the last election for the 300 seat parliament was:

  • New Democracy: 58 (Centre Right) plus a bonus of 50 seats for coming first (go figure!)
  • Syriza: 52 (Left)
  • Pasok: 41 seats (Centre Left)
  • Independent Greeks: 33 (Right)
  • KKE (Communist): 26 (Far Left)
  • Golden Dawn: 21 (Far Right: ultra-nationalist to the extent of proposing land mines between Greece and Turkey to stop immigration)
  • Democratic Left: 19 (Left)

Deputy Prime Minister Theodoros Pangalos has warned the electorate and anti-austerity political parties that Greece could be bankrupt in 6 weeks if the country rejects the austerity measures and loses the financial support of Germany. “There is a school of thought that says the Germans are bluffing, and that they need Greece and will never throw us out of the eurozone. But what will happen … is they will not give us the money to pay our debts. We will be in wild bankruptcy, out-of-control bankruptcy. The state will not be able to pay salaries and pensions. This is not recognised by the citizens. We have until June before we run out of money. We have been spending the future for half a century. What [the anti-bailout forces] are asking from the EU is not just to pay our bills, but to pay for the deficit we are still creating. I’m sure the Germans don’t want Greece to leave the euro. What I don’t know is how much they’re willing to pay. It depends on the German man on the street. Is he willing to pay his taxes to save Greece? I doubt it.” [More]

PortfolioTicker suggests that German Chancellor Merkel is also less willing to commit German taxpayers to austerity in order to provide funds for Greece (let’s face it – if Greece defaults, then the commitment is fiscal expenditure, not a loan). Her Christian Democrats party (CDU) was smashed down from 35% to 26% in the North Rhine-Westphalia elections over the weekend. [More]

What if Greece leaves the eurozone?

For some time many have considered the process and consequences of Greece leaving the eurozone. Here’s one point of view:

  • Adolfo Laurenti, Deputy Chief Economist, Mesirow Financial (14 May 2012): “It will result in the complete collapse of the Greek financial sector. It will result in the complete collapse of the private sector whose debts are denominated in euros.” [Source: NBR.com]

EAST ASIA

China (President Hu Jintao and Premier Wen Jiabao), Japan (Prime Minister Yoshihiko Noda) and South Korea (President Lee Myung-bak) have begun negotiations in Beijing on the establishment of a Free Trade Pact. Trade between the three countries is around USD690bn (in 2011). [More]

USA MARKET

Commodities

  • Gold Futures (Jun): down $23.00 to $1,561/oz
  • Oil Futures (WTI LSC Jun): down $1.35 to $94.78/barrel

Treasury yields

BIG falls in yields as demand for a safe haven increases (driven by the European economic/debt crisis):

  • 30-year: 2.93%
  • 10-year: 1.77%
  • 5-year: 0.71%

Market moving news

  • JP Morgan Chase [NYSE:JPM] $2bn loss: Last Friday 11 May 2012 JPM closed down 9.28% at $36.96. Today JPM fell another 3.3% to $35.79.

Share market indices

  • S+P 500: 1,339 -1.04%
  • DJIA: 12,695 -0.98%
  • NASDAQ: 2,903 -1.06%

Tech stock news

  • Yahoo! CEO Scott Thompson has resigned over the issue of his CV, which falsely stated that he had a degree in computer science. Thompson is being replaced by Ross Levinshon, Yahoo’s head of global media – he will be Yahoo’s fifth CEO in 5 years. Yahoo [NASDAQ:YHOO] shares rose 2.0% to $15.50.
  • Satellite communications company LightSquared has filed for bankruptcy after regulators blocked its rollout plan. [More]
  • Groupon [NASDAQ:GRPN] reported its first quarter results, reporting earnings of $0.02/share (profit) compared to a loss for Q1 in 2011 of $0.41/share. The tuppeny result was better than the penny result expected by analysis. GRPN rose 18.54% to $11.74.
  • Apple [NASDAQ:AAPL] product lineup for next month (11 Jun 2012) [More]:
    • thinner MacBook laptops with more powerful Intel Ivy Bridge processor chips.
    • high definition screens and flash memory for MacBook Pro laptops.
    • new operating system, Mountain Lion, connected to iCloud.

Tech stock price movements

  • Substantial rises (more than 2.0%)
    • Groupon [NASDAQ:GRPN: up 18.54% to $11.74
    • Zynga [NASDAQ:ZNGA]: up 6.28% to $7.95
    • LinkedIn [NYSE:LNKD]: up 3.05% to $110.50
  • Substantial falls (more than 2.0%)
    • Micron Technology [NYSE:MU]: down 2.36% to $6.21
    • Intel [NASDAQ:INTC]: down 2.2% to $27.02
    • Amazon [NASDAQ:AMZN]: down 2.09% to $222.93

PORTFOLIO

NASDAQ

  • Apple [AAPL] $558.22 -1.50%
  • Amazon [AMZN] $222.93 -2.09%
  • Google [GOOG] $604.00 -0.2%

NYSE

  • Linkedin [LNKD] $110.45 +3.00%
  • VMware [VMW] $100.65 -1.63%

AUSTRALIAN CURRENCY

Portfolio valuation rate: AUD1.00 = USD 1.0010

The AUD briefly dropped below USD parity to USD0.9996 at 12:30 before falling further in the evening. The driver is considered to be the weaker than expected Australian economy. [More]

Australian exchange rates

Date Time AEST USD/AUD EUR/AUD GBP/AUD CAD/AUD
15 May 2012 20:00 0.99957 0.77811 0.62182 1.00154
15 May 2012 12:15 0.99693 0.77687 0.61924 0.999463
15 May 2012 06:05 0.99669 0.77653 0.61920 0.999204
14 May 2012 21:15 0.99803 0.77562 0.62117 1.00220
14 May 2012 16:40 1.00046 0.77653 0.62300 1.00183
14 May 2012 07:05 1.00128 0.77604 0.62322 1.00179
12 May 2012 12:50 1.00195 0.77571 0.62353 1.00260

Weekly Review: 11 May 2012

OUTLOOK

Europe

Greece: Greece will probably be forced into another election, but the feeling of the electorate is anti-austerity. Chances are: Greece will remain unstable – the IMF may review its aid program. The combination of an electorate reluctance to support fiscal responsibility, the German demand that Greece deliver on its commitments, and a suspension of aid to Greece causing sovereign debt default increases the probability of a Greek exit from the eurozone.

France: President Francois Hollande has the task of undoing France’s austerity commitments.

USA MARKET

Economy

  • Public debt (10 May 2012): $15.675 trillion, up from $15.671 trillion (3 May 2012). The statutory borrowing limit is $16.4 trillion.
  • Interest expense on public debt in 7 months from 1 Oct 2011 to 30 Apr 2012: $241.474bn. [More]
  • Federal fiscus: In the month of Apr 2012 the federal Government achieved a surplus of $59bn, the net of $319bn revenue raised and $260bn spent. It is the first monthly surplus in 3 years.
  • Unemployment (Apr 2012): 8.1%. However this is the net result of the workforce participation rate falling faster than the fall in job creation. More than 200,000 beneficiaries of the 79-week unemployment insurance program will lose those benefits next week.
  • Home mortgage rates: The average 30-year fixed home mortgage rate has fallen to 3.83% (the lowest since records began in 1971). It is 83 basis points above the yield on 30-year bonds. Home mortgages cannot be very profitable for banks, although yields are lower on shorter term Treasuries:
    • 30-year: 3.01%
    • 10-year: 1.84%
    • 5-year: 0.75%
  • Gold Futures (Jun): $1,584/oz down $61 (3.7%) from $1,645/oz last Friday.
  • Oil Futures (WTI LSC Jun): $96.13/barrel down $2.36 (2.4%) from $98.49/barrel last Friday.

US market indices

  • S+P 500: 1,354 – down 1.2% from 1,369. Rises: 2, Falls: 3
  • DJIA: 12,821 – down 1.7% from 13,038. Rises: 1, Falls: 4
  • NASDAQ: 2,934 – down 0.8% from 2,959. Rises: 2, Falls: 3

PORTFOLIO

Apple

  • Friday close: $566.71, up 0.26% from $565.25.
  • Market value: $528bn up 0.19% from $527bn
  • P/E (historical): 13.82, up from 13.78
  • P/E (1 year fwd): 12.24, down from 12.50
  • Target (1 year): consensus $740, range $500 – $910. Consensus raised from $730.

Amazon

  • Friday close: $227.68, up 1.65% from $223.99.
  • Market value: $103.6bn, up 1.67% from $101.9bn
  • P/E (historical): 188, up from 185
  • P/E (1 year fwd): 189, down from 193
  • Target (1 year): consensus $250, range $210 – $285.

Google

  • Friday close: $605.23, up 1.38% from $596.97.
  • Market value: $156, up 1.30% from $154bn
  • P/E (historical): 18.36, up from 18.11
  • P/E (1 year fwd): 16.47, up from 16.40
  • Target (1 year): consensus $750, range $645 – $850.

LinkedIn

  • Friday close: $107.23, down 8.58% from $117.30.
  • Market value: $6.69bn, up 39.09% from $4.81bn
  • P/E (historical): 894 down from 1,173 (revised earnings),
  • P/E (1 year fwd): 555, up from 497
  • Target (1 year): consensus $132.5, range $92 – $145. Consensus raised from $102.5, range raised from $87 – $134.

VMware

  • Friday close: $102.32, down 5.28% from $108.02.
  • Market value: $13.1bn, down 4.40% from $13.7bn
  • P/E (historical): 56.22, down from 59.35
  • P/E (1 year fwd): 51.89, down from 57.67
  • Target (1 year): consensus $122, range $95 – $135.

USD/AUD

  • The rate for valuation of the portfolio was AUD 1.00 = USD 1.0059, down from 1.0312 on 4 May 2012.
  • Outlook: A “risk off” attitude at US funds, driven by concerns about European, Asian or US growth, could see the AUD fall below parity with the USD (collateral damage).

Friday 11 May 2011

EUROPE

Greece

Evangelos Venizelos, leader of the socialist Pasok party, has handed back his mandate as he cannot form a coalition government. Two attempts by leaders of other parties earlier this week have also failed. Tomorrow Karolos Papoulias, President of Greece, will try to facilitate an agreement. If no agreement can be reached by next Thursday (17 May 2012) then the Greeks will go back to the polls. [More]

USA MARKET

US economy

  • More than 200,000 beneficiaries of the 79-week unemployment insurance program will lose those benefits next week. (States affected: CA, CO, CT, FL, IL, NC, PA, TX)

Commodities

  • Gold Futures (Jun): down $11.50 to $1,584/oz
  • Oil Futures (WTI LSC Jun): down $0.95 to $96.13/barrel, continuing to benefit from the strengthening USD.

Treasury yields

  • 30-year: 3.01%
  • 10-year: 1.84%
  • 5-year: 0.75%

Share market indices

  • S+P 500: 1,354 -0.34%
  • DJIA: 12,821 -0.27%
  • NASDAQ: 2,934 +0.01%

Tech stock price movements

  • Substantial rises (more than 2.0%)
    • Netflix [NASDAQ:NFLX]: up 6.85% to $77.38
    • Nvidia [NASDAQ:NVDA]: up 6.4% to $13.21
  • Substantial falls (more than 2.0%)
    • Zynga [NASDAQ:ZNGA]: down 4.35% to $7.48
    • LinkedIn [NASDAQ:LNKD]: down 3.77% to $107.23

PORTFOLIO

NASDAQ

  • Apple [AAPL] $566.71 -0.67%
  • Amazon [AMZN] $227.68 +0.44%
  • Google [GOOG] $605.23 -1.37%

NYSE

  • Linkedin [LNKD] $107.23 -3.77%
  • VMware [VMW] $102.32 +1.13%

AUSTRALIAN CURRENCY

Portfolio valuation rate (USD/AUD): 1.0059

Australian exchange rates

Date Time AEST USD/AUD EUR/AUD GBP/AUD CAD/AUD
12 May 2012 12:50 1.00195 0.77571 0.62353 1.00260
12 May 2012 06:30 1.00272 0.77607 0.62383 1.00285
12 May 2012 04:05 1.00339 0.77638 0.62424 1.00321
11 May 2012 19:15 1.00483 0.77603 0.62320 1.00477

Thursday 10 May 2012

EUROPE

  • Greece: The Left Wing Syriza party has handed back its mandate as it cannot form a government. This follows a similar action by the New Democracy Party, indicating a risk that Greece will have to go back to the polls. The last chance will be an attempt by the socialist Pasok party. [More]

USA MARKET

US economy

  • Weekly jobless claims: First time jobless claims fell 1,000 to 367,000 in the week to 5 May 2012 [More]
  • Balance of trade: The US trade deficit grew by 14% in Mar 2012 to $51.8bn, driven by a 5.2% rise in imports and a 2.9% rise in exports. [More]
  • Home mortgage rates: The average 30-year fixed home mortgage rate has fallen to 3.83% (the lowest since records began in 1971). [More]
  • Federal fiscus: In the month of Apr 2012 the federal Government achieved a surplus of $59bn, the net of $319bn revenue raised and $260bn spent. It is the first monthly surplus in 3 years. However the total federal government debt is closing on its $16.4 trillion borrowing limit.

Commodities

  • Gold Futures (Jun): up $1.30 to $1,596/oz
  • Oil Futures (WTI LSC Jun): up $0.27 to $97.08/barrel.

Treasury yields

  • 30-year: 3.04%
  • 10-year: 1.87%
  • 5-year: 0.76%

Market-moving news

  • JPMorgan Chase & Co [NYSE:JPM] has reported a $2bn gross loss ($0.8bn net loss) in mark-to-market adjustments on its synthetic credit securities portfolio which “has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed”. Of concern is that the loss is based on investment of unused depositors’ funds in higher risk synthetics (virtual assets). This announcement was made in a quarterly SEC filing after normal trading. CEO Jamie Dimon said that JPM is disclosing this problem now, because it could get worse during the year. Shortly before post market trading closed, JPM was down around 7%. [More]
    Update: On Friday 11 May 2012 JPM closed down 9.28% at $36.96.

Share market indices

  • S+P 500: 1,358 +0.25%
  • DJIA: 12,855 +0.16% – a small rise, but it ended the 6 day run of losses on this index
  • NASDAQ: 2,934 -0.04%

Tech stock price movements

  • Substantial falls (more than 2.0%)
    • Cisco [NASDAQ:CSCO]: down 10.49% to $16.81 [More]
    • Salesforce [NYSE:CRM]: down 9.09% to $135.44
    • Yelp [NYSE:YELP]: down 4.43% to $20.05
    • Zillow [NASDAQ:Z]: down 3.97% to $41.40
    • VMware [NYSE:VMW]: down 3.94% to $101.18
    • Oracle [NASDAQ:ORCL]: down 2.74% to $27.02
    • Zynga [NASDAQ:ZNGA]: down 2.25% to $7.82

PORTFOLIO

NASDAQ

  • Apple [AAPL] $570.52 +0.24%
  • Amazon [AMZN] $226.69 +1.66%
  • Google [GOOG] $613.66 +0.74%

NYSE

  • Linkedin [LNKD] $111.00 -1.38%
  • VMware [VMW] $101.18 -3.94%

AUSTRALIAN CURRENCY

Portfolio valuation rate (USD/AUD): 1.0111

Australian exchange rates

Date Time AEST USD/AUD EUR/AUD GBP/AUD CAD/AUD
11 May 2012 19:15 1.00483 0.77603 0.62320 1.00477
11 May 2012 05:10 1.00973 0.77940 0.62491 1.00936
10 May 2012 23:50 1.01292 0.78150 0.62630 1.01335
10 May 2012 22:35 1.01339 0.78170 0.62681 1.01351
10 May 2012 16:15 1.01133 0.78085 0.62648 1.01133

Wednesday 9 May 2012

USA MARKET

Commodities

  • Gold Futures (Jun): down $10.30 to $1,594/oz
  • Oil Futures (WTI LSC Jun): down $0.20 to $96.81/barrel.

Treasury yields

  • 30-year: 3.03%
  • 10-year: 1.83%
  • 5-year: 0.76%

Share market indices

  • S+P 500: 1,355 -0.67%
  • DJIA: 12,836 -0.75% (6th straight fall, down 444 points (3.3%) from the 4-year high of 13,280 on 1 May 2012)
  • NASDAQ: 2,935 -0.39%

Tech stock price movements

  • Substantial rises (more than 2.0%)
    • NetFlix [NASDAQ:NFLX]: up 2.14% to $74.35.
    • Salesforce [NYSE:CRM]: up 2.03% to $148.98.
  • Substantial falls (more than 2.0%)
    • Groupon [NASDAQ:GRPN]: down 2.52% to $10.07
    • Advanced Micro Devices [NYSE:AMD]: down 2.42% to $6.86

PORTFOLIO

NASDAQ

  • Apple [AAPL] $569.18 +0.18%
  • Amazon [AMZN] $222.98 -0.41%
  • Google [GOOG] $609.15 -0.59%

NYSE

  • Linkedin [LNKD] $112.55 -0.05%
  • VMware [VMW] $105.33 +0.25%

AUSTRALIAN CURRENCY

Portfolio valuation rate (USD/AUD): 1.0089

Australian economy

Australia’s unemployment fell to 4.9% in Apr 2012 from 5.2% in Mar 2012. This was lower than expected – economists had predicted a rise to 5.3%. The lower rate is seen as reducing the likelihood that the Reserve Bank of Australia (RBA) will cut interest rates again in Jun 2012. The AUD ticked up half a cent against the USD on this news.

Australian exchange rates

Date Time AEST USD/AUD EUR/AUD GBP/AUD CAD/AUD
10 May 2012 16:15 1.01133 0.78085 0.62648 1.01133
10 May 2012 12:55 1.01045 0.78049 0.62619 1.01047
10 May 2012 06:25 1.00558 0.77710 0.62307 1.00540
9 May 2012 18:20 1.00780 0.77610 0.62388 1.00929