Tue 23 Aug 2016

In Portfolioticker today

Today at the stock market NBR

bull/bearU.S. stocks closed near a record high after mixed data in USA bolstered speculation the Federal Reserve will be in no rush to raise interest rates. Oil climbed.

The dissonance of reports showing a surge in American new home sales and a slowdown in manufacturing brought into question the hawkish tone of recent comments from Fed officials, keeping the relative sense of calm across asset classes. The S&P 500 Index briefly topped its record closing high, while Treasury 10-year notes were stuck in the tightest monthly trading range since 2006. Oil rallied on speculation that Iran may be more willing to cooperate with other producers seeking to freeze output.

Market sentiment has seesawed in recent weeks as traders look for clues on how aggressive the Fed will be in its approach to tightening, while awaiting a speech from Chair Janet Yellen at the Economic Symposium at Jackson Hole on Friday. The set of mixed economic data is dimming the outlook for the U.S. to diverge from increased monetary stimulus in Europe and Asia. There’s a 26% chance of a rate hike in Sep 2016, according to data compiled by Bloomberg based on fed fund futures.

“We’re crawling toward another high, and it’s all about being in this sweet spot where everything is working well, but not overheating,” said Larry Peruzzi, managing director of international equities at Mischler Financial Group Inc. in Boston. “Now everybody’s looking to Yellen’s testimony on Friday.”

The Bank of America Merrill Lynch GFSI Market Risk Index, a measure of future price swings implied by options trading on global equities, interest rates, currencies and commodities, is close to the lowest level of 2016.

U.S. stock volatility hovered near a w-year low, while a similar gauge for Treasuries has tumbled from its Jun 2016 peak. Earlier this month, a JPMorgan Chase & Co. index tracking three-month currency swings fell to its lowest since late 2015.

American equities showed signs of breaking out of a torpor, with Monsanto Co. leading a rally in raw-material shares as it’s said to be closer to a merger with Bayer AG. Chipmakers boosted the technology group, and Best Buy Co. surged 20 percent after surprising earnings. The S&P 500 rose 0.2% at 4 p.m. in New York. The benchmark gauge has been moving within narrow ranges as investors assess valuations near the highest levels in more than a decade and signals from policy makers, while the earnings season winds down.

“We’re in the most aggressive dip-buying market I’ve ever seen,” said Brian Frank, a portfolio manager at Key Biscayne, Florida-based Frank Capital Partners LLC. “I wouldn’t even call the last 2 days a dip, but any little tiny decline seems to be an excuse to buy and talk about the Fed.”

European shares rose the most in two weeks as commodity producers rebounded on higher metals prices, and data pointed to continuing economic progress in the region. BHP Billiton Ltd. and Anglo American Plc led miners to the best performance of the 19 industry groups on the equity gauge as iron ore in China jumped to a two-week high.Bloomberg

The shape of market indices today
^ Market indices today Chart: Yahoo Finance

Market indices

Index Ticker Today Change 31 Dec 15 YTD
S&P 500 SPX (INX) 2,186.90 +0.19% 2,043.94 +6.99%
DJIA INDU 18,547.30 +0.09% 17,425.03 +6.44%
NASDAQ IXIC 5,260.08 +0.29% 5,007.41 +5.04%

The portfolio today

Index values

Index Currency Today Change 31 Dec 15 YTD
USD-denominated Index USD 2.036 +0.27% 1.939 +4.97%
Valuation Rate USD/AUD 0.76669 -0.19% 0.73374 +4.49%
AUD-denominated Index AUD 2.656 +0.45% 2.643 +0.46%

Stock price movements

The shape of the portfolio today
^ The shape of the portfolio today Chart: Yahoo Finance

Portfolio stock prices

Stock Ticker Today Change 31 Dec 15 YTD
Alphabet A GOOGL $796.59 -0.05% $778.01 +2.38%
Alphabet C GOOG $772.08 -0.01% $758.88 +1.73%
Apple AAPL $108.85 +0.31% $105.26 +3.41%
Amazon AMZN $762.45 +0.39% $675.89 +12.8%
Ebay EBAY $30.67 +0.16% $27.48 +11.6%
Facebook FB $124.37 +0.18% $104.66 +18.83%
Linkedin LNKD $191.82 +0.03% $225.08 -14.78%
PayPal PYPL $37.86 -0.66% $36.20 +4.58%
Twitter TWTR $18.69 +0.75% $23.14 -19.24%
Visa V $80.80 -0.32% $77.55 +4.19%
VMware VMW $74.56 +2.03% $56.57 +31.80%

52-week performance

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

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

FX: USD/AUD

USD

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

The Bloomberg Dollar Spot Index, which tracks the USD against 10 major peers, rose 0.1% after dropping throughout most of the trading day. The USD lost 0.1% to JPY 100.24, and rose 0.1% to $1.1306 per EUR.

“The way investors are starting to get biased right now is that yes, maybe we get a little bit of a boost to the USD from this one hike this year, but if the longer-term picture is still relatively benign, this supports risk sentiment” and works against the USD, Vassili Serebriakov, a foreign-exchange strategist at Credit Agricole CIB in New York, said in a Bloomberg TV interview. “The bias is still for Yellen to be quite dovish, and if there’s a risk of a surprise, maybe it’s a little less dovish than more dovish.”Bloomberg

AUD

AUD movements against the USD
^ AUD movements against the USD today Chart: xe.com

AUD movements against the USD
^ AUD movements against the USD over the past year Chart: xe.com

Oil and Gas Futures

Futures prices

Oil rose 1.5% higher after Reuters reported that Iran is sending “positive signals” that it may support joint action to bolster the oil market, citing unidentified sources in OPEC and the oil industry. Iran hasn’t decided whether to join any action, according to the sources. If OPEC and some other producers agree to cap output at informal talks next month, the resulting price boost may help other suppliers revive output, Goldman Sachs analysts wrote.

“This is just more jawboning,” said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. “Iran, Iraq and Saudi Arabia are the OPEC members that everyone is listening to. The market will react to any news that comes from them.”

West Texas Intermediate for October delivery rose 69 cents to settle at USD 48.10/barrel on the New York Mercantile Exchange. Prices dropped as much as 1.7% earlier. Brent for Oct 2016 settlement climbed 80 cents, or 1.6%, to $49.96/barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $1.86 premium to WTI.Bloomberg

Prices are as at 16:06 EDT

  • NYMEX West Texas Intermediate (WTI): $47.05/barrel -3.03% Chart
  • ICE (London) Brent North Sea Crude: $49.83/barrel +1.36% Chart
  • NYMEX Natural gas futures: $2.76/MMBTU +3.06% Chart

flag_europe Europe: Manufacturing PMI (flash estimate). Aug 2016

Press Release Extract

Key findings:

  • Flash Eurozone PMI Composite Output Index at 53.3 (53.2 in July). 7-month high.
  • Flash Eurozone Services PMI Activity Index at 53.1 (52.9 in July). 3-month high.
  • Flash Eurozone Manufacturing PMI at 51.8 (52.0 in July). 3-month low.
  • Flash Eurozone Manufacturing PMI Output Index at 54.0 (53.9 in July). 8-month high.

eu_pmi_20160823

The euro area economy continued to expand at a steady pace in August. At 53.3, up from 53.2 in July, the flash estimate of the Markit Eurozone PMI® inched up to a seven-month high. With the index only slightly above the average seen throughout the year to date, growth in the third quarter is likely to be similar to that seen in the first half of the year.

A slowing in manufacturing order book growth and a dip in services optimism led to a weakened rate of hiring and suggested that growth could fade in coming months, however. Inflationary pressures meanwhile remained muted.
The August survey saw growth of output accelerate marginally in both manufacturing and services, with the former recording the slightly stronger pace of expansion.

Greater variation was seen in terms of order books, however, where manufacturing saw a slowing in demand. Whereas inflows of new business in the service sector rose at the fastest rate for four months, new orders received by factories grew at the slowest rate for one-and-a-half years.

Manufacturers worked down their inventories in the face of weaker demand growth, with warehouse stocks of finished goods falling at the fastest rate for six years.

The future strength of demand in the service sector was meanwhile called into question as business expectations about the year ahead among service providers fell to its lowest since December 2014.

There were also signs that the strongest spell of job creation seen in the region over the past five years may be cooling. Although employment rose again in August, the rate of increase slowed to a three- month low, hit by weaker hiring trends in both manufacturing and services.

Inflationary pressures remained muted. Although input costs rose for the fifth month in a row, the rise was the smallest since April. Average selling prices meanwhile fell again, dropping at a slightly greater rate than July, continuing the trend of falling prices seen over much of the past five years.

By country, an upturn in the rate of growth to the highest since last October put France on course for its best quarter of growth so far this year. France nevertheless continued to trail behind Germany in terms of the overall pace of expansion, despite the latter seeing growth falter from July’s seven-month high. German expansion in the third quarter so far is running slightly ahead of the pace seen over the first half of the year, acting as a key engine of the eurozone’s overall expansion.

The rest of the eurozone excluding Germany and France registered further robust overall growth in August, albeit at one of the weakest rates of expansion seen over the past year-and-a-half.

Markit Economics, “Markit Flash Eurozone PMI® – Eurozone Flash PMI edges up to seven-month high. Aug 2016“, 23 Aug 2016 More

flag_europe Europe: Consumer Confidence Indicator (flash estimate). Aug 2016

Press Release Extract

In August 2016, the DG ECFIN flash estimate of the consumer confidence indicator remained broadly stable in the EU (-0.1 points to -7.8), while it decreased in the euro area (by 0.6 points to -8.5) compared to July.

eu_cci_20160823

European Commission, “Consumer Confidence Indicator (flash estimate). Aug 2016“, 23 Aug 2016 More

flag_usa USA: Manufacturing PMI (flash estimate). Aug 2016

Press Release Extract

Key findings:

  • Production continues to rise solidly
  • Total new order growth slows, despite fastest increase in export sales for nearly two years
  • Employment expands at slowest pace for four months

us_pmi_20160823

U.S. goods producers saw a further upturn in overall business conditions during August, though the rate of improvement was softer than seen in July. While output continued to rise markedly, total new work rose at a slower pace and employment expanded at the weakest rate in four months. Meanwhile, companies reported near-stagnant price trends overall, with input prices rising only marginally and companies leaving their prices charged unchanged from the previous month.

The seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered at 52.1 in August, down from July’s nine-month high of 52.9. The PMI has now pointed to improving business conditions in each month since October 2009. However, August’s reading pointed to a moderate rate of improvement that was weaker the post-crisis average. A further solid increase in output was the most positive influence on the latest PMI reading. In contrast, slower growth in total new work and employment, alongside further cuts to inventories, had dampened the overall headline figure.

U.S. manufacturers signalled increased output for the third month running in August. Furthermore, the rate of expansion remained solid overall, having edged up slightly from July to a nine-month high. Anecdotal evidence suggested that new product launches, stronger underlying demand and new marketing strategies had supported production growth in August.

Although solid growth of output was sustained, total new orders expanded at a slower rate in August. Data indicated that relatively subdued domestic demand was a reason behind softer growth in overall new work, as export sales increased at the fastest pace in 23 months. While some companies commented that a number of clients had adopted a wait-and-a-see approach until the outcome of the presidential election, others mentioned that total new work had been boosted by new foreign client wins over the latest survey period.

Manufacturing employment increased only slightly during August. Furthermore, it was the weakest rate of payroll growth seen for four months. Greater staff numbers were generally linked to higher amounts of new work. At the same time, other firms mentioned that efforts to raise efficiency had weighed on overall all jobs growth.

August survey data pointed to a further rise in purchasing activity, which was generally attributed to greater amounts of incoming new work. In line with the trend for new orders, however, the rate of expansion slowed since July. Meanwhile, stocks of finished goods and purchased items both fell as companies generally adopted cautious inventory policies.

Average cost burdens faced by U.S. manufacturers rose only slightly during August. Furthermore, the rate of input price inflation was the slowest seen in the current five-month sequence of increasing costs.

Prices charged for U.S. manufactured goods were unchanged in August, thereby ending a three- month sequence of increase. According to anecdotal evidence, greater competition for new work had weighed on the overall pricing power of firms in the latest survey period.

Markit Economics, “Markit Flash US Manufacturing PMI“, 23 Aug 2016 (09:45) More

flag_usa USA: New Residential Sales. Jul 2016

Press Comment

Purchases of new U.S. homes unexpectedly jumped in July to the highest level in almost nine years, led by soaring demand in the nation’s south and adding to signs of persistent housing-market strength.

Sales increased 12.4 percent to a 654,000 annualized pace, the fastest since October 2007, Commerce Department data showed Tuesday in Washington. That exceeded the most optimistic forecast in a Bloomberg survey. Purchases in the South were the strongest since before the start of the last recession.

Employment gains and historically low borrowing costs are providing firm support for housing demand, helping reduce inventory, which will probably keep new construction elevated. The report showed an increase in the share of homes sold for less than $300,000, indicating builders are turning their sights to entry-level buyers.

The median forecast of 72 economists surveyed by Bloomberg called for the pace of sales to decelerate to 580,000. Estimates ranged from 540,000 to 610,000.

The Commerce Department revised the June reading lower to a 582,000 pace from a previously estimated 592,000. It’s still less than half the record pace of 1.39 million sales in 2005, before the housing bubble burst.Bloomberg

Press Release Extract

Sales of new single-family houses in July 2016 were at a seasonally adjusted annual rate of 654,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.4 percent (±12.7%) above the revised June rate of 582,000 and is 31.3 percent (±19.9%) above the July 2015 estimate of 498,000.

The median sales price of new houses sold in July 2016 was $294,600; the average sales price was $355,800. The seasonally adjusted estimate of new houses for sale at the end of July was 233,000. This represents a supply of 4.3 months at the current sales rate.

US Census and Housing and Urban Development, “New Residential Sales. Jul 2016“, 23 Aug 2016 (10:00) More

flag_japan Japan update

Flash Manufacturing PMI. Aug 2016

Key points:

  • Flash Japan Manufacturing PMI™ at 49.6 in August (49.3 in July). The PMI signalled only a slight deterioration in the health of the sector that was the weakest in the current six-month sequence of decline.
  • Flash Japan Manufacturing Output Index at 50.6 (49.4 in July). This highlighted the first increase in production since February (albeit marginal).

jp_pmi_20160823

Commenting on the Japanese Manufacturing PMI survey data, Annabel Fiddes, economist at IHS Markit, which compiles the survey, said “Japan’s manufacturing sector edged closer to stabilisation in August, but the latest batch of PMI data gave a mixed picture overall. Encouragingly, output expanded for the first time in six months (albeit marginally), while companies also saw softer reductions in total new work and export sales. However, the latest survey also registered a slight drop in employment for the first time since last September. Furthermore, relatively weak client demand alongside a strong yen prompted firms to cut their selling prices at the sharpest rate since October 2012 as part of efforts to attract new business.”

Markit Economics, “Nikkei Flash Japan Manufacturing PMI™. Aug 2016“, 23 Aug 2016 More

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: Yahoo 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: Yahoo Finance