Week 17-23 Nov 2014

SCIENCE

Update on Philae, Rosetta’s comet lander << Previous

It appears that Philae is not awake – the hope is that as the comet nears the sun, the brighter light will recharge Philae’s battery. Philae’s closest approach to the Sun occurs 13 Aug 2015. One just hopes that as surface activity increases, Philae’s solar panels don’t get covered in dust.

Philae was active on the comet’s surface for 60 hours. Data transmitted before Philae shut down is being analysed. One possible finding is that the comet contains organic matter. More

CHINA

PBOC open to further stimulus Impact

Reuters reports that a senior economist at a government think-tank involved in internal policy discussions has said that the People’s Bank of China had shifted its focus toward broad-based stimulus and were open to more rate cuts as well as a cut to the banking industry’s reserve requirement ratio (RRR), which effectively restricts the amount of capital available to fund loans. Economists are concerned that employment and confidence may be affected if GDP falls below 7% next year. They are also concerned about the risk of deflation. More

USA

A short week ahead

The holiday shopping season starts this week:

  • Thanksgiving (Thursday): 27 Nov 2014 (Black Friday business is migrating forward into Thanksgiving More)
  • Black Friday: 28 Nov 2014
  • Cyber Monday: 1 Dec 2014 (online shopping event)

The NYSE and NASDAQ are closed on Thanksgiving, and close at 1:00pm on Black Friday More

Shopping season risks

Weather

There’s some risk that the shopping season in North West USA’s snowbelt may be affected by recent lake effect show storm (“Knife”) which has delivered snowfalls of up to 7 feet, leading to the deaths of 13 people Watch CNN With warmer temperatures there is a further risk of flooding from thawing snow and/or lake effect rain More The Buffalo, NY area is under flood watch until Wednesday Read Watch USA Today

Shopper caution

Real average hourly earnings increased 0.4%, seasonally adjusted, over the 12 months to October
2014. More Households experiencing low, if any, real increase in income this year are less likely to increase spending this season Watch Reuters However the recent fall in oil price has driven a fall in fuel prices, increasing households’ spending power.

US market indices Impact

US stocks posted a fifth straight week of gains this week, record high closes for the S&P500 and DJIA indices.

Index 21 Nov 2014 Week 14 Nov 2014 Month 31 Oct 2014 Year 31 Dec 13
S&P 500 2,063.50 +1.16% 2,039.82 +2.25% 2,018.05 +11.64% 1,848.36
DJIA 17,810.06 +0.99% 17,634.74 +2.41% 17,390.52 +7.44% 16,576.66
NASDAQ 4,712.97 +0.52% 4,688.54 +1.78% 4,630.74 +12.84% 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)

Is the market getting overvalued?

S&P500 1-year forward P/E (Chart: The Age)

S&P500 1-year forward P/E (Chart: The Age) More

Last year, almost the entire growth in the S&P came from multiple expansion, this year it has been much more earnings driven and we think it has the potential to go higher based on the growth of the earnings. Forward price-to-earnings ratio on the S&P500 is 17.08x, just a few clicks above the long-term average of 16.73. Earnings are good, they continue to grow. Valuation, right now, going forward is going to be much more a function of the earnings power than the multiple.
Matt Rubin, Chief Investment Officer, Neuberger Berman More

What if …?

But if people were to to decide that the market is overvalued, how would the trigger be pulled on a selloff? It might work something like these clips from the movie “Margin Call” Deciding (YouTube) Implementing (YouTube). Yes, there are consequences Senate (YouTube), but the company that pulls the trigger survives, while the average retail investor loses.

And remember the advice Sky Masterson’s father gave him: “One of these days in your travels a guy is going to come up to you and show you a nice brand-new deck of cards on which the seal is not yet broken, and this guy is going to offer to bet you that he can make the Jack of Spades jump out of the deck and squirt cider in your ear. But, son, do not bet this man, for as sure as you are standing there, you are going to end up with an earful of cider.Watch

Author’s message

To survive and be successful, investors have to be diligent, vigilant, and ahead of the game – or leave their money in a bank that is “too large to fail”.

PORTFOLIO

:-) Our USD-denominated closed above 1.800, with a record value of 1.818.
:-) Our AUD-denominated index broke through 2.100 for the first time on Thursday, but closed the week a little lower at 2.086.

Long term (52-week) performance Impact

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

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

This week’s performance Impact

Index 21 Nov 2014 Week 14 Nov 2014 Month 31 Oct 2014 Year 31 Dec 13
USD Index 1.818 +1.17% 1.797 +5.76% 1.719 +29.95% 1.399
Valuation USD/AUD 0.87166 -1.04% 0.88082 -1.51% 0.88505 -2.92% 0.89789
AUD Index 2.086 +2.25% 2.040 +7.47% 1.941 +33.89% 1.558

Portfolio stocks

Apple AAPL +2.01%

:-) Apple closed the week on an all-time high.

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

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

Amazon AMZN +1.51%

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

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

Ebay EBAY +0.11%

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

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

Facebook FB -1.51%

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

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

Google Class A GOOGL -1.68%

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

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

  • Friday close: $545.89 -1.68% from $555.19.
  • P/E (historical): 28.63 Change from 29.11
  • P/E (1 year fwd): 25.83 Change from 26.36
  • Target (1 year): NASDAQ consensus $650, range $530 ↔ $750.
  • SEC filings (CIK 0001288776): Edgar Search (New, Beta)

Google Class C GOOG -1.27%

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

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

  • Friday close: $537.50 -1.27% from $544.40.
  • P/E (historical): 22.38 Change from 22.68
  • Analyst recommendations: 8 strong buy, 3 buy, 0 hold.

Linkedin LNKD -6.33%

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

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

VMware VMW -1.24%

vmw_20141122

USD/AUD

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

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

Friday 21 Nov 2014

Diamond Princess visiting Port Melbourne today

Diamond Princess visiting Port Melbourne today

CHINA

Economy

PBOC cuts deposit rates Opinion

The Peoples’ Bank of China (PBOC) Monetary Policy Committee has announced the following interest rate reductions, effective tomorrow (2 Nov 2014):

  • one-year deposit rate reduced by 25bp to 2.75%, and
  • one-year lending rate reduced by 40bp to 5.6%, the first reduction since Jul 2012.

The lending rate averaged 6.40% from 1996 to 2014, with a high of 10.98% in Jun 1996 and low of 5.31% in Feb 2002.

Comment

Disinflationary pressures remain strong and the labour market showed further signs of weakening. We still see uncertainties in the months ahead from the property market and on the export front. We think growth still faces significant downward pressures, and more monetary and fiscal easing measures should be deployed.
Qu Hongbin, Chief China Economist, HSBC More

They are cutting rates and liberalising rates at the same time so that the stimulus won’t be so damaging.
Li Huiyong, Economist, Shenyin and Wanguo Securities More

It’s absolutely the right thing to do. Real interest rates have moved up significantly with slowing growth and inflation, which hurts corporate cash flow and balance sheet and threatens to increase non-performing loans.
Wang Tao, Chief China Economist, UBS AG (HK) More

It’s a surprise, another Friday night special. It may not have a major impact on GDP growth – that depends on if policy makers also allow the rate of credit growth to pick up.
Mark Williams, Chief Asia Economist, Capital Economics (London) More

The rate cut clearly signals that China’s central bank has changed its monetary policy stance to a more accommodative one. The conditions for further policy easing are ripe.
Li-Gang Liu and Hao Zhou, Economists, Australia & New Zealand Banking Group Ltd. (Shanghai) More

EUROPE

Economy

ECB Monetary Policy Statement

Extract

The current situation in the euro area

Two and a half years ago, the euro area faced a very bleak situation. We had a fragmented financial system, a banking sector that would not lend and an economy in recession. European economies were on diverging but generally downward paths.

Since then governments and the ECB have taken several steps to address fragmentation, and the financial situation in the euro area has improved dramatically. Spreads on government bonds have fallen on average by 3 percentage points. Interest rates on corporate and bank bonds have also converged substantially. And the fragmentation of financial flows across borders has receded, although it is still higher in some markets than it was before the crisis.

The process of cleaning up the banking sector has also advanced considerably. In particular, our Comprehensive Assessment has encouraged banks to frontload their balance sheet repair and recapitalisation efforts, as well as identifying €25bn in capital shortfalls and imposing important prudential requirements. All this increases confidence in the sector and puts euro area banks in a better position to restart lending to the real economy.

Nevertheless, these positive developments in the financial sphere have not transferred fully into the economic sphere. The economic situation in the euro area remains difficult. The euro area exited recession in the second quarter of 2013, but underlying growth momentum remains weak. Unemployment is only falling very slowly. And confidence in our overall economic prospects is fragile and easily disrupted, feeding into low investment.

Indeed, the latest flash euro area Purchasing Managers Index released yesterday suggests a stronger recovery is unlikely in the coming months, with new orders falling for the first time since July 2013.

In this context, the inflation situation in the euro area has also become increasingly challenging. Headline inflation has fallen significantly over the last year. Last November, it still stood at 0.9%. This was low, but it was generally expected to rise safely above 1% by now. Instead, the latest reading for headline inflation is 0.4%.

This downward movement of inflation was primarily driven by declines in energy and food price inflation, which are two components that tend to be volatile and whose effects are typically temporary. So to some extent the ECB could “look through” them. Indeed, in our current environment low energy and food prices give valuable support to economic activity by raising real disposable incomes.

But we also see that core inflation is low – the inflation rate that strips out these volatile and temporary components. The annual rate of change in core inflation has been consistently below 1% over the past year, with the latest reading for October at 0.7%. A low reading for core inflation for such a period of time indicates that it is not only temporary factors that are operative: underlying demand weakness is also playing a role.

Indeed, we have clear signs from survey data that weak demand is contributing to low pricing power among firms. We also know that with high unemployment in many euro area countries workers have less power to negotiate higher wages, which reduces inflation pressures. Compensation per employee increased by only 1.1% year-on-year in the second quarter of this year, the lowest increase in three years.

We have had low headline inflation in the past driven by energy prices – it was even negative in 2009. But at that time, core inflation was already moving upwards as the economy was rebounding, which provided us with comfort that inflation would pick up over the medium-term. This time around, the overall picture is different.

So we cannot be complacent – we have to be very watchful that low inflation does not start percolating through the economy in ways that further worsen the economic situation and inflation outlook. There are several channels through which low inflation can have this effect, including by complicating relative price adjustment between euro area countries, and worsening the effects of the debt overhang that prevails in parts of the euro area.

But a channel I particularly want to focus on is the risk that a too prolonged period of low inflation becomes embedded in inflation expectations. The firm anchoring of inflation expectations is critical under any circumstances, as it ensures that temporary movements in inflation do not feed into wages and prices and hence become permanent. But it is even more critical in the circumstances we face today.

This is because if inflation expectations fall, the real interest rate rises, which is the interest rate that matters most for investment decisions. And because nominal short-term rates in the euro area have already reached the effective lower bound, they cannot be adjusted downwards further to compensate for this. In other words, any de-anchoring of expectations would cause an effective monetary tightening – the exact opposite of what we want to see.

We are currently seeing some volatility in inflation expectations. Longer-term indicators are on the whole within a range that we consider consistent with price stability. Over shorter horizons, however, indicators have been declining to levels that I would deem excessively low. Survey-based measures of inflation expectations have generally been more stable, but the latest Survey of Professional Forecasters also indicates some decline – and at all horizons.

If we put this all together, we see that it has been essential that the ECB has acted – and is continuing to act – to bring inflation back towards 2% and ensure the firm underpinning of inflation expectations.

The monetary policy response

So how have we responded? Our response has certainly been unconventional, in the sense that our measures are unprecedented – but it is far from unorthodox. We have responded in a way that any central bank with a strict price stability objective would do. It has essentially involved three overlapping steps.

The first step, as I said, was to lower overnight interest rates all the way to their effective lower bound – including below zero for the deposit facility. But once we reach this point, and if inflation is still too low and more monetary stimulus needed, the central bank has to adopt new instruments to fulfil its mandate.

The next logical step to ease monetary conditions is to influence more directly the term structure of interest rates, which we did by introducing forward guidance in July of last year. We have recently re-affirmed our forward guidance that key policy rates will stay low for an extended period of time in line with the subdued outlook for inflation. And in the Targeted Long-Term Refinancing Operations (TLTRO) programme we have backed this up, by providing term funding over up to four years at a very low fixed rate.

As a result, the level of the forward interest rate curve in the euro area is currently uniformly lower than it has ever been – and also lower for instance than at any point in the US since the start of the financial crisis.

Both these steps have in common that they operate through steering current and forward money market rates. However, once the margin for manoeuvre here becomes exhausted – that is, overnight and near-term money market rates are both at the lower bound – a third step becomes necessary. If further monetary stimulus is needed, central banks need to by-pass the money market and intervene directly in other asset markets to affect, through prices and quantities, the various transmission channels of monetary policy.

Speaking in Amsterdam earlier this year, I clarified the circumstances under which the ECB would need to resort to asset purchases to increase meaningfully the degree of monetary accommodation. In what I called the “third contingency”, I referred to a broad-based weakening of aggregate demand that would threaten our baseline scenario of recovery and/or a loosening in the anchoring of medium-term inflation expectations.

And this is the point the ECB has reached with the Governing Council’s decision to initiate purchases of asset-backed securities (ABS) and covered bonds.

How asset purchases contribute to the ECB’s objective

With our monetary policy decisions in June and in particular in September, we have transitioned from a monetary policy framework based predominantly on passive provision of liquidity to a more active and controlled management of our balance sheet.

This means that it is now changes in the size and composition of our balance sheet that determine our monetary policy stance – or to be more specific, the markets in which we intervene, and the magnitude and pace of our purchases. We expect such interventions to affect output and inflation through two main channels.

Direct pass-through effects

The first is by addressing impairments in financial markets that have a direct pass-through effect to the real economy. And this effect will naturally be stronger in those markets that are more important for the transmission of monetary policy.

With this in mind, we began our shift to actively deploying our balance sheet by focusing on the ABS market, as this was a market that was both impaired and that had a tight link with bank lending, which is the main transmission mechanism of monetary policy in the euro area. This reinforced our overall aim to ensure there are no barriers to credit supply as credit demand progressively picks up.

Purchases of ABS will push down market spreads on senior tranches, reduce volumes available for investors in those markets and thereby encourage banks to relieve this scarcity by originating more ABS. As they can only do this by creating more loans in the first place, this ought to increase the supply of credit and reduce the price at which it is granted.

The impact of these purchases will be bolstered by the scaling-up in parallel of the TLTROs. As banks receive cheap long-term funding on the condition that they expand loans to households and firms, the TLTRO will increase credit supply, which in turn should lead the price of credit to fall in a competitive environment.

And both these measures will arrive in the context of the successful completion of the Comprehensive Assessment, which puts banks in a much stronger position to transmit our new monetary policy impulse.

Indeed, there is already evidence that in expectation of the roll-out of these measures, banks are lowering lending rates and increasing loan volumes. Our latest Bank Lending Survey reported a net easing of credit standards on loans to non-financial corporations and, more generally, suggests we have passed a turning point in credit growth.

Portfolio balance effects

The second channel through which we expect asset purchases to work in the euro area is the broad portfolio balance channel. Let me explain how in principle that channel operates.

As we buy assets, investors are likely to substitute the lower risk assets we buy with riskier assets such as longer-term assets, equities and possibly real estate. This has well-known effects on interest rates across the curve, on the cost of capital, on wealth – via higher equity and real estate prices – and therefore on balance sheets more generally.

There are certainly question marks as how strong these effects are in the euro area. We do not have precedents and therefore empirical data for an economy such as ours, which has a different financial structure from the US or Japan. But there is no question as to the sign of the effects – it is clearly positive.

Indeed, given our relatively greater reliance on banks as a source of finance, these balance sheet effects could work particularly through the bank lending channel. On the bank side, rising asset prices would free up capital resources for additional lending. While on the side of firms and households, an improvement in net worth, combined with a general improvement in economic prospects and hence future earnings, can expand their capacity to borrow.

Substitution of assets can also take place across jurisdictions, which would take the form of investors rebalancing portfolios away from euro-denominated assets towards other jurisdictions and currencies providing higher yields.

For example, there is evidence that both the various Large Scale Asset Purchase programmes of the Fed as well as the Bank of Japan’s Quantitative and Qualitative Easing programme led to a significant depreciation of their respective exchange rates, even in a situation in which long-term yields were already very low, as in Japan.

Finally, through these portfolio balance effects the central bank can also expect to have a strong signalling effect. They signal that we will use all means available to us, within our mandate, to return inflation towards our objective – and without any undue delay. This in turn helps anchor inflation expectations and thereby lower real interest rates, boosting activity and inflation. This is also a channel that was operative in the US and Japan.

Both economic theory and international experience suggest that the magnitude of portfolio balance effects is a function of the size of the central bank’s balance sheet. As this effect stems from the displacement of portfolios, it is logical that the greater the purchases, the greater the displacement across asset classes.

This is why the Governing Council has communicated its expectation that the combination of all the decided measures will expand the Eurosystem’s balance sheet towards the levels prevailing in early 2012. And in this context, the addition of purchases of covered bonds to our ABS purchases will allow us to conduct interventions on a scale that will achieve the intended effects in terms of portfolio rebalancing and signalling.

Let me underline however that contingent on outcomes, we are committed to recalibrate the size, pace and composition of our purchases as necessary to deliver our mandate. This is why the Governing Council has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed.

Conclusion

For all the reasons I have mentioned, it is essential to bring back inflation to target and without delay. Monetary policy can and will do its part to achieve this. But it is also clear that, as monetary policy works on the demand side of the economy, other policies can assist in this process – or at least not counteract it.

This means that the aggregate fiscal stance of the euro area has to be consistent with our position in the cycle. And it means that this fiscal stance must be achieved in a confidence-enhancing way – that is, consistent with the fiscal governance framework – otherwise lack of confidence will undermine investment and offset the positive effects of fiscal policy on demand.

And as investment does not only create current demand, but also future supply – by raising growth potential – appropriate structural policies are also a key part of the policy mix. We need to create a business environment where new investment is attractive. And this in turn would also help monetary policy to reap its full effects.

In short, there is a combination of policies that will work to bring growth and inflation back on a sound path, and we all have to meet our responsibilities in achieving that. For our part, we will continue to meet our responsibility – we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us.

If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialise, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases.

Mario Draghi, President, European Central Bank, Speaking at the Frankfurt European Banking Congress
Frankfurt am Main, 21 Nov 2014 More

Comment

Draghi all but announced that the central bank will step up monetary easing soon. Mr Maybe has become Mr Definitely.
Nick Kounis, Head Macro & Financial Markets Research, ABN AMRO Bank N.V. (Amsterdam) More

It has never been cheaper for countries such as France to borrow. Buying state bonds could influence the price of state bonds, but wouldn’t have much impact on the economy.
Michael Heise, Chief Economist, Allianz SE (Munich) More

USA

Economy

Regional and State employment and unemployment – Oct 2014

Extract

Regional and state unemployment rates were generally little changed in October. Thirty-four states and the District of Columbia had unemployment rate decreases from September, 5 states had increases, and 11 states had no change, the U.S. Bureau of Labor Statistics reported today. Forty-two states and the District of Columbia had unemployment rate decreases from a year earlier, five states had increases, and three states had no change. The national jobless rate edged down to 5.8 percent from September and was 1.4 percentage points lower than in October 2013.

In October 2014, nonfarm payroll employment increased in 38 states and decreased in 12 states and the District of Columbia. The largest over-the-month increases in employment occurred in California (+41,500), Texas (+35,200), and Florida (+34,400). The largest over-the-month decrease in employment occurred in Nevada (-7,300), followed by New York (-5,600) and New Jersey (-4,500). The largest over-the-month percentage increase in employment occurred in Wyoming (+1.4 percent), followed by Idaho (+0.8 percent) and Utah (+0.7 percent). The largest over-the-month percentage declines in employment occurred in Montana and Nevada (-0.6 percent each), followed by Rhode Island (-0.5 percent). Over the year, nonfarm employment increased in 49 states and the District of Columbia and decreased in Alaska (-0.2 percent). The largest over-the-year percentage increase occurred in North Dakota (+5.0 percent), followed by Utah (+3.8 percent) and Texas (+3.7 percent).

Bureau of Labor Statistics, “Regional and State employment and unemployment – Oct 2014“, 21 Nov 2014 (10:00am) More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 2,063.50 +0.52% 1,848.36 +11.64%
DJIA INDU 17,810.06 +0.51% 16,576.66 +7.44%
NASDAQ IXIC 4,712.97 +0.24% 4,176.59 +12.84%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 21 Nov 2014 Watch Read
Comment

Asia is strong on the interest rates, and Europe is strong on the Draghi comments. There’s a positive flow coming through to U.S. businesses. A rising tide lifts all boats.
Michael James, Managing Director of Equity Trading, Wedbush Securities Inc. More

… but later …

Initially everything looked really good with China lowering interest rates, Draghi saying he’ll do anything necessary and with oil bouncing a bit. But the market is drifting now. That may be a reflection of people trying to stay flat over the weekend and eliminate any geopolitical risk.
Brian Peery, Co-Portfolio Manager, Hennessy Advisors Inc. More

PORTFOLIO

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.818 +0.23% 1.399 +29.93%
Valuation Rate USD/AUD 0.87166 +0.47% 0.89789 -2.92%
Portfolio Index AUD 2.086 +0.53% 1.558 +33.84%

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)

Stock price movements

(Note: the feed for this chart stopped about a minute before close, so the prices and deltas are different from the corrected numbers in the table below)

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 $116.47 +0.14% $80.1457 +45.32%
Amazon AMZN $332.63 +0.63% $398.79 -16.59%
Ebay EBAY $54.42 -0.22% $54.865 -0.82%
Facebook FB $73.75 -0.07% $54.65 +34.95%
Google A GOOGL $545.89 +0.39% $560.365 -2.58%
Google C GOOG $537.27 +0.50% $560.365 -4.08%
Linkedin LNKD $219.09 -0.55% $216.83 +1.04%
VMware VMW $85.26 +2.81% $89.71 -4.96%

Thursday 20 Nov 2014

RUSSIA-UKRAINE

Economy

Ukrainian loans to borrowers in Crimea are becoming unrecoverable. “Andriy Pyshnyy, chairman of the management board of Ukraine’s state-owned Oschadbank, says “99.99 percent” of the bank’s loans in Crimea – which totaled more than $500 million – are now delinquent.” Crimeans with deposits in Ukrainian banks cannot access their funds. “Most ATMs no longer accept non-Russian bank cards; foreign credit cards can’t be used to buy things. Most non-local mobile phones can’t receive a signal. And even if they could, calling other Crimeans is complicated: Most of the peninsula’s residents recently had to get new mobile phone numbers because Ukrainian services were cut off.More

JAPAN

Economy

Markit/JMMA Flash Japan Manufacturing PMI – Nov 2014 Opinion

Key points:

  • Flash Japan Manufacturing PMI at 52.1 (52.4 in October). Moderate improvement in business conditions in November.
  • Flash Japan Manufacturing Output Index at 53.5 (51.3 in October). Output growth accelerates to fastest pace since March.

Markit, “Markit/JMMA Flash Japan Manufacturing PMI” 20 Nov 2014 More

CHINA

Economy

HSBC Flash China Manufacturing PMI – Nov 2014 Opinion

Key points:

  • Flash China Manufacturing PMI at 50.0 in November (50.4 in October). Six-month low.
  • Flash China Manufacturing Output Index at 49.5 in November (50.7 in October). Seven-month low.

Markit, “HSBC Flash China Manufacturing PMI” 20 Nov 2014 More

EUROPE

Economy

Markit Flash Eurozone PMI – Nov 2014 Opinion

Key points:

  • Flash Eurozone PMI Composite Output Index at 51.4 (52.1 in October). 16-month low.
  • Flash Eurozone Services PMI Activity Index at 51.3 (52.3 in October). 11-month low.
  • Flash Eurozone Manufacturing PMI at 50.4 (50.6 in October). 2-month low.
  • Flash Eurozone Manufacturing PMI Output Index at 51.8 (51.5 in October). 4-month high.

Markit, “Markit Flash Eurozone PMI” 20 Nov 2014 More

USA

Economy

Unemployment Insurance Weekly Claims Report: Week to 15 Nov 2014 Opinion

Extract

In the week ending November 15, the advance figure for seasonally adjusted initial claims was 291,000, a decrease of 2,000 from the previous week’s revised level. The previous week’s level was revised up by 3,000 from 290,000 to 293,000. The 4-week moving average was 287,500, an increase of 1,750 from the previous week’s revised average. The previous week’s average was revised up by 750 from 285,000 to 285,750.

The advance seasonally adjusted insured unemployment rate was 1.8 percent for the week ending November 8, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 8 was 2,330,000, a decrease of 73,000 from the previous week’s revised level. This is the lowest level for insured unemployment since December 16, 2000 when it was 2,322,000. The previous week’s level was revised up 11,000 from 2,392,000 to 2,403,000. The 4-week moving average was 2,369,000, a decrease of 6,250 from the previous week’s revised average. This is the lowest level for this average since January 13, 2001 when it was 2,360,500. The previous week’s average was revised up by 2,750 from 2,372,500 to 2,375,250.

U.S. Employment and Training Administration, “Unemployment Insurance Weekly Claims Report – Week to 15 Nov 2014“, 20 Nov 2014 (08:30am) More

Comment

Claims are still well under the 300,000 mark and they’ve remained there for a little over two months now, and that bodes well in terms of payroll growth,. We’re seeing good prospects and a strong trend for progress in the labor market.
Gregory Daco, Lead U.S. Economist, Oxford Economics USA Inc (NY) More

Consumer price index (CPI) – Oct 2014

Extract

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.

Gasoline and other energy indexes declined, offsetting increases in shelter and an array of other indexes to leave the seasonally adjusted all items index unchanged. The gasoline index fell for the fourth month in a row, declining 3.0 percent, and the indexes for natural gas and fuel oil also decreased. The food index rose slightly in October, with major grocery store food groups mixed.

The index for all items less food and energy increased 0.2 percent in October. Besides the shelter index, airline fares, household furnishings and operations, medical care, recreation, personal care, tobacco, and new vehicles were among the indexes that increased. The indexes for used cars and trucks and for apparel declined in October.

The all items index increased 1.7 percent over the last 12 months, the same increase as for the 12 months ending September. The index for all items less food and energy increased 1.8 percent over the span, and the food index rose 3.1 percent. In contrast, the energy index declined 1.6 percent over the last 12 months.

Bureau of Labor Statistics, “Consumer price index (CPI) – Oct 2014“, 20 Nov 2014 (08:30am) More

Comment

Core inflation, which is our best measure of future headline inflation, is showing signs of bottoming out here. The weakness overseas is more than offset by what’s looking to be a strengthening domestic demand picture.
Eric Green, Head of U.S. Rates and Economic Research, TD Securities USA LLC More

Real earnings – Oct 2014

Extract

Real average hourly earnings for all employees rose 0.1 percent from September to October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from a 0.1 percent increase in average hourly earnings combined with no change in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings increased 0.4 percent over the month due to the increase in real average hourly earnings combined with a 0.3 percent increase in the average workweek.

Real average hourly earnings increased 0.4 percent, seasonally adjusted, from October 2013 to October 2014. This increase in real average hourly earnings, combined with a 0.6 percent increase in the average workweek, resulted in a 0.9 percent increase in real average weekly earnings over this period.

Bureau of Labor Statistics, “Real earnings – Oct 2014“, 20 Nov 2014 (08:30am) More

Markit Flash US Manufacturing PMI – Nov 2014 Opinion

November data highlighted a further slowdown in the pace of recovery across the U.S. manufacturing sector. At 54.7, down from 55.9 in October, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ IndexTM (PMITM) indicated the weakest overall improvement in business conditions since the snow-related setback in January. Although the latest reading remained well above the neutral 50.0 threshold, the index has now dropped for three months in a row.

Weaker rates of output and new business growth were the main negative influences on the headline PMI figure in November. Latest data pointed to the slowest expansion of manufacturing production for ten months, with a number of survey respondents citing less favourable demand conditions.

Incoming new work also increased at the weakest pace since January, partly reflecting a reversal in export sales volumes. Although only modest, the rate of decline in new orders from abroad was the most marked for 17 months. Some survey respondents commented on the strengthening dollar exchange rate, as well as more subdued underlying export market business conditions.

Resilient job market trends continued across the U.S. manufacturing sector in November. Latest data highlighted a robust rise in payroll numbers, and the rate of expansion was slightly stronger than seen in the previous month. However, there were signs of moderating capacity pressures, as manufacturers indicated that backlogs of work increased at the slowest pace for ten months.

In line with softer new business gains, the latest survey indicated the weakest upturn in input buying since March. Pre-production inventories increased for the fifth month running, but at a slower pace than in October, while stocks of finished goods rose only marginally. Despite slower growth of purchasing activity, average lead times from suppliers continued to lengthen in November, which extended the current period of deterioration to 17 months.”

Markit, “Markit Flash US Manufacturing PMI – Nov 2014“, 20 Nov 2014 (09:45am) More

Existing home sales – Oct 2014 Opinion

Extract

Existing-home sales rose in October for the second straight month and are now above year-over-year levels for the first time in a year, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.5 percent to a seasonally adjusted annual rate of 5.26 million in October from an upwardly-revised 5.18 million in September. Sales are at their highest annual pace since September 2013 (also 5.26 million) and are now above year-over-year levels (2.5 percent from last October) for the first time since last October.

The median existing-home price for all housing types in October was $208,300, which is 5.5 percent above October 2013. This marks the 32nd consecutive month of year-over-year price gains.

Total housing inventory at the end of October fell 2.6 percent to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace – the lowest since March (also 5.1 months). Unsold inventory is now 5.2 percent higher than a year ago, when there were 2.11 million existing homes available for sale.

National Association of Realtors, “Existing home sales – Oct 2014“, 20 Nov 2014 (10:00am) More

Bloomberg Consumer Comfort Index – Week to 16 Nov 2014 Opinion

Extract

Consumer sentiment in the U.S. advanced last week to the highest level since January 2008 as Americans grew more optimistic about their financial well-being and the buying climate.

The Bloomberg Consumer Comfort Index climbed to 38.5 in the period ended Nov. 16 from 38.2 the week before. While a monthly measure tracking the economic outlook fell to 47 in November from a two-year high of 51, the share of respondents saying the economy is improving matched the second-highest since June 2013.

Improving employment prospects, record stock values and declining gasoline prices probably boosted sentiment as the holiday-shopping season gets under way. At the same time, confidence among lower-income earners is lagging behind as wages are slow to pick up.

Bloomberg, “Bloomberg Consumer Comfort Index – Nov 2014“, 20 Nov 2014 (10:00am) More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 2,052.75 +0.20% 1,848.36 +11.06%
DJIA INDU 17,719.00 +0.19% 16,576.66 +6.89%
NASDAQ IXIC 4,701.87 +0.56% 4,176.59 +12.58%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 20 Nov 2014 Watch Read
Comment

The swing from this morning was powerful, that shows you there’s strength and the data is quieting market fears about growth. We got some concerning numbers out of Europe and softness in China but the data in the U.S. continues to be mixed to better whereas in other places it’s mixed to worse.
Paul Zemsky, Head of Multi-Asset Strategies, Voya Investment Management LLC ($213 billion) More

The backdrop for holiday sales and retail is setting up to be a very good holiday season. That additional cash or income that consumers will have to spend from lower energy prices at least for a quarter or two will be a fantastic tailwind for retailers.
David Lyon, Global Investment Specialist, JP Morgan Private Bank ($1 trillion) More

Next year will be a reasonable to maybe a surprisingly good year. There is no reason in the world why we can’t see P/Es expand.
Margaret Patel, Senior Portfolio Manager, Wells Capital Management – speaking at the Reuters Global Investment Outlook Summit More

PORTFOLIO

Index values Opinion

:-) During intra-day trading this morning our AUD-denominated index broke through 2.100 for the first time! As the day progressed it fell to a lower closing value, but remains within reach of that level.

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.814 +1.09% 1.399 +29.63%
Valuation Rate USD/AUD 0.86762 +0.13% 0.89789 -3.37%
Portfolio Index AUD 2.090 +0.95% 1.558 +34.16%

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 $116.31 +1.43% $80.1457 +45.12%
Amazon AMZN $330.54 +1.22% $398.79 -17.11%
Ebay EBAY $54.54 -0.73% $54.865 -0.59%
Facebook FB $73.60 +0.37% $54.65 +34.68%
Google A GOOGL $543.76 -0.63% $560.365 -2.96%
Google C GOOG $534.83 -0.40% $560.365 -4.56%
Linkedin LNKD $220.30 +0.31% $216.83 +1.60%
VMware VMW $82.93 -1.14% $89.71 -7.56%

FX: USD/AUD

Westpac Banking Corporation’s strategist Sean Callow predicts the AUD will climb to USD0.88 in Dec 2014, to USD0.90 in Jun 2015, then USD0.92 by the end of 2015. Australia currently offers the world’s highest AAA sovereign returns, maintaining the AUD as the developed world’s most overvalued currency after the NZD. More

Wednesday 19 Nov 2014

EUROPE

Economy

Eurozone monthly balance of payments – Sep 2014

In September 2014, the current account of the euro area recorded a surplus of €30.0 billion.

In the financial account, combined direct and portfolio investment recorded net increases of €84 billion and €27 billion in assets and liabilities respectively.

Current account

The current account of the euro area recorded a surplus of €30.0 billion in September 2014 (see Table 1). This reflected surpluses for goods (€20.7 billion), services (€10.4 billion) and primary income (€7.6 billion), which were partly offset by a deficit for secondary income (€8.7 billion). [2]

The 12-month cumulated current account for the period ending in September 2014 recorded a surplus of €245.6 billion (2.5% of euro area GDP), compared with one of €229.7 billion (2.4% of euro area GDP) for the 12 months to August 2014 (see Table 1 and Chart 1). The increase in the current account surplus was due mainly to increases in the surpluses for goods (from €211.5 billion to €217.3 billion) and, to a lesser extent, to increases in the surplus for services (from €92.3 billion to €95.2 billion) and primary income (from €68.0 billion to €71.9 billion), as well as to a decrease in the deficit for secondary income (from €142.0 to €138.8 billion).

Financial account

In the financial account (see Table 2), combined direct and portfolio investment recorded net increases of assets of €84 billion and of liabilities of €27 billion in September 2014.

Euro area residents recorded direct investment abroad (assets) of €33 billion, almost evenly split between equity and debt instruments (mostly inter-company loans). Foreign direct investors increased their investments in the euro area (liabilities) by €10 billion, almost entirely by means of debt instruments. As regards portfolio investment assets, euro area residents had net acquisitions of foreign securities of €51 billion, mostly debt securities (€47 billion). On the liability side, non-residents had net acquisitions of euro area securities of €17 billion (net purchases in equity securities of €20 billion partially offset by €3 billion of net sales in debt securities).

The euro area financial derivatives account recorded net flows of €7 billion. Other investment recorded net decreases of €39 billion and €4 billion in assets and liabilities respectively. The net decrease of assets was explained by developments in the MFIs excluding the Eurosystem (€37 billion) and the general government (€4 billion) sectors. The net decrease of liabilities was explained by decreases in the Eurosystem (€3 billion), general government (€3 billion) and other sectors (€14 billion), which were partly offset by an increase in MFIs excluding the Eurosystem (€17 billion).

The Eurosystem’s stock of reserve assets increased by €3 billion in September 2014 (to €597 billion). This was explained by net disposals of reserve assets of €2 billion and positive revaluations of €5 billion.

European Central Bank, “Eurozone monthly balance of payments – Sep 2014“, 19 Nov 2014 More

USA

Economy

New residential construction (permits, starts, completions) – Oct 2014

Opinion Housing starts for single-family homes, condominiums and apartments in Oct 2014 fell 2.8% from Sep 2014.
Opinion Permits for future projects rose to the highest level since Jun 2008.
Opinion Residential-construction permits climbed to a six-year high.

Extract

BUILDING PERMITS

Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,080,000. This is 4.8 percent (±1.3%) above the revised September rate of 1,031,000 and is 1.2 percent (±1.2%) above the October 2013 estimate of 1,067,000.

Single-family authorizations in October were at a rate of 640,000; this is 1.4 percent (±1.2%) above the revised September figure of 631,000. Authorizations of units in buildings with five units or more were at a rate of 406,000 in October.

HOUSING STARTS

Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,009,000. This is 2.8 percent (±10.0%) below the revised September estimate of 1,038,000, but is 7.8 percent (±8.7%)* above the October 2013 rate of 936,000.

Single-family housing starts in October were at a rate of 696,000; this is 4.2 percent (±8.8%) above the revised September figure of 668,000. The October rate for units in buildings with five units or more was 300,000.

HOUSING COMPLETIONS

Privately-owned housing completions in October were at a seasonally adjusted annual rate of 881,000. This is 8.8 percent (±14.7%) below the revised September estimate of 966,000, but is 8.1 percent (±13.0%)* above the October 2013 rate of 815,000.

Single-family housing completions in October were at a rate of 585,000; this is 7.4 percent (±9.5%) below the revised September rate of 632,000. The October rate for units in buildings with five units or more was 289,000.

US Census Bureau, “New residential construction (permits, starts, completions) – Oct 2014“, 19 Nov 2014 (08:30) More

Comment

Conditions in the housing market are at least stable, and on the margin they appear to be improving a bit. We should expect continued gradual growth heading into next year.
Ryan Wang, Economist, HSBC Securities USA Inc More

Housing activity continues to recover, although the pace of the recovery remains slower than in the previous couple of years, owing to the decline in housing affordability.
Blerina Uruci, Economist, Barclays (NY) More

Quarterly data series on business employment dynamics – Q1 2014

Extract

From December 2013 to March 2014, gross job gains from opening and expanding private sector establishments were 6.9 million, a decrease of 440,000 jobs from the previous quarter, the U.S. Bureau of Labor Statistics reported today. Over this period, gross job losses from closing and contracting private sector establishments were 6.5 million, a decrease of 94,000 jobs from the previous quarter.

The difference between the number of gross job gains and the number of gross job losses yielded a net employment gain of 397,000 jobs in the private sector during the first quarter of 2014.

Bureau of Labor Statistics, “Quarterly data series on business employment dynamics – Q1 2014“, 19 Nov 2014 (10:00) More

FOMC Minutes: meeting of 28-29 Oct 2014

Extract

In their discussion of monetary policy for the period ahead, members judged that information received since the FOMC met in September indicated that economic activity was expanding at a moderate pace. Labor market conditions had improved somewhat further, with solid job gains and a lower unemployment rate; on balance, a range of indicators suggested that underutilization of labor resources was gradually diminishing. Household spending was rising moderately and business fixed investment was advancing, while the recovery in the housing sector remained slow. Inflation had continued to run below the Committee’s longer-run objective. Market-based measures of inflation compensation had declined somewhat, but survey-based measures of longer-term inflation expectations had remained stable. The Committee expected that, with appropriate policy accommodation, economic activity would expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate.

In their discussion of language for the post-meeting statement, a number of members judged that, while some underutilization in the labor market remained, it appeared to be gradually diminishing. In addition, members considered the advantages and disadvantages of adding language to the statement to acknowledge recent developments in financial markets. On the one hand, including a reference would show that the Committee was monitoring financial developments while also providing an opportunity to note that financial conditions remained highly supportive of growth. On the other hand, including a reference risked the possibility of suggesting greater concern on the part of the Committee than was actually the case, perhaps leading to the misimpression that monetary policy was likely to respond to increases in volatility. In the end, the Committee decided not to include such a reference. Finally, a couple of members suggested including language in the statement indicating that recent foreign economic developments had increased uncertainty or had boosted downside risks to the U.S. economic outlook, but participants generally judged that such wording would suggest greater pessimism about the economic outlook than they thought appropriate.

In their discussion of the asset purchase program, members generally agreed that the condition articulated by the Committee when it began the program in September 2012 had been achieved—that is, there had been a substantial improvement in the outlook for the labor market—and that there was sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, all members but one supported concluding the Committee’s asset purchase program at the end of October and maintaining its existing policy of re-investing principal payments from its holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction. By keeping the Committee’s holdings of longer-term securities at sizable levels, this policy was expected to help maintain accommodative financial conditions.

In addition, the Committee agreed to maintain the target range for the federal funds rate at 0 to 1⁄4 percent and to reaffirm the indication in the statement that the Committee’s decision about how long to maintain the current target range for the federal funds rate would depend on its assessment of actual and expected progress toward its objectives of maximum employment and 2 percent inflation. All but one member agreed that the Committee should reiterate the expectation that it likely would be appropriate to maintain the current target range for the federal funds rate for a considerable time following the end of the asset purchase program in October, especially if projected inflation continued to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remained well anchored. The one member thought that the Committee should instead strengthen the forward guidance in order to underscore the Committee’s commitment to its 2 percent inflation objective. The Committee agreed to include additional wording in the statement in order to emphasize that the Committee’s decision on the timing of the first increase in the federal funds rate would be data dependent. In particular, the statement would say that, if incoming information indicated faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate would likely occur sooner than currently anticipated. It would also note that, if progress proves slower than expected, then increases in the target range would likely occur later than currently anticipated. The Committee also agreed to re-iterate its expectation 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, “Minutes of the Federal Open Market Committee October 28–29, 2014“, 19 Nov 2014 (14:00) More

Comment

They seemed to pay more attention to inflation. If inflation is not high and they’re not too concerned about it being a problem, it gives them more breathing room to hold off raising rates. If they don’t feel inflation is imminent and the labor market is recovering nicely, but not heating up too much, it gives them more breathing room.
Jeff Kravetz, Regional Investment Strategist, U.S. Bank Wealth Management More

The wording (of the minutes) would suggest greater pessimism. They didn’t want to create fears.
Robbert Van Batenburg, Director of Market Strategy, Newedge More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 2,048.72 -0.15% 1,848.36 +10.84%
DJIA INDU 17,685.73 -0.01% 16,576.66 +6.69%
NASDAQ IXIC 4,675.71 -0.57% 4,176.59 +11.95%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 19 Nov 2014 Watch Read
Comment: Pre-FOMC minutes

There’s been a build up to what the Fed will say today. The market’s been in quite a tight channel. Last time, they left the ‘considerable period of time’ phrase but they tweaked some other language. They’re clearly trying to get the message across that things are getting better.
Jasper Lawler, Market Analyst, CMC Markets Plc (London) More

The market’s had a huge, huge run in a virtually straight line up to here, and now we’re down a little bit. It’s hard to believe the market’s going to go up every week through year-end. I don’t expect to see any surprises coming out of the Fed today.
Bruce Bittles, Chief Investment Strategist, RW Baird & Co More

Comment: Post-FOMC minutes

The market is yawning … The Fed minutes did nothing to change the conversation.
Adam Sarhan, Chief Executive, Sarhan Capital More

PORTFOLIO

Index values Opinion

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.794 -0.60% 1.399 +28.24%
Valuation Rate USD/AUD 0.86646 -1.27% 0.89789 -3.50%
Portfolio Index AUD 2.071 +0.68% 1.558 +32.89%

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 $114.67 -0.69% $80.1457 +43.08%
Amazon AMZN $326.31 +0.42% $398.79 -18.17%
Ebay EBAY $54.94 -0.79% $54.865 +0.14%
Facebook FB $73.33 -1.36% $54.65 +34.18%
Google A GOOGL $547.20 +0.49% $560.365 -2.35%
Google C GOOG $536.99 +0.37% $560.365 -4.17%
Linkedin LNKD $219.61 -0.66% $216.83 +1.28%
VMware VMW $83.89 -2.78% $89.71 -6.49%

Tuesday 18 Nov 2014

USA

Economy

Producer Price Indices – Oct 2014

The Producer Price Index for final demand rose 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase followed a 0.1-percent decline in September and no change in August. On an unadjusted basis, the index for final demand advanced 1.5 percent for the 12 months ended in October, the smallest 12-month increase since a 1.2-percent rise in February 2014.

In October, the 0.2-percent rise in final demand prices can be traced to the index for final demand services, which advanced 0.5 percent. In contrast, prices for final demand goods moved down 0.4 percent.

Within intermediate demand, prices for processed goods declined 0.9 percent, the index for unprocessed goods fell 2.4 percent, and prices for services inched up 0.1 percent.

Bureau of Labor Statistics, “Producer Price Indices – Oct 2014“, 18 Nov 2014 (08:30) More

Comment

The upside surprise is pretty much entirely in one component of services, and it’s correcting from a below-trend number in September. The picture’s pretty subdued – there’s no real sign of inflationary pressure.
David Sloan, Senior Economist, 4Cast Inc. More

Stock market indices Opinion

Record closes for the S&P500 and DJIA indices.

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 2,051.82 +0.51% 1,848.36 +11.01%
DJIA INDU 17,687.82 +0.23% 16,576.66 +6.70%
NASDAQ IXIC 4,702.44 +0.67% 4,176.59 +12.59%

The shape of the day

 Market indices today (Chart: Yahoo)


Market indices today (Chart: Yahoo)

Nightly Business Report: 18 Nov 2014 Watch Read
Comment

People are happy the market is at all-time highs, but they are still nervous. Going into next year, will the market be able to maintain these gains and go higher given the cautiousness from Europe and Asia?
Michael James, Managing Director of Equity Trading, Wedbush Securities Inc. More

Consumer and investor sentiment is pretty positive at the moment. We continue to see M&A as the topic of the day and U.S. economic data is suggesting really good stability.
Omar Aguilar, Chief Investment Officer of Equities, Charles Schwab Investment Management More

Whether that’s a sign of strength or a bounce-back rally from the weakness we’ve seen, it’s still too early to tell. People are still biased towards moving money into equities and you’ve seen that flow prevent any meaningful corrections throughout the year.
Bruce McCain, Chief Investment Strategist, KeyCorp ($25 billion) More

PORTFOLIO

Index values Opinion

:-) Our USD-denominated index closed above 1.800 for the first time today, and our AUD-denominated index is now at 2.057.

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.805 +0.96% 1.399 +29.01%
Valuation Rate USD/AUD 0.87757 +0.17% 0.89789 -2.26%
Portfolio Index AUD 2.057 +0.78% 1.558 +32.00%

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

:-) Another record close for Apple.

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $115.47 +1.30% $80.1457 +44.08%
Amazon AMZN $324.93 +0.58% $398.79 -18.52%
Ebay EBAY $55.38 +1.01% $54.865 +0.94%
Facebook FB $74.34 +0.13% $54.65 +36.03%
Google A GOOGL $544.51 -0.39% $560.365 -2.83%
Google C GOOG $535.03 -0.28% $560.365 -4.52%
Linkedin LNKD $221.07 -0.99% $216.83 +1.96%
VMware VMW $86.29 -0.40% $89.71 -3.81%

Monday 17 Nov 2014

Holland-America’s Volendam visiting Port Melbourne yesterday and today
Holland-America’s Volendam visiting Port Melbourne yesterday and today

CHINA

Economy

China Banking Regulatory Commission reported on Saturday that bad loans increased during Q3 2014 by the most since 2005. More

JAPAN

Economy

TOKYO (Reuters) – Japan’s economy shrank an annualised 1.6 per cent in July-September, confounding expectations for a modest rebound after a severe contraction in the previous quarter and solidifying the view premier Shinzo Abe will delay a second sales tax hike next year.

Abe has said Monday’s GDP data would be key to his decision on whether to proceed with the increase to 10 per cent in October next year. That decision had been expected by year-end.

The second straight quarter of contraction, which compared with a 2.1 per cent increase forecast in a Reuters poll, added to signs the world’s third-largest economy has been slow in healing from the blow to consumption from the first tax increase in April.

The April tax hike to 8 per cent from 5 per cent led to a revised 7.3 per cent economic contraction in the second quarter, which was the biggest decline since the global financial crisis.Business Insider

Comment

Japan’s GDP data added to some of the market’s concerns about the global growth outlook and the extent to which the recent rallies in the U.S. dollar and U.S. assets can be justified.
Greg Gibbs, Head of Asia-Pacific Market Strategy, Royal Bank of Scotland Group Plc (Singapore) More

It’s much weaker than we expected. The growth of consumption is very weak; that’s one reason that the government may decide to delay the sales tax.
Kenichiro Yoshida, Senior Economist, Mizuho Research Institute More

The prime minister in all likelihood is going to say, look, we’re going to reduce the likelihood of Japan falling into recession again next year by taking away the VAT hike.
Jesper Koll, Head of Japan Equity Research, JPMorgan Chase & Co (Tokio) More

USA

Economy

Industrial output and capacity utilization – Sep 2014 Opinion

Industrial production edged down 0.1 percent in October after having advanced 0.8 percent in September. In October, manufacturing output increased 0.2 percent for the second consecutive month. The index for mining declined 0.9 percent and the output of utilities moved down 0.7 percent. At 104.9 percent of its 2007 average, total industrial production in October was 4.0 percent above its level of a year earlier. Capacity utilization for the industrial sector decreased 0.3 percentage point in October to 78.9 percent, a rate that is 1.2 percentage points below its long-run (1972–2013) average.
Federal Reserve, “Industrial output and capacity utilization – Sep 2014“, 17 Nov 2014 (09:15) More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 2,041.32 +0.07% 1,848.36 +10.44%
DJIA INDU 17,647.75 +0.37% 16,576.66 +11.84%
NASDAQ IXIC 4,671.00 -0.37% 4,176.59 +30.97%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 17 Nov 2014 Watch Read
Comment

After a significant rally on the Bank of Japan’s decision to introduce more stimulus, the market is reacting to shock that there was actually a recession there. It’s time to take back some of those gains but not to overreact. The weakness of Japan really increases the fact that we rely too much on the U.S. to support global growth.
Francois Savary, Chief Investment Officer, Reyl & Cie. (Geneva) More

(Japan’s recession) is a bit of shock for the market, because people believed that the Bank of Japan had everything under control. But overall, the initial negative reaction shouldn’t last too long. Investors still expect central bank action worldwide to support the global economy.
Nicolas Cheron, Analyst, FXCM More

PORTFOLIO

Index values Opinion

Our USD index rose above 1.800 during morning trading, but dropped below that level and into negative territory shortly after 11am.

:-( Underperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.788 -0.48% 1.399 +27.79%
Valuation Rate USD/AUD 0.87605 -0.54% 0.89789 -2.43%
Portfolio Index AUD 2.041 +0.06% 1.558 +30.97%

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

It had to happen … “Facebook Inc is secretly working on a new website called “Facebook at Work” that would allow users to keep their personal profile separate from their work profile, the Financial Times reported. The new website, that will look very much like Facebook, will compete with professional social network LinkedIn Corp, Google Inc, and Microsoft Corp, the newspaper said. Facebook’s new site will allow users to chat with colleagues, connect with professional contacts and collaborate over documents, the newspaper reported, citing unidentified sources.Reuters

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 $113.99 -0.17% $80.1457 +42.23%
Amazon AMZN $323.05 -1.48% $398.79 -18.99%
Ebay EBAY $54.83 +0.86% $54.865 -0.06%
Facebook FB $74.248 -0.85% $54.65 +35.85%
Google A GOOGL $546.64 -1.54% $560.365 -2.45%
Google C GOOG $536.51 -1.45% $560.365 -4.26%
Linkedin LNKD $223.28 -4.54% $216.83 +2.97%
VMware VMW $86.64 +0.36% $89.71 -3.42%

Week: 10-16 Nov 2014

Dawn Princess visiting Port Melbourne for the fourth time this season
Dawn Princess visiting Port Melbourne for the fourth time this season

SCIENCE

Update on Philae, Rosetta’s comet lander << Previous Next >>

The story so far

After a 10.5 year journey, on 6 Aug 2014, Rosetta caught up with Comet 67P/Churyumov–Gerasimenko (Comet 67P/C-G) between Jupiter and Mars, heading towards the Sun. Last Wednesday (12 Nov 2014) Rosetta released its lander module (Philae) which was supposed to secure itself to the comet on arrival. The securing systems failed, and Philae bounced and floated above the comet’s surface for about 2 hours before coming to rest, leaning against a rock near a cliff that threatened to shadow Philae’s solar panels.

Philae floating across the surface of Comet 67P/C-G (Photo: ESA)

Philae floating across the surface of Comet 67P/C-G (Photo: ESA)

Photos from the comet’s surface are available Here

Today’s news More

With its batteries depleted and not enough sunlight available to recharge, Philae has fallen into ‘idle mode’ for a potentially long silence. In this mode, all instruments and most systems on board are shut down.

‘Prior to falling silent, the lander was able to transmit all science data gathered during the First Science Sequence,’ says DLR’s Stephan Ulamec, Lander Manager, who was in the Main Control Room at ESOC tonight.

‘This machine performed magnificently under tough conditions, and we can be fully proud of the incredible scientific success Philae has delivered.’

Contact was lost at 00:36 UTC / 01:36 CET, not long before the scheduled communication loss that would have happened anyway as Rosetta orbited below the horizon.

From now on, no contact would be possible unless sufficient sunlight falls on the solar panels to generate enough power to wake it up.

The possibility that this may happen was boosted this evening when mission controllers sent commands to rotate the lander’s main body, to which the solar panels are fixed. This may have exposed more panel area to sunlight.

The next possible communication slot begins on 15 November at about 10:00 UTC / 11:00 CET. The orbiter will listen for a signal, and will continue doing so when its orbit enables communication visibility in the future.

G20 Leaders Summit, Brisbane Australia, 15-16 Nov 2014

IMF contributions

The G20 is putting pressure on USA to deliver on its quota to the IMF. In Dec 2010 the IMF doubled quotas, and USA’s quota (the largest) is about $65 billion – however USA has not ratified the new quotas. More The G20 Leaders’ Communiqué includes the following:

The G20 must be at the forefront in helping to address key global economic challenges. Global economic institutions need to be effective and representative, and to reflect the changing world economy. We welcome the increased representation of emerging economies on the FSB and other actions to maintain its effectiveness. We are committed to maintaining a strong, quota-based and adequately resourced International Monetary Fund (IMF). We reaffirm our commitment in St Petersburg and in this light we are deeply disappointed with the continued delay in progressing the IMF quota and governance reforms agreed in 2010 and the 15th General Review of Quotas, including a new quota formula. The implementation of the 2010 reforms remains our highest priority for the IMF and we urge the United States to ratify them. If this does not happen by year-end, we ask the IMF to build on its existing work and stand ready with options for next steps.More

Taxation of global companies

We are taking actions to ensure the fairness of the international tax system and to secure countries’ revenue bases. Profits should be taxed where economic activities deriving the profits are performed and where value is created. We welcome the significant progress on the G20/OECD Base Erosion and Profit Shifting (BEPS) Action Plan to modernise international tax rules. We are committed to finalising this work in 2015, including transparency of taxpayer-specific rulings found to constitute harmful tax practices. We welcome progress being made on taxation of patent boxes. To prevent cross-border tax evasion, we endorse the global Common Reporting Standard for the automatic exchange of tax information (AEOI) on a reciprocal basis. We will begin to exchange information automatically with each other and with other countries by 2017 or end-2018, subject to completing necessary legislative procedures.More

USA

Looking forward

We’re now just 2 weeks from the start of the holiday shopping season:

  • Thanksgiving (Thursday): 27 Nov 2014 (Black Friday business is migrating forward into Thanksgiving)
  • Black Friday: 28 Nov 2014
  • Cyber Monday: 1 Dec 2014 (online shopping event)

A global supply glut has seen the price of crude oil fall for 7 straight weeks, with the International Energy Agency predicting further falls. A lower price of crude oil has the effect of reducing fuel costs, increasing consumer spending power, and raising consumer confidence. Friday’s preliminary reading by University of Michigan on the overall index on consumer sentiment for Nov 2014 came in at 89.4, the highest reading since July 2007, above the range of economists’ estimates. Job numbers indicate continuing strength – to the extent that there has been an increase in employees quitting their jobs (confident enough to go to other jobs).

However a lot can happen: oil price rise, natural disaster (e.g. another severe winter), economic tripup (e.g. China, Europe), overseas political conflict (e.g. Ukraine, Middle East) or domestic political conflict (e.g. White House vetos), escalation of the Ebola problem, etc. Here’s hoping for an enjoyable and prosperous lead up to Christmas.

:-( Uh oh! Here’s a spoiler: “A group of Walmart employees pushing for higher wages said they were planning protests at 1,600 Walmart stores nationwide on Black Friday.More

:-( Uh oh! And another: “A vocal group of conservatives in the House of Representatives is pressing to use government funding as leverage to prevent any White House moves that would allow millions of undocumented immigrants to stay and work in the United States.More

:-( Oh … and why not an increase in bad loans in China More, or a recession in Japan? More

US market indices Impact

US stocks posted a fourth straight week of gains this week.

Index 14 Nov 2014 Week 7 Nov 2014 Month 31 Oct 2014 Year 31 Dec 13
S&P 500 2,039.82 +0.39% 2,031.92 +1.08% 2,018.05 +10.36% 1,848.36
DJIA 17,634.74 +0.35% 17,573.93 +1.40% 17,390.52 +6.38% 16,576.66
NASDAQ 4,688.54 +1.21% 4,632.53 +1.25% 4,630.74 +12.26% 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)

Comment

The market has been in a very narrow range. If the markets get to all-time highs, investors get a little bit skittish. Earnings have been generally good but there hasn’t been anything to get them overly excited to push the market to higher levels.
Karyn Cavanaugh, Senior Market Strategist, Voya Investment Management LLC. ($215bn) More

Most portfolio managers are lagging the indices and there are going to be some aggressive efforts to make up for performance in the next six weeks. Those that are under invested are going to want to be more invested. (Barring a huge drop in oil prices) the market will either tread water or move higher from here to the end of the year” barring a huge drop in oil prices.
Michael James, Managing Director of Equity Trading, Wedbush Securities More

PORTFOLIO

Long term (52-week) performance Impact

:-) At 2.040 our AUD-denominated index closed the week above 2.000 for the first time, despite a rise in the AUD against the USD during the week. Over the past 52 weeks our AUD-denominated index (ex-div) has grown 46.96%. Since 31 Dec 2012 it is up 78.48% on the adjusted (reweighted) value of 1.143.

:-) At 1.797 our USD-denominated index passed last week’s EOY target of 1.750 and is very close to our (upwardly) revised EOY target of 1.800 after rising 4.26% this week. Over the past 52 weeks our USD-denominated index (ex-div) has grown 37.42%. Since 31 Dec 2012 it is up 50.63% on the adjusted (reweighted) value of 1.193.

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 14 Nov 2014 Week 7 Nov 2014 Month 31 Oct 2014 Year 31 Dec 13
USD Index 1.797 +4.26% 1.723 +4.53% 1.719 +28.40% 1.399
Trading USD/AUD 0.88082 +1.42% 0.86850 -0.48% 0.88505 -1.90% 0.89789
AUD Index 2.040 +2.80% 1.984 +5.03% 1.941 +30.89% 1.558

Portfolio stocks

Apple AAPL +4.74%

:-) Apple closed the week on a record high of $114.18. In pre-split terms, this is a few cents under $800 (actually $799.26).

AAPL share price performance over the last year (Chart: Yahoo Finance)

AAPL share price performance over the last year (Chart: Yahoo Finance)

If you owned Apple Inc, and sold it, you could purchase the entire stock market of Russia, and still have enough change to buy every Russian an iPhone 6 Plus. The value of Russian equities has slumped $234 billion to $531 billion this year, while Apple gained $147 billion to $652 billion, according to data compiled by Bloomberg. The technology company’s innovation and brand value attract investors, while Russia’s political conflicts, sanctions and the threat of economic stagnation next year make them nervous, according to Vadim Bit-Avragim, a portfolio manager who helps oversee about $4 billion at Kapital Asset Management LLC in Moscow.” Bloomberg, 14 Nov 2014 More

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

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

Amazon AMZN +9.28%

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

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

Ebay EBAY +1.59%

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

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

Facebook FB -0.95%

FB share price performance over the last 2 years (Chart: Yahoo Finance)

FB share price performance over the last 2 years (Chart: Yahoo Finance)

Facebook has been flat since its record high of $80.77 on 28 Oct 2014, when the $22bn price paid for WhatsApp was disclosed More. For our portfolio FB has been a fantastic investment since our original investment at $20.75 just over 2 years ago on 12 Sep 2012.

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

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

Google Class A GOOGL +0.61%

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

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

  • Friday close: $555.19 +0.61% from $551.82.
  • P/E (historical): 29.11 Change from 28.94
  • P/E (1 year fwd): 26.36 Change from 26.13
  • Target (1 year): NASDAQ consensus $650, range $530 ↔ $750.
  • SEC filings (CIK 0001288776): Edgar Search (New, Beta)

Google Class C GOOG +0.63%

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

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

  • Friday close: $544.40 +0.63% from $541.01.
  • P/E (historical): 22.68 Change from 22.52
  • Analyst recommendations: 8 strong buy, 3 buy, 0 hold.

Linkedin LNKD +4.86%

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

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

VMware VMW +3.84%

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

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

USD/AUD

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

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

Friday 14 Nov 2014

EUROPE

Economy

EU GDP – Q3 2014 – Flash estimate Opinion

Eurozone GDP increased 0.2% during Q3 2014 exceeding expectations of 0.1%.

Extract

eu_gdp_20141114

Seasonally adjusted GDP rose by 0.2% in the euro area (EA18) and by 0.3% in the EU28 during the third quarter of 2014, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the second quarter of 2014, GDP grew by 0.1% in the euro area and by 0.2% in the EU28.

Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 0.8% in the euro area and by 1.3% in the EU28 in the third quarter of 2014, after +0.8% and +1.3% respectively in the previous quarter.

During the third quarter of 2014, GDP in the United States increased by 0.9% compared with the previous quarter (after +1.1% in the second quarter of 2014). Compared with the same quarter of the previous year, GDP grew by 2.3% (after +2.6% in the previous quarter).

Eurostat, “GDP – Q3 2014 – Flash estimate“, 14 Nov 2014 More

Comment

The eurozone problems can’t be solved in one quarter, they are a long-term problems.
Andreas Scheuerle, Economist, Dekabank (Frankfurt) More

EU inflation – Oct 2014

Extract

eu_inflation_20141114

Euro area annual inflation was 0.4% in October 2014, up from 0.3% in September. A year earlier the rate was 0.7%. European Union annual inflation was 0.5% in October 2014, up from 0.4% in September. A year earlier the rate was 0.9%. These figures come from Eurostat, the statistical office of the European Union.

In October 2014, negative annual rates were observed in Greece (-1.8%), Bulgaria (-1.5%), Hungary and Poland (both -0.3%) and Spain (-0.2%). The highest annual rates were recorded in Romania (1.8%), Austria (1.4%) and Finland (1.2%). Compared with September 2014, annual inflation fell in eight Member States, remained stable in three and rose in sixteen.

Eurostat, “EU inflation – Oct 2014“, 14 Nov 2014 More

USA

Economy

Consumer confidence – Preliminary estimate – Nov 2014 Opinion

Extract

The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment for Nov 2014 came in at 89.4, the highest reading since July 2007, above not only the median forecast of 87.5 among 61 economists polled by Reuters, but also the highest estimate of 89.0.

The survey’s barometer of current economic conditions rose to 103.0 from 98.3 and above the 98.8 forecast.

The survey’s gauge of consumer expectations rose to 80.6 from 79.6, beating the 80.2 forecast.

The survey’s one-year inflation expectation fell to 2.6 percent from 2.9 percent, while its five-year inflation outlook was also at 2.6 percent, the second-lowest reading in the survey’s history after 2.5 percent recorded in September 2002.

Reuters, “U.S. consumer sentiment at more than seven-year high“, 14 Nov 2014 More

Advance monthly retail sales – Oct 2014

Extract

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $444.5 billion, an increase of 0.3 percent (±0.5%) from the previous month, and 4.1 percent (±0.9%) above October 2013. Total sales for the August through October 2014 period were up 4.5 percent (±0.7%) from the same period a year ago. The August to September 2014 percent change was unrevised from -0.3% (±0.2%).

Retail trade sales were up 0.3 percent (±0.5%) from September 2014, and 3.8 percent (±0.7%) above last year. Nonstore retailers were up 9.1 percent (±2.1%) from October 2013 and auto and other motor vehicle dealers were up 8.3 percent (±3.0%) from last year.

US Census Bureau, “Advance monthly sales for retail and food services – Oct 2014“, 14 Nov 2014 (08:30)More

US import and export price indexes – Oct 2014

Extract

The price index for U.S. imports decreased 1.3 percent in October following a 0.6-percent decline in September, the U.S. Bureau of Labor Statistics reported today. The October drop was mostly led by falling fuel prices. U.S. export prices declined 1.0 percent in October, after falling 0.4 percent in September and 0.5 percent in August.

Imports

All Imports: Import prices fell 1.3 percent in October, after decreasing 1.6 percent over the previous 3 months. The October decline was the largest monthly drop since a 2.3-percent decrease in June 2012. In October, the drop was led by lower fuel prices, although nonfuel prices fell as well. The price index for overall imports declined 1.8 percent over the past 12 months, the largest year-over-year drop since a 1.8- percent decrease in November 2013.

Exports

All Exports: Overall export prices declined 1.0 percent in October. Other than a 1.0-percent decrease in April, that was the largest 1-month drop for the index since a 1.7-percent decline in June 2012. In October lower prices for agricultural exports and nonagricultural exports drove the decrease. Export prices also fell for the year ended in October, declining 0.8 percent, the largest 12-month drop since a 1.0-percent decrease between February 2013 and February 2014.

Bureau of Labor Statistics, “US import and export price indexes – Oct 2014“, 14 Nov 2014 (08:30) More

Manufacturing and trade inventories and sales – Sep 2014

Extract

Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for September, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,352.5 billion, virtually unchanged (±0.3%) from August 2014, but were up 4.1 percent (±0.6%) from September 2013.

Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,756.1 billion, up 0.3 percent (±0.1%) from August 2014 and up 5.3 percent (±0.5%) from September 2013.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.30. The September 2013 ratio was 1.28.

US Census Bureau, “Manufacturing and trade inventories and sales – Sep 2014“, 14 Nov 2014 (10:00) More

Stock market indices Opinion

Concern that slowing growth outside the U.S. will hurt the economy persists. The world economy is in its worst shape in two years, with the euro area and emerging markets deteriorating and the danger of deflation rising, according to a Bloomberg Global Poll of international investors More. Much of the concern is again focused on the euro area: Almost two-thirds of those polled said its economy was weakening while 89 percent saw disinflation or deflation as a greater threat there than inflation over the next year.Bloomberg

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 2,039.82 +0.02% 1,848.36 +10.36%
DJIA INDU 17,634.74 -0.10% 16,576.66 +6.38%
NASDAQ IXIC 4,688.54 +0.18% 4,176.59 +12.26%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 14 Nov 2014 Watch Read
Comment

Retail sales were good and the preponderance of the evidence is we’re continuing on the path we’ve been on which is an improving economy. All those great things are no secret, though, and that’s priced into stocks right now. The thing that gives me pause is valuations.
John Fox, Director of Research, Fenimore Asset Management More

People are looking for a holiday rally and may be asking if it’s happened already. The small retail beat isn’t going to do it. We’re going to see a little pause. We can’t continue to climb up this ladder forever.
Robert Pavlik, Chief Market Strategist, Banyan Partners LLC ($4.5 billion) More

PORTFOLIO

Index values Opinion

:-) Record closes for both our USD and AUD denominated indices. The USD index is very close to our upwardly revised target of 1.800 for 2014. The AUD index is above our target of 2.000 for 2014.

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.797 +1.17% 1.399 +28.40%
Valuation Rate USD/AUD 0.88082 +0.49% 0.89789 -1.90%
Portfolio Index AUD 2.040 +0.68% 1.558 +30.89%

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

:-) Another record close for Apple.
:-( It’s not clear whether developers’ “loss of faith” in Google Glass is responsible for Google’s recent underperformance. More

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $114.18 +1.21% $80.1457 +42.47%
Amazon AMZN $327.69 +3.54% $398.79 -17.83%
Ebay EBAY $54.36 -0.02% $54.865 -0.92%
Facebook FB $74.88 +0.85% $54.65 +37.02%
Google A GOOGL $555.19 -0.22% $560.365 -0.92%
Google C GOOG $544.40 -0.18% $560.365 -2.85%
Linkedin LNKD $233.89 +1.79% $216.83 +7.87%
VMware VMW $86.33 +0.88% $89.71 -3.77%

Thursday 13 Nov 2014

Celebrity Century visiting Port Melbourne today

Celebrity Century visiting Port Melbourne again today

OECD

Economy

Standardised unemployment rates

Extract

OECD unemployment rate edges down to 7.2% in September 2014.

The OECD unemployment rate fell by 0.1 percentage point to 7.2% in September 2014. Across the OECD area, 44.2 million people were unemployed, 5.6 million less than the peak recorded in April 2010 but still 9.6 million more than in July 2008.

The unemployment rate was stable in the Euro area, at 11.5%, for the fourth consecutive month. Within the Euro area, unemployment recorded the strongest declines in Portugal (by 0.3 percentage point, to 13.6%), Ireland (by 0.2 percentage point, to 11.2%), the Slovak Republic (by 0.2 percentage point, to 13.0%), Slovenia (by 0.2 percentage point, to 8.9%) and Spain (by 0.2 percentage point, to 24.0%), and the highest increase in Austria (by 0.2 percentage point to 5.1%).

In the United States and in Canada, the unemployment rate decreased by 0.2 percentage point to 5.9% and 6.8% respectively, while it rose by 0.1 percentage point in Japan (to 3.6%). More recent data for October show that the unemployment rate continued to fall in Canada (by 0.3 percentage point to 6.5%) and in the United States (by 0.1 percentage point to 5.8%).

The OECD unemployment rate for youth (15-24) increased, by 0.3 percentage point, in September, to a level of 15.1%. Youth unemployment remains exceptionally high in several Euro area countries, with more than one in two unemployed among young people participating in the labour market in Greece (50.7% in July, the latest month available) and Spain (53.7%), and more than one in three unemployed in Portugal (35.2%) and Italy (42.9%).

OECD, “Harmonised Unemployment Rates” 13 Nov 2014 more

OECD unemployment: Sep 2014 (Source: Bunting, using OECD data)

OECD unemployment: Q3 2014 (Source: Bunting, using OECD data) More

USA

Politics

Congress gets started with a new Senate Majority Leader

Congress gets started with a new Senate Majority Leader

Mitch McConnell elected Senate Majority Leader

Mitch McConnell has today been elected as the Senate Majority Leader as the Republicans took control of the Senate. McConnell has expressed concern about President Barack Obama’s (independent of Congress) actions on issues such as net neutrality, immigration, “ridiculous” carbon reduction agreement with China, etc.

The problem is the president continues to send signals he has no intention of moving to the middle. I was particularly distressed by the deal that apparently he has reached with the Chinese on his current trip, which, as I read the agreement, requires the Chinese to do nothing at all for 16 years while these carbon emission regulations are creating havoc in my state and other states around the country.” Mitch McConnell, 12 Nov 2014

Economy

Unemployment Insurance Weekly Claims Report: Week to 8 Nov 2014

Jobless claims increased by 12,000 to 290,000 in the week ended Nov. 8, the highest since Sept. 20, a Labor Department report showed today in Washington. The median forecast of 53 economists surveyed by Bloomberg called for 280,000. It was the ninth straight week claims have been less than 300,000 … Employment has climbed by at least 200,000 for nine consecutive months, putting the U.S. job market on track for its best showing in 15 years.Bloomberg

Extract

In the week ending November 8, the advance figure for seasonally adjusted initial claims was 290,000, an increase of 12,000 from the previous week’s unrevised level of 278,000. The 4-week moving average was 285,000, an increase of 6,000 from the previous week’s unrevised average of 279,000.

The advance seasonally adjusted insured unemployment rate was 1.8 percent for the week ending November 1, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 1 was 2,392,000, an increase of 36,000 from the previous week’s revised level. The previous week’s level was revised up 8,000 from 2,348,000 to 2,356,000. The 4-week moving average was 2,372,500, an increase of 750 from the previous week’s revised average. The previous week’s average was revised up by 2,000 from 2,369,750 to 2,371,750.

U.S. Employment and Training Administration, “Unemployment Insurance Weekly Claims Report – Week to 8 Nov 2014“, 13 Nov 2014 (08:30am) More

Comment

The labor market is doing quite well. It’s definitely beneficial for households. Better labor-market data and low gas prices should make for a good holiday season.
Tom Simons, Economist at Jefferies LLC More

Job openings and labor turnover – Sep 2014

Extract

There were 4.7 million job openings on the last business day of September, little changed from 4.9 million in August, the U.S. Bureau of Labor Statistics reported today. Hires (5.0 million) and separations (4.8 million) increased in September. Within separations, the quits rate (2.0 percent) increased and the layoffs and discharges rate (1.2 percent) was unchanged. This release includes estimates of the number and rate of job openings, hires, and separations for the nonfarm sector by industry and by four geographic regions.

U.S. Bureau of Labor Statistics, “Job openings and labor turnover – Sep 2014“, 13 Nov 2014 (10:00am) More

Stock market indices Opinion

A record close for the DJIA index today! Walmart and Nordstrom reported better than expected sales and earnings, with cautious optimism for the Q4 2014 shopping season. Crude oil (Dec 2014) has fallen to a 4-year low of $74.21/barrel, with consequential boosts to transport industry companies and consumer spending power.

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 2,039.33 +0.05% 1,848.36 +10.33%
DJIA INDU 17,652.79 +0.23% 16,576.66 +6.49%
NASDAQ IXIC 4,680.14 +0.11% 4,176.59 +12.06%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 13 Nov 2014 Watch Read
Comment

The market is just churning right now, looking for an indication of which direction the future is going to take. There is no catalyst to get investors excited or to instill additional fear.
Peter Sorrentino, Fund Manager, Huntington Asset Advisors Inc. ($1.8 billion) More

We had a pretty big run-up within the month of November and late October and we’ve seen a slowing of the momentum recently. From the context of a price standpoint, we’re due for a breather.
Joe Bell, Senior Equity Analyst, Schaeffer’s Investment Research Inc. More

PORTFOLIO

Index values Opinion

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.776 +1.04% 1.399 +26.92%
Valuation Rate USD/AUD 0.8766 -0.03% 0.89789 -2.38%
Portfolio Index AUD 2.026 +1.07% 1.558 +30.01%

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

A record close for Apple again today!

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $112.82 +1.41% $80.1457 +40.77%
Amazon AMZN $316.48 +1.60% $398.79 -20.64%
Ebay EBAY $54.37 +0.57% $54.865 -0.90%
Facebook FB $74.25 -0.63% $54.65 +35.87%
Google A GOOGL $556.44 -0.32% $560.365 -0.70%
Google C GOOG $545.38 -0.35% $560.365 -2.67%
Linkedin LNKD $229.77 -0.59% $216.83 +5.97%
VMware VMW $85.58 -1.06% $89.71 -4.60%

Wednesday 12 Nov 2014

Radiance of the Seas visiting Port Melbourne today

Radiance of the Seas visiting Port Melbourne today

SCIENCE

ESA’s Rosetta project achieves a landing on Comet 67P/C-G Update >>

20 months after the launch of its Rosetta mission, the European Space Agency has successfully landed its Philae probe on Comet 67P/Churyumov–Gerasimenko – the first comet landing in history.

Timetable: Wednesday 12 Nov 2014
Event PST (CA) EST (NY) UTC (UK) CET (EU) AEDT (VIC)
Final Go/No Go decision Opinion Tue 22:35 01:35 06:35 07:35 17:35
Separation Opinion 01:00 04:00 09:00 10:00 20:00
Touchdown Opinion 08:00 11:00 16:00 17:00 03:00 Thu
First image (see risk below) Opinion 11:00 14:00 19:00 20:00 06:00 Thu
First image Opinion 02:00 Thu 05:00 Thu 10:00 Thu 11:00 Thu 21:00 Thu
Philae separation

Successful separation of Philae, commencing the landing process

Philae, after separation, enroute to Comet 67P/Churyumov–Gerasimenko (Photo: ESA)

Philae, after separation, enroute to Comet 67P/Churyumov–Gerasimenko (Image: ESA)

Comet image  at a distance of 3KM (Photo: ESA)

3KM from landing (Image: ESA – Philae’s ROLIS descent camera)

Congratulatory speeches after a successful landing

Congratulatory speeches after a successful landing Touchdown images

Photo from Philae's CIVA on Comet 67P/C-G

First image from Philae’s CIVA on Comet 67P/C-G: close to a cliff

Problems: security and location
Philae's landing aids (Image: ESA)

Philae’s landing aids (Image: ESA)

First analysis of the touchdown data suggests that the lander bounced twice before settling on the surface of Comet 67P/C-G. The lander remains unanchored to the surface, but the instruments are running and are delivering images and data.

After touchdown at 15:34 UTC (confirmed at 17:02 CET), a clear strong signal was received, with some breaks. Lander telemetry stabilised at about 17:32 UTC and communication with the surface was maintained until the link to the orbiter was lost at 17:59 UTC due to Rosetta’s orbit; this was about an hour earlier than predicted for the target landing site (most likely due to local horizon interference).

Later on 12 November, after analysing lander telemetry, the Lander Control Centre (in Cologne) and Philae Science, Operations and Navigation Centre (SONC, Toulouse) reported:

  • There were three touchdowns at 15:34, 17:25 and 17:32 UTC; in other words, the lander bounced
  • The firing of the harpoons did not occur
  • The primary battery is working properly
  • The mass memory is working fine (all data acquired until lander loss of signal at 17:59 UTC were transmitted to the orbiter)
  • Systems on board the lander recorded a rotation of the lander after the first touchdown. This is confirmed by ROMAP instrument data, which recorded a rotation around the Z-axis (vertical).
  • The lander did receive some power from the solar panels on Wall No. 2 (technical description of the lander’s solar walls here), but it appears that parts of the lander were in shadow during the time that last night’s surface telemetry were being transmitted.

Teams are still working to confirm the location and the overall power and thermal situation on board. Nonetheless, the lander appears to be performing well.

Andrea Accomazzo, Rosetta Flight Director, 13 Nov 2014 More

Program milestones Watch
  • Launch (Ariane): 2 Mar 2004 Watch
  • 1st Earth gravity assist: 4 Mar 2005
  • Mars gravity assist: 25 Feb 2007
  • 2nd Earth gravity assist: 13 Nov 2007
  • Asteroid Steins flyby: 5 Sep 2008 More
  • 3rd Earth gravity assist: 13 Nov 2009
  • Asteroid Lutetia flyby: 10 Jul 2010 More
  • Enter deep space hibernation: 8 Jun 2011
  • Exit deep space hibernation: 20 Jan 2014
  • Comet rendezvous manoeuvres: May 2014 – Aug 2014 May 2014 Jul 2014
  • Arrival at comet: 6 Aug 2014 More
  • Orbiting comet: from 10 Sep 2014 Very detailed imagery
  • Opinion Philae lander delivery: 12 Nov 2014 Animation
  • Closest approach to Sun: 13 Aug 2015

USA

Economy

Monthly wholesale trade: sales and inventories – Sep 2014

Sales. The U.S. Census Bureau announced today that September 2014 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $454.3 billion, up 0.2 percent (+/-0.9) from the revised August level and were up 5.2 percent (+/-1.6%) from the September 2013 level. The August preliminary estimate was revised downward $0.4 billion or 0.1 percent. September sales of durable goods were up 0.5 percent (+/-0.9%) from last month and were up 5.4 percent (+/- 1.6%) from a year ago. Sales of hardware and plumbing and heating equipment and supplies were up 4.8 percent from last month and sales of lumber and other construction materials were up 1.8 percent. Sales of nondurable goods were down 0.1 percent (+/-1.4%) from August, but were up 5.1 percent (+/-3.0%) from last September. Sales of paper and paper products were down 2.6 percent from last month, while sales of apparel, piece goods, and notions were up 4.0 percent.

Inventories. Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $538.8 billion at the end of September, up 0.3 percent (+/-0.4%) from the revised August level and were up 7.4 percent (+/-0.9%) from the September 2013 level. The August preliminary estimate was revised downward $0.6 billion or 0.1 percent. September inventories of durable goods were up 0.8 percent (+/-0.4%) from last month and were up 9.0 percent (+/-1.4%) from a year ago. Inventories of computer and computer peripheral equipment and software were up 3.4 percent from last month and inventories of metals and minerals, except petroleum, were up 1.8 percent. Inventories of nondurable goods were were down 0.6% (+/-0.4%) from August, but were up 4.9 percent (+/-0.7%) from last September. Inventories of petroleum and petroleum products were down 5.3 percent from last month and inventories of farm product raw materials were down 3.0 percent.

Inventories/Sales Ratio. The Septmber inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.19. The September 2013 ratio was 1.16.”

US Census Bureau, “Monthly wholesale trade: sales and inventories – Sep 2014“, 12 Nov 2014 (10:00am) More

Stock market indices Opinion

Index Ticker Today Change 31 Dec 13 YTD
S&P 500 SPX (INX) 2,038.24 -0.07% 1,848.36 +10.27%
DJIA INDU 17,612.20 -0.02% 16,576.66 +6.25%
NASDAQ IXIC 4,675.13 +0.13% 4,176.59 +11.94%

The shape of the day

Market indices today (Chart: Yahoo)

Market indices today (Chart: Yahoo)

Nightly Business Report: 12 Nov 2014 Watch Read
Comment

There was some nervousness at first out of Europe but as often is the case some of that’s fading as European markets close and we don’t see any real earnings blowups or economic data that’s hurt the market. As it happens very often, we see a dip and people buy in, there’s still some fear in the market that if you don’t buy in, you’re left watching.
Steve Bombardiere, Equity Trader, Conifer Securities LLC More

PORTFOLIO

Index values Opinion

:-) VOILA! Our AUD-denominated index closed above 2.000 for the first time today.

:-) Outperformed Currency Today Change 31 Dec 13 YTD
Portfolio Index USD 1.757 +1.04% 1.399 +25.61%
Valuation Rate USD/AUD 0.8777 +0.24% 0.89789 -2.35%
Portfolio Index AUD 2.004 +0.80% 1.558 +28.63%

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

A record close for Apple again today.

Stock Ticker Today Change 31 Dec 13 YTD
Apple AAPL $111.25 +1.41% $80.1457 +38.81%
Amazon AMZN $311.43 -0.19% $398.79 -21.91%
Ebay EBAY $54.06 -0.24% $54.865 -1.47%
Facebook FB $74.72 +0.15% $54.65 +36.73%
Google A GOOGL $558.25 -0.54% $560.365 -0.38%
Google C GOOG $547.31 -0.54% $560.365 -2.33%
Linkedin LNKD $231.13 +0.06% $216.83 +6.60%
VMware VMW $86.50 +2.57% $89.71 -3.58%