Wednesday 17 October 2012

EUROPE

European Commission Summit: Greece

3 years after Greece’s Finance Minister reported a problem with Greece’s budget (25 Oct 2009) the country is again seeking bailout funds. Since 2009 Greece has received bailout funding of EUR240bn and private sector lenders have been forced to write down the face value of their loans by 50.5%. Greece says that it will be bankrupt next month if the EC and IMF don’t release EUR31.5bn of bailout funds withheld because the country has not delivered on its promises made when the bailout package was approved. That puts Greece on the agenda for today’s European Commission Summit (again).

The EU, IMF and ECB audit team (the troika) have concluded their mission to Greece. [More] Lloyd says: it appears that the troika has had enough, after talks with Greece broke down again last night. The audit team says that they have agreed most of the core measures needed on reform and that discussions on the remaining issues with continue via the technical representatives. An interim report is not expected to be available for this EC Summit. Lloyd adds: this is not surprising – it was predicted months ago that the report would not come out until after the US Presidential election on 6 Nov 2012.

The Guardian reports “A full break-up and demise of the euro remains unlikely but the risk of a Greek exit is material. That’s the view of ratings agency Fitch in a new report on the effect of a possible eurozone exit on covered bonds.” [More (Blog)]

Germany

Minister for Economics and Technology Philipp Rösler expects GDP growth in Germany to be positive: “We are still talking about 1% growth [for 2013], so there’s no talk about a crisis for Germany.” [More (Blog)]

UK

Unemployment fell to 7.9% in the 3 months to 31 Aug 2012, down from 8.1%. The number of people in employment has reached a record high of 29.59m.

CHINA

The National Bureau of Statistics of China reported today that “The gross domestic product (GDP) of China in the first three quarters of this year was 35,348.0 billion yuan, a year-on-year increase of 7.7 percent calculated at comparable prices. Specifically, the growth was 8.1 percent for the first quarter, 7.6 percent for the second quarter and 7.4 percent for the third quarter. The value added of the primary industry was 3,308.8 billion yuan, up by 4.2 percent; that of the secondary industry was 16,542.9 billion yuan, up by 8.1 percent; and that of the tertiary industry was 15,496.3 billion yuan, up by 7.9 percent. The gross domestic product of the third quarter of 2012 went up by 2.2 percent on a quarterly basis.” [More]

The Dec 2012 quarter is expected to see a rebound to more than 7.6%pa growth, with around 7.6% growth for the full 2012 calendar year. Growth remains below China’s average growth of 10%pa.

USA

  • Polls indicate that the public blames both political parties (Democrats and Republicans) for the state of the economy. A survey of investors by Natixis Global Asset Management indicates that:
    • 91% are concerned about USA’s public debt – what will happen to USA if the government doesn’t address the deficit and start paying down the debt?
    • 88% are worried about higher taxes on investments.
  • Housing starts rose 15% to 872,000 during Sep 2012, a rise of 35% for the year to 30 Sep 2012.

Treasury yields

  • 30-year: 3.00%, up 8 points from 2.92%
  • 10-year: 1.82%, up 10 points from 1.72%
  • 5-year: 0.78%, up 9 points from 0.69%

Commodities

Stock market indices

  • S&P 500 [SPX]: 1,461 +0.40%
  • DJIA [INDU]: 13,557 +0.04%
  • NASDAQ [IXIC]: 3,104 +0.10%

Tech stock news

  • IBM [IBM]: reported that its revenue fell 5.4% to $24.7bn, $0.7bn below the expected level of $24.7bn. Corporate customers in USA concerned about uncertainty in 2013 after the fiscal cliff have deferred purchases of software and computer maintenance contracts. IBM fell 4.91% to close at $200.63. [More]. VMware [VMW] is strongly down on concerns that deferred software purchases may impact on its revenue. VMW fell 3.82% to $87.29.

Tech stock price movements

  • Substantial rises (more than 2.0%)
    • Pandora [P]: up 6.86% to $9.35.
    • Nokia [NOK]: up 4.26% to $2.94.
    • Netflix [NFLX]: up 3.74% to $68.52.
    • Yelp [YELP]: up 3.42% to $25.70.
    • Facebook [FB]: up 2.05% to $19.88.
    • RIM [RIMM]: up 2.04% to $7.99.
    • Zynga [ZNGA]: up 2.00% to $2.55.
  • Substantial falls (more than 2.0%)
    • Salesforce [CRM]: down 2.46% to $151.63.
    • Intel [INTC]: down 2.51% to $21.79.
    • VMware [VMW]: down 3.82% to $87.29.
    • IBM [IBM]: down 4.91% to $200.63.

Tech startup news

PORTFOLIO

Portfolio index

:-( We underperformed the market today.

  • Portfolio Index (USD): 1.201 -0.50%
  • AUD 1.00 = USD 1.0433 +1.03%
  • Portfolio Index (AUD): 1.151 -1.51%

Stock prices

  • Apple [AAPL] $644.6136 -0.80%
  • Amazon [AMZN] $247.49 +1.46%
  • Ebay [EBAY] $48.20 +0.08%
  • Facebook [FB] $19.88 +2.05%.
    SeekingAlpha suggests that there is more downside for FB before it represents a value buy. [More]
  • Google [GOOG] $755.49 +1.45%
  • Linkedin [LNKD] $109.42 -1.58%.
    Bret Jensen, Chief Investment Strategist for Simplified Asset Management, notes the level of insider sales of LNKD and argues that it is overvalued. [More]
  • VMware [VMW] $87.29 -3.82%