Wed 31 May 2017


 NBR  Nightly Business Report.
 NAR  NAR’s Lawrence Yun discusses pending home sales in Apr 2017.
 BTV  Bloomberg TV: British election: YouGov projects hung UK Parliament YouGov
 BTV  Bloomberg TV: British election: Impact of latest projection on GBP Chart

In Portfolioticker today

Today at the stock market

bull/bearU.S. stocks trimmed a monthly advance as a decline in trading revenue (-15% so far in the second quarter) at JPMorgan Chase & Co. sent bank shares into a tailspin. The S&P 500 Index all but erased losses in the final hour of trading to finish May higher by 1.2%. Treasuries rose, while the USD and oil retreated.

  • The S&P 500 fell 0.1% to 2,411.81 at 4 p.m. in New York, trimming its gain in May 2017 to 1.2%. It closed Friday at a record and is down 0.2% since then.
  • The Nasdaq 100 Index retreated 0.1% to halt an 8-day rally. It advanced 3.7% during May 2017.
  • The Stoxx Europe 600 Index lost 0.1%.
  • The MSCI Emerging Market Index slipped 0.6%, trimming its monthly rise to 2.9%, the most since Feb 2017.

US Banks have been under pressure as 10-year Treasury yields slumped to 2.2%. Bloomberg’s USD index (DXY) retreated to cap a third straight monthly loss. Crude extended losses amid doubts prolonged output cuts will clear a global surplus. Gold climbed.Bloomberg

Market indices

Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,411.80 -0.05% 2,238.83 +7.72%
DJIA INDU 21,008.65 -0.10% 19,762.60 +6.30%
NASDAQ IXIC 6,198.52 -0.08% 5,383.12 +15.14%

The portfolio today

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

Index values

Index Currency Today Change 31 Dec 16 YTD
USD-denominated Index USD 2.737 -0.54% 2.105 +30.03%
Valuation Rate USD/AUD 0.74808 -0.46% 0.72663 +2.95%
AUD-denominated Index AUD 3.658 -0.09% 2.895 +26.36%

Portfolio stock prices

:-) PayPal closed on a record high of $52.21, beating the record of $51.19 set on 26 May 2017.
:-) Visa closed on a record high of $95.23, beating the record of $95.04 set on 25 May 2017.

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $987.09 -0.91% $792.45 +24.56%
Alphabet C GOOG $964.86 -1.13% $771.82 +25.01%
Apple AAPL $152.76 -0.59% $115.82 +31.89%
Amazon AMZN $994.62 -0.21% $749.87 +32.63%
Ebay EBAY $34.30 -0.92% $29.69 +15.52%
Facebook FB $151.46 -0.60% $115.05 +31.64%
PayPal PYPL $52.21 +2.25% $39.47 +32.27%
Twitter TWTR $18.32 -0.62% $16.30 +12.39%
Visa V $95.23 +0.57% $78.02 +22.05%
VMware VMW $97.15 +0.43% $78.73 +23.39%

FX: USD/AUD

USD

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

The Bloomberg Dollar Spot Index (DXY) fell 0.2%. The DXY weakened 1.5% in May 2017, the most since Jan 2017.
Britain’s GBP added 0.2% to USD 1.2884. The EUR jumped 0.4% to USD 1.1233.
Japan’s JPY strengthened 0.1% to 110.73/USD for a fourth straight day of advances.
Bloomberg

AUD

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

Oil and Gas Futures

Futures prices

Pumping crude from seabeds thousands of feet below water is turning cheaper as producers streamline operations and prioritize drilling in core wells, according to Wood Mackenzie Ltd. That means oil at $50/barrel could sustain some of these projects by next year, down from an average break-even price of about $62 in the first quarter and $75 in 2014, the energy consultancy estimates.

The tumbling costs present another challenge for the Organization of Petroleum Exporting Countries, which is currently curbing output to shrink a glut. In 2014, when the U.S. shale boom sparked oil’s crash from above $100/barrel, OPEC embarked on a different strategy of pumping at will to defend market share and throttle high-cost projects. Ali Al-Naimi, the former energy minister of OPEC member Saudi Arabia, said in Feb 2016 that such producers need to either “lower costs, borrow cash or liquidate.”

The falling costs make it more likely that investors will approve pumping crude from such large deep-water projects, the process for which is more complex and risky than drilling traditional fields on land. That may compete with OPEC’s oil to meet future supply gaps that the group sees forming as demand increases and output from existing wells naturally declines.Bloomberg

Prices are as at 15:48 ET

  • NYMEX West Texas Intermediate (WTI): $48.24/barrel -2.86% Chart
  • ICE (London) Brent North Sea Crude: $50.31/barrel -2.95% Chart
  • NYMEX Natural gas futures: $3.08/MMBTU -2.16% Chart

flag_europe EU: Unemployment. Apr 2017

Press Release Extract [ser_40]

The euro area (EA19) seasonally-adjusted unemployment rate was 9.3% in April 2017, down from 9.4% in March 2017 and down from 10.2% in April 2016. This is the lowest rate recorded in the euro area since March 2009. The EU28 unemployment rate was 7.8% in April 2017, down from 7.9% in March 2017 and from 8.7% in April 2016. This is the lowest rate recorded in the EU28 since December 2008. These figures are published by Eurostat, the statistical office of the European Union.

eu_ue_20170531

Eurostat estimates that 19.121 million men and women in the EU28, of whom 15.040 million in the euro area, were unemployed in April 2017. Compared with March 2017, the number of persons unemployed decreased by 253 000 in the EU28 and by 233 000 in the euro area. Compared with April 2016, unemployment fell by 2.225 million in the EU28 and by 1.529 million in the euro area.

Member States

Among the Member States, the lowest unemployment rates in April 2017 were recorded in the Czech Republic (3.2%), Germany (3.9%) and Malta (4.1%). The highest unemployment rates were observed in Greece (23.2% in February 2017) and Spain (17.8%).

eu_ue_states_20170531

Compared with a year ago, the unemployment rate in April 2017 fell in twenty-seven Member States and remained stable in Finland. The largest decreases were registered in Croatia (from 13.7% to 11.0%), Spain (from 20.4% to 17.8%) and Ireland (from 8.4% to 6.4%).

In April 2017, the unemployment rate in the United States was 4.4%, down from 4.5% in March 2017 and from 5.0% in April 2016.

Youth unemployment

In April 2017, 3.746 million young persons (under 25) were unemployed in the EU28, of whom 2.617 million were in the euro area. Compared with April 2016, youth unemployment decreased by 600 000 in the EU28 and by 419 000 in the euro area. In April 2017, the youth unemployment rate was 16.7% in the EU28 and 18.7% in the euro area, compared with 19.0% and 21.4% respectively in April 2016. In April 2017, the lowest rate was observed in Germany (6.8%), while the highest were recorded in Greece (47.9% in February 2017), Spain (39.3%) and Italy (34.0%).

Eurostat, “Unemployment. Apr 2017“, 31 May 2017 More

flag_europe EU: Inflation (HICP). May 2017 (Flash Estimate)

Press Comment: Bloomberg

Euro-area inflation slowed more than economists forecast, giving ammunition for European Central Bank policy makers who say it’s too early to commit to an exit from monetary stimulus.

Consumer-price growth decelerated to 1.4% in May 2017 — the weakest reading this year — from 1.9% Apr 2017, Eurostat said on Wednesday. A measure that strips out volatile components such as energy and food fell to 0.9%, also weaker than expected. In a separate release, the European Union’s statistics office said unemployment declined to 9.3%, its lowest level since Mar 2009.

ECB President Mario Draghi has tried to downplay expectations that the Governing Council will do much more than acknowledge the latest economic progress — let alone put the ECB on an exit course — at its meeting next week in Tallinn. Actual proof that price trends remain weak should help him hammer home the message that the central bank has to remain patient and quell the urge of some of his colleagues to take more decisive steps.Bloomberg

Press Release Extract [ser_21]

Euro area annual inflation is expected to be 1.4% in May 2017, down from 1.9% in April 2017, according to a flash estimate from Eurostat, the statistical office of the European Union.

Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in May (4.6%, compared with 7.6% in April), followed by food, alcohol & tobacco (1.5%, stable compared with April), services (1.3%, compared with 1.8% in April) and non-energy industrial goods (0.3%, stable compared with April).

Eurostat, “Inflation (HICP). May 2017 (Flash Estimate)“, 31 May 2017 More

flag_usa US: Pending Home Sales. Apr 2017

Press Release Extract [ser_79]

Pending home sales in April slumped for the second consecutive month and were down year-over-year nationally and in all four major regions, according to the National Association of Realtors®. Only the West saw an increase in contract signings last month.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 1.3 percent to 109.8 in April from a downwardly revised 111.3 in March. After last month’s decline, the index is now 3.3 percent below a year ago, which is the first year-over-year decline since last December and the largest since June 2014 (7.1 percent).

Lawrence Yun, NAR chief economist, says contract activity is fading this spring because significantly weak supply levels are spurring deteriorating affordability conditions. “Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market,” he said. “Realtors® are indicating that foot traffic is higher than a year ago, but it’s obviously not translating to more sales.”

Added Yun, “Prospective buyers are feeling the double whammy this spring of inventory that’s down 9.0 percent from a year ago and price appreciation that’s much faster than any rise they’ve likely seen in their income.”

Unfortunately, Yun believes there is little evidence these astoundingly low supply levels are going away soon. Homebuilding activity has not picked up enough this year and too few homeowners are listing their home for sale.

“The unloading of single-family homes purchased by real estate investors during the downturn for rental purposes would also go a long way in helping relieve these inventory shortages,” said Yun. “To date, there are no indications investors are ready to sell. However, they should be mindful of the fact that rental demand will soften as the overall population of young adults starts to shrink in roughly five years.”

Yun forecasts existing-home sales to be around 5.64 million this year, an increase of 3.5 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 5 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

The PHSI in the Northeast decreased 1.7 percent to 97.2 in April, and is now 0.6 percent below a year ago. In the Midwest the index fell 4.7 percent to 104.4 in April, and is now 6.1 percent lower than April 2016.

Pending home sales in the South declined 2.7 percent to an index of 125.9 in April and are now 2.3 percent below last April. The index in the West jumped 5.8 percent in April to 100.0, but is still 4.2 percent below a year ago.

National Association of Realtors, “Pending Home Sales. Apr 2017“, 31 May 2017 (10:00) More

flag_usa US: Beige Book. May 2017

Press Release Extract [ser_80]

Overall Economic Activity

Most of the twelve Federal Reserve Districts reported that their economies continued to expand at a modest or moderate pace from early April through late May. Boston and Chicago signaled that growth in their Districts had slowed somewhat to a modest pace since the prior Beige Book period, while New York indicated that activity had flattened out. Consumer spending softened with many Districts noting little or no change in non-auto retail sales, while auto sales have edged down from last year’s record highs in several Districts; tourism activity has continued to keep pace with the general economy. Meanwhile, the majority of Districts continued to report moderate growth in manufacturing activity and in most non-financial service sectors. Construction of new homes and nonresidential structures also continued to grow at modest to moderate rates, as did sales of existing homes; nonresidential leasing picked up a bit. Lending volume trends tended to mirror (and support) the general activity of the economy. Agricultural conditions remained mixed with some regions negatively affected by unusually wet weather. Most energy sectors tended to modestly improve. A majority of Districts reported that firms expressed positive near-term outlooks; however, optimism waned somewhat in a few Districts.

Employment and Wages

Labor markets continued to tighten, with most Districts citing shortages across a broadening range of occupations and regions. Despite supply constraints impeding the ability of firms to attract and retain qualified workers, most Districts reported that employment continued to grow at a modest to moderate pace. Similarly, most firms across the Districts noted little change to the recent trend of modest to moderate wage growth, although many firms reported offering high- er wages to attract workers where shortages were most severe. A manufacturing firm in the Chicago District reported attracting better applicants and improving retention for its unskilled workforce by raising wages 10 percent.

Prices

On balance, pricing pressures were little changed from the prior report, with most Districts reporting modest increases. Rapidly rising costs for lumber, steel, and other commodities tended to push input costs higher for some manufacturers and the construction sector. In contrast, some Districts noted falling prices for certain final goods, including groceries, apparel, and autos. Energy prices and farm prices were mixed across products and among Districts. Low inventories of for-sale homes were pushing house prices higher in many markets.

US Federal Reserve, “Summary of Commentary on Current Economic Conditions By Federal Reserve District (Beige Book)“, 31 May 2017 (14:00) More

flag_japan Japan update

Currency: USD/JPY

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

Stockmarket: Nikkei 225

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

flag_china China update

Industrial Profits. First Four Months of 2017

Press Release Extract [ser_cn]

In the first four months of 2017, the profits made by industrial enterprises above the designated size achieved 2,278.03 billion yuan, a year-on-year increase of 24.4 percent, and the growth rate decreased by 3.9 percentage points from the first three months.

In the first four months, the profits of state-holding industrial enterprises above the designated size gained 514.86 billion yuan, up by 58.7 percent year-on-year; that of collective-owned enterprises reached 14.08 billion yuan, an increase of 5.0 percent; that of joint-stock enterprises stood at 1,567.71 billion yuan, up by 26.7 percent; that of foreign funded enterprises, and enterprises funded from Hong Kong, Macao and Taiwan achieved 560.58 billion yuan, increased by 19.8 percent; and that of private enterprises gained 750.7 billion yuan, an increase of 14.3 percent.

In the first four months, the profits of mining and quarrying reached 161.92 billion yuan, while that in the same period of last year was -7.11 billion yuan; that of manufacturing was 1,999.07 billion yuan, an increase of 19.9 percent year-on-year; that of production and distribution of electricity, heat, gas and water reached 117.04 billion yuan, down by 31.3 percent.

In the first four months, within 41 branches of industrial divisions, the industrial profits of 38 industrial divisions increased year-on-year, and that of 3 decreased. In view of the profit growth of major industries, the profits of processing of food from agricultural products increased by 8.4 percent year-on-year, that of manufacture of textile up by 5.3 percent, that of processing of petroleum, coking, processing of nucleus fuel increased by 46.5 percent, that of manufacture of chemical raw material and chemical products increased by 39.7 percent, that of manufacture of non-metallic mineral products increased by 26.8 percent, that of manufacture and processing of ferrous metals increased by 1.4 times, that of manufacture and processing of non-ferrous metals increased by 74.5 percent, that of manufacture of general-purpose machinery up by 20.0 percent, that of manufacture of special-purpose machinery up by 24.4 percent, that of manufacture of motor vehicles increased by 11.8 percent, that of manufacture of electrical machinery and equipment increased by 4.4 percent, that of manufacture of computer, communication equipment and other electronic equipment increased by 12.9 percent, mining and washing of coal, extraction of petroleum and natural gas turned losses in the same period into profits, and the profits of production and supply of electric power and heat power down by 36.9 percent.

In the first four months, the revenue from principal activities of industrial enterprises above the designated size reached 37.7 trillion yuan, increased by 13.5 percent year-on-year. The costs of principal activities were 32.2 trillion yuan, up by 13.4 percent. The profit rate of revenue from principal activities was 6.04 percent, an increase of 0.53 percentage points year-on-year.

By the end of April, the total assets of industrial enterprises above the designated size was 105.4 trillion yuan, increased by 7.9 percent year-on-year; the total liabilities reached 59.2 trillion yuan, increased by 6.7 percent; the total owners’ equity was 46.2 trillion yuan, increased by 9.4 percent. The asset-liability ratio was 56.2 percent, a decrease of 0.6 percentage points year-on-year.

By the end of April, the total volume of receivable accounts for industrial enterprises above designated hit 12.4 trillion yuan, went up by 10.7 percent year-on-year. The total value of finished products for industrial enterprises accounted for 3,988.88 billion yuan, increased by 10.4 percent.

In the first four months, the costs for per-hundred-yuan turnover of principal activities stood at 85.51 yuan, a decrease of 0.06 yuan year-on-year; the revenue from principal activities brought by per hundred yuan assets was 108.7 yuan, an increase of 5.5 yuan; the revenue from principal activities per capita was 1272 thousand yuan, an increase of 158 thousand yuan; the turnover days of finished goods were 14.4 days, a decrease of 0.7 days; the days sales outstanding hit an average of 38.4 days, a decrease of 1.0 day.

In April, the profits made by industrial enterprises above the designated size achieved 572.78 billion yuan, a year-on-year increase of 14.0 percent, and the growth rate decreased by 9.8 percentage points from March.

National Bureau of Statistics of China, “Industrial Profits. First Four Months of 2017“, 31 May 2017 More

Manufacturing PMI. May 2017

Press Comment: Bloomberg

China’s official manufacturing gauge held up in May 2017, buoyed by an improving global outlook.

Key Points:

  • Manufacturing PMI remained at 51.2 for a second straight month in May 2017, compared with a median estimate of 51 in a Bloomberg survey of economists.
  • Non-manufacturing PMI rose to 54.5.

While some early indicators for May 2017 suggested a slowdown in growth is taking hold, the PMI data signal continuing momentum that gives policy makers more room to rein in financial risks. While economists forecast growth will meet or exceed the government’s target of at least 6.5% this year, projections also point to a continued slowdown after the first quarter’s surprise acceleration to a 6.9% pace.

Economist Takeaways

Callum Henderson, a managing director for Asia-Pacific at Eurasia Group in Singapore: “China’s economy is stabilizing ahead of a modest slowdown in the second half. The service PMI was still very strong at 54.5, evidence that the Chinese consumer remains active.”

Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing: “Whether or not growth has steadied in May, the path for the months ahead is down. The official PMI is indicating stability, but most other early gauges point to a further moderation in growth in May. China’s markets have also only recently recovered their footing, following the deleveraging scare.”

Tommy Xie, an economist at OCBC Bank in Singapore: “The global economy will continue to recover and that’ll bolster Chinese manufacturers. PMI this year will probably stay above 50. But the deleveraging campaign will inevitably slow growth as tightening measures have already pushed up borrowing costs for factories.”

Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney: “While Chinese growth may have slowed from earlier this year, it looks to have stabilized at a level that is still solid and consistent with the official 6.5 percent GDP target. Policy is likely to continue to focus on fine tuning the economy, but it doesn’t need big adjustments.Bloomberg

Press Release Extract [ser_77]

In May 2017, China’s manufacturing purchasing managers index (PMI) was 51.2 percent, flat from last month, and continued to be higher than the threshold, the manufacturing industry grew steadily.

cn_pmi_20170531

In view of the sizes of enterprises, the PMI of large-sized enterprises was 51.2 percent, decreased 0.8 percentage points from last month, but continued to be higher than the threshold; that of medium-sized and small-sized enterprises were 51.3 and 51.0 percent respectively, increased 1.1 and 1.0 percentage points from last month respectively, of which, the PMI of small-sized enterprises rose for three consecutive months, and rose to the expansion range for the first time during the year.

Among the five sub-indices composing PMI, the production index, new orders index and supplier delivery time index were higher than the threshold. The main raw materials inventory index and employed person index were lower than the threshold.

Production index was 53.4 percent, a decrease of 0.4 percentage points month-on-month, and still positioned in the expansion range, indicating that the manufacturing production kept growth.

New orders index was 52.3 percent, the same as last month, and was higher than the threshold, showing that the manufacturing market demand expanded.

Main raw materials inventory index was 48.5 percent, increased 0.2 percentage points month-on-month, and continued to be below the threshold, indicating that the manufacturing main raw material inventory continued to decrease.

Employed person index was 49.4 percent, increased 0.2 percentage points month-on-month, and was still below the threshold, indicating that the pace of decline of manufacturing enterprises’ labor employment narrowed.

Supplier delivery time index was 50.2 percent, a decrease of 0.3 percentage points from last month, still higher than the threshold, indicating that the delivery time of manufacturing raw material suppliers was accelerated slightly month-on-month.

National Bureau of Statistics of China, “Manufacturing PMI. May 2017“, 31 May 2017 More

Non-Manufacturing PMI. May 2017

Press Release Extract [ser_78]

In May 2017, China’s non-manufacturing purchasing manager index was 54.5 percent, an increase of 0.5 percentage points from the previous month, and was positioned in the expansion range. The non-manufacturing industry continued to maintain a steady and rapid development momentum, and the growth has accelerated.

cn_psi_20170531

In view of different industries, non-manufacturing purchasing manager index of service industry was 53.5 percent, an increase of 0.9 percentage points from the previous month, and the growth of the service industry has accelerated. Of which, the indices of retail trade, transport via railway, air transport, post, telecommunications, broadcasting, television and satellite transmission services, were positioned in the high level of the range which above 59.0 percent, and the total enterprise business increased rapidly. The indices of transport via road, loading, unloading, portage and storage, capital market services, real estate, were below the threshold, and the total business decreased. Non-manufacturing purchasing manager index of construction industry achieved 60.4 percent, a decrease of 1.2 percentage points from the previous month, still positioned in the high level of the range which above 60.0 percent.

New orders index was 50.9 percent, up by 0.4 percentage points from the previous month, and continued to be higher than the threshold, indicating that the growth of the non-manufacturing market demand accelerated. In view of different industries, the new orders index of service industry was 50.3 percent, increased 0.6 percentage points from the previous month, and moved back above the threshold. The new orders index of construction industry was 54.1 percent, decreased 1.3 percentage points from the previous month, and was higher than the threshold.

Input price index was 51.1 percent, down by 0.6 percentage points from the previous month, and was still above the threshold, indicating that the input price during the process of production and operation of non-manufacturing enterprises continued to increase, while the amount of increase narrowed. In view of different industries, the intermediate input price indices of service industry was 49.8 percent, decreased 1.7 percentage points from the previous month. The input price index of construction industry was 58.4 percent, an increase of 5.6 percentage points from the previous month.

The sales price index was 48.8 percent, down by 1.4 percentage points from last month, and was below the threshold, indicating that the overall level of non-manufacturing sales price decreased. In view of different industries, the sales price index of service industry was 48.1 percent, a decrease of 1.6 percentage points from the previous month. The sales price index of construction industry was 52.9 percent, a decrease of 0.2 percentage points from the previous month.

Employment index was 49.0 percent, decreased 0.5 percentage points from the previous month, and was lower than the threshold. In view of different industries, the employment index of service industry was 48.4 percent, a decrease of 0.7 percentage points from the previous month. The employment index of construction industry was 52.4 percent, an increase of 0.5 percentage points from the previous month.

Business activities expectation index was 60.2 percent, an increase of 0.5 percentage points from last month, rose to the high level of the range.

National Bureau of Statistics of China, “Non-Manufacturing PMI. May 2017“, 31 May 2017 More

Currency: USD/CNY

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

China’s offshore yuan jumped the most in 4 months as funding costs surged amid speculation policy makers were supporting the currency in the wake of a surprise sovereign rating downgrade.Bloomberg

Stockmarket: CSI300

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

The Shanghai Composite rose 0.2%, after an earlier gain of 1.1% on better-than-expected Chinese factory data.Bloomberg