Tue 6 Jun 2017


 NBR  Nightly Business Report.
 BTV   Bloomberg Technology: Market Report (Emily Chang).

In Portfolioticker today

Today at the stock market

bull/bearU.S. stocks fell a second day, the USD weakened to an 8-month low and Treasuries advanced as caution prevailed before testimony Thursday from former FBI Director James Comey, the ECB’s policy decision and the U.K. election.

The S&P 500 Index fell the most since mid-May 2017 as consumer and industrial shares slumped. The S&P 500 Index dropped 0.3% to 2,429.34 as of 4 p.m. in New York. Equities briefly pared declines on reports Comey would stop short of saying the president sought to obstruct justice.

Thursday is shaping up to be a pivotal day for capital markets as Comey’s testimony may give clues on how politically effective the Trump administration will be in refocusing attention on its policy agenda. Investors had already taken a defensive stance this week following a diplomatic spat among energy producing nations in the Middle East and the weekend’s terror attack in London.

“There is not much scheduled today that could potentially inspire the markets as the main focus this week is on ‘Super Thursday,”’ Piotr Matys, a London-based currency strategist at Rabobank, wrote in a client note. “Essentially, we brace for a volatile session on Thursday and Friday as at least one of those crucial events could trigger sharp moves in the markets.”

Europe’s equity benchmark slid the most in a week. The Stoxx Europe 600 Index declined 0.7%. Swiss pharmaceutical company Roche Holding AG slid after one of its drug studies disappointed.

Emerging-market shares lost 0.2%. Qatari stocks fell another 1.6% after plunging the most since 2009 on Monday when Saudi Arabia and 3 other Arab countries severed most diplomatic and economic ties to the country.

Gold headed for a 7-month high and the JPY rose to the strongest since Apr 2017, while 10-year Treasury yields fell to the lowest since Nov 2016.Bloomberg

Market indices

Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,429.33 -0.28% 2,238.83 +8.50%
DJIA INDU 21,136.23 -0.23% 19,762.60 +6.95%
NASDAQ IXIC 6,275.06 -0.33% 5,383.12 +16.56%

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 2.763 -0.02% 2.105 +31.25%
Valuation Rate USD/AUD 0.75599 +0.32% 0.72663 +4.04%
AUD-denominated Index AUD 3.655 -0.33% 2.895 +26.24%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $996.68 -0.72% $792.45 +25.77%
Alphabet C GOOG $976.57 -0.72% $771.82 +26.52%
Apple AAPL $154.45 +0.34% $115.82 +33.35%
Amazon AMZN $1,003.00 -0.82% $749.87 +33.75%
Ebay EBAY $35.47 -0.23% $29.69 +19.46%
Facebook FB $152.81 -0.53% $115.05 +32.82%
PayPal PYPL $53.40 -0.74% $39.47 +35.29%
Twitter TWTR $17.57 -3.62% $16.30 +7.79%
Visa V $95.79 -0.79% $78.02 +22.77%
VMware VMW $92.08 +0.20% $78.73 +16.95%

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 0.3% and was trading at the lowest since Oct 2016.
Japan’s JPY rose 1% to 109.409/USD, the strongest level since 21 Apr 2017 on a closing basis.
The EUR strengthened 0.2% to USD 1.1277.
Britain’s GBP was unchanged at USD 1.2904.
South Africa’s ZAR weakened 0.9% after a report showed the economy contracted in Q1/2017, a second successive negative quarter.
Bloomberg

AUD

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

Oil and Gas Futures

Futures prices

WTI crude climbed 1.7% to settle at $48.19/barrel in New York. The gains came as U.S. crude stockpiles are seen falling for a 9th week, ahead of the release of industry-funded data on inventories.Bloomberg

Prices are as at 15:48 ET

  • NYMEX West Texas Intermediate (WTI): $48.30/barrel +1.90% Chart
  • ICE (London) Brent North Sea Crude: $50.20/barrel +1.48% Chart
  • NYMEX Natural gas futures: $3.05/MMBTU +2.28% Chart

flag_australia AU: Current Account Deficit. Q1/2017

Press Release Extract [ser_50]

For the third quarter in succession, higher export commodity prices contributed to a narrowing of the current account deficit in the March quarter 2017, according to latest figures from the Australian Bureau of Statistics (ABS).

The seasonally adjusted current account deficit fell $403 million (11%) to $3,108 million in the March quarter 2017. In seasonally adjusted terms, the balance on goods and services surplus in the March quarter 2017 is the highest on record at $9,242 million. Exports of goods and services rose $4,852 million (5%) and imports of goods and services rose $1,723 million (2%). The primary income deficit widened $2,712 million (29%).

In volume terms, imports grew this quarter while exports went down, and as a result international trade is expected to detract 0.7 percentage points from growth in the March quarter 2017 Gross Domestic Product. In seasonally adjusted chain volume terms, the balance on goods and services surplus decreased $2,966 million (85%) to $543 million.

Australia’s net international investment position was a liability of $1,025.5 billion at 31 March 2017, a decrease of $2.7 billion on the revised 31 December 2016 position of $1,028.2 billion.

Australia’s net foreign debt liability decreased $13.6 billion (1%) to a net liability position of $1,015.0 billion. Australia’s net foreign equity had a turnaround of $10.9 billion from a net asset position of $0.3 billion at 31 December 2016 to a net liability position of $10.6 billion at 31 March 2017.

Australian Bureau of Statistics, “5302.0 – Balance of Payments and International Investment Position, Australia, Mar 2017“, 6 Jun 2017 More

flag_australia AU: RBA Monetary Policy Decision

Press Release Extract [ser_51]

(Same text as 2 May 2017)

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

The broad-based pick-up in the global economy is continuing. Labour markets have tightened further in many countries and forecasts for global growth have been revised up since last year. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. In China, growth is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. Commodity prices are generally higher than they were a year ago, providing a boost to Australia’s national income. The prices of iron ore and coal, however, have declined over recent months as expected, unwinding some of the earlier increases.

Headline inflation rates in most countries have moved higher over the past year, partly reflecting the higher commodity prices. Core inflation remains low, as do long-term bond yields. Further increases in US interest rates are expected over the year ahead and there is no longer an expectation of additional monetary easing in other major economies. Financial markets have been functioning effectively.

Domestically, the transition to lower levels of mining investment following the mining investment boom is almost complete. Business conditions have improved and capacity utilisation has increased. Business investment has picked up in those parts of the country not directly affected by the decline in mining investment. Year-ended GDP growth is expected to have slowed in the March quarter, reflecting the quarter-to-quarter variation in the growth figures. Looking forward, economic growth is still expected to increase gradually over the next couple of years to a little above 3 per cent.

Indicators of the labour market remain mixed. Employment growth has been stronger over recent months, although growth in total hours worked remains weak. The various forward-looking indicators point to continued growth in employment over the period ahead. Wage growth remains low and this is likely to continue for a while yet. Inflation is expected to increase gradually as the economy strengthens. Slow growth in real wages is restraining growth in household consumption.

The outlook continues to be supported by the low level of interest rates. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.

Conditions in the housing market vary considerably around the country. Prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease. In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. Growth in housing debt has outpaced the slow growth in household incomes. The recent supervisory measures should help address the risks associated with high and rising levels of indebtedness. Lenders have also announced increases in mortgage rates, particularly those paid by investors and on interest-only loans.

Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Reserve Bank of Australia, “Statement by Philip Lowe, Governor: Monetary Policy Decision“, 6 Jun 2017 More

Consequences of Increasing Interest Rates While Wage Growth is Low …

After bingeing on credit for a half decade, U.S. consumers may finally be feeling the hangover.

Americans faced with lackluster income growth have been financing more of their spending with debt instead. There are early signs that loan burdens are growing unsustainably large for borrowers with lower incomes. Household borrowings have surged to a record USD 12.73 trillion, and the percentage of debt that is overdue has risen for two consecutive quarters. And with economic optimism having lifted borrowing rates since the election and the Federal Reserve expected to hike further, it’s getting more expensive for borrowers to refinance.

Since the 2008 financial crisis, the Fed has kept rates low to encourage companies and consumers to borrow more and spur economic growth. Much of the gains in household debt since 2012 have come from student loans, auto debt and credit cards. Over that time, wage growth has averaged around 2.2% per year, and the pace has been slowing for much of this year. Bloomberg

… However Where’s There’s Wage Growth, People Invest In Their Homes

Americans’ spending on residential construction projects – from the pouring of foundations to home improvement – just hammered out its strongest 3-month period since 1994. Solid job growth, low borrowing costs and a recovery in home equity since the market crash a decade ago are generating momentum. The outsized advance in outlays also has its roots in more than favorable conditions for building across the U.S. After all, the first 4 months of 2017 were the second-warmest on record, according to the National Oceanic and Atmospheric Administration.

Home sales continue to mount, albeit unevenly, and there are more one-family houses under construction now than at any time since mid-2008.

What’s more, Americans are spending more on home improvements. While a report last Thursday from the Commerce Department showed a 2.9% drop in Apr 2017 outlays for improvements from Mar 2017, such spending was still 32.3% higher than it was a year ago. That’s the strongest advance since Jan 2000.Bloomberg

Press Release: Metrostudy

The remodeling industry opened 2017 on a strong note with the national Residential Remodeling Index (RRI) reaching a new all-time high of 107.3, which represented a solid gain of 4.5 percent from one year earlier. The index has now seen twenty consecutive quarters of year-over-year gains since 2011, which was the bottom of remodeling activity nationwide. The index has posted annual gains above 4.0 percent since the second quarter of 2015 and is forecast to continue doing so through fourth quarter 2017, before some slight moderation is expected.

The current strength of the remodeling market can be attributed primarily to economics – low mortgage rates, strong existing home sales, the bull stock market run, good job gains, and now more recently, wage gains,’ said Mark Boud, Chief Economist at Metrostudy. ‘Yet, as the economic cycle matures over the next few years, rates increase and full employment translates to less robust job growth over time, demographic trends will play a bigger role in driving demand for remodeling. Baby-boomers will continue retiring and aging in place as they have been, and Millennials will be increasingly maturing in their life stages –jobs, dating, marrying (or not marrying), buying a home, and choosing to remodel that home. And, with housing affordability an issue in many markets across the country, Millennials will be more inclined to purchase older, more-affordable existing homes that will necessitate renovations. Demographics will matter greatly to remodeling over the next few years as the economic cycle matures.’

Metrostudy, “Metrostudy Releases Q1 2017 Residential Remodeling Index (RRI)— Remodeling Activity Resilient, Set for Strong Near Term Performance“, 18 May 2017 More

flag_europe EU: Retail Trade. Apr 2017

Press Release Extract [ser_56]

In April 2017 compared with March 2017, the seasonally adjusted volume of retail trade rose by 0.1% in the euro area (EA19) and by 0.5% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In March the retail trade volume increased by 0.2% in the euro area, while it fell by 0.1% in the EU28.

eu_retail_20170606

In April 2017 compared with April 2016, the calendar adjusted retail sales index increased by 2.5% in the euro area and by 3.0% in the EU28.

Monthly comparison by retail sector and by Member State

The 0.1% increase in the volume of retail trade in the euro area in April 2017, compared with March 2017, is due to the rise of 0.6% for “Food, drinks and tobacco”, while non-food products fell by 0.4% and automotive fuel by 0.8%. In the EU28, the 0.5% increase in the volume of retail trade is due to rises of 0.6% for “Food, drinks and tobacco” and of 0.4% for non-food products, while automotive fuel fell by 0.3%.

Among Member States for which data are available, the highest increases in the total retail trade volume were registered in the United Kingdom (+2.8%), Finland (+2.0%), Portugal and Sweden (both +1.5%), while the largest decreases were observed in Croatia (-2.1%), Austria (-1.2%) and Hungary (-0.8%).

Annual comparison by retail sector and by Member State

The 2.5% increase in the volume of retail trade in the euro area in April 2017, compared with April 2016, is due to rises of 3.4% for non-food products and of 2.1% for “Food, drinks and tobacco”, while automotive fuel fell by 1.6%. In the EU28, the 3.0% increase in retail trade volume is due to rises of 4.2% for non-food products and of 2.6% for “Food, drinks and tobacco”, while automotive fuel fell by 1.1%.

Among Member States for which data are available, the highest increases in the total retail trade volume were observed in Luxembourg (+11.3%), Slovenia (+10.4%) and Ireland (+8.4%), while a decrease was observed in Belgium (-0.8%).

Eurostat, “Retail Trade. Apr 2017“, 6 Jun 2017 More

flag_usa US: Job Openings and Labor Turnover. Apr 2017

Press Release Extract [ser_49]

The number of job openings increased to a series high of 6.0 million on the last business day of April, the U.S. Bureau of Labor Statistics reported today. Over the month, hires decreased to 5.1 million and separations edged down to 5.0 million. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.1 percent and 1.1 percent, respectively. 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.

Job Openings

us_jolts1_20170606

On the last business day of April, the job openings level increased to a series high of 6.0 million (+259,000). The job openings rate was 4.0 percent. The number of job openings edged up for total private (+220,000) and increased for government (+39,000). Job openings increased in a number of industries with the largest increase occurring in accommodation and food services (+118,000). Job openings decreased in durable goods manufacturing (-30,000). The number of job openings increased in the Midwest and Northeast regions.

Hires

The number of hires fell to 5.1 million (-253,000) in April. The hires rate was 3.5 percent. The number of hires decreased for total private (-257,000) and was little changed for government. Hires decreased in health care and social assistance (-68,000) and real estate and rental and leasing (-23,000). The number of hires decreased in the West region.

Separations

us_jolts2_20170606

The number of total separations edged down to 5.0 million (-225,000) in April. The total separations rate was 3.4 percent. Total separations decreased for total private (-239,000) and was little changed for government. Total separations increased in state and local government education (+17,000) but decreased in retail trade (-100,000). The number of total separations was little changed in all four regions.

The number of quits edged down to 3.0 million (-111,000) in April. The quits rate was 2.1 percent. The number of quits was little changed for total private and decreased for government (-21,000). Quits decreased in retail trade (-72,000); state and local government, excluding education (-20,000); and information (-12,000). The number of quits was little changed in all four regions.

There were 1.6 million layoffs and discharges in April, little changed from March. The layoffs and discharges rate was 1.1 percent in April. The number of layoffs and discharges was little changed for total private and increased for government (+32,000). The layoffs and discharges level increased in state and local government, excluding education (+20,000) and in state and local government education (+12,000). Layoffs and discharges decreased in real estate and rental and leasing (-23,000). The number of layoffs and discharges was little changed in all four regions.

The number of other separations was little changed in April. Other separations edged down for total private (-46,000) and was little changed for government. Other separations increased in state and local government education (+5,000) but decreased in professional and business services (-32,000). In the regions, the number of other separations decreased in the Midwest.

Net Change in Employment

Large numbers of hires and separations occur every month throughout the business cycle. Net employment change results from the relationship between hires and separations. When the number of hires exceeds the number of separations, employment rises, even if the hires level is steady or declining. Conversely, when the number of hires is less than the number of separations, employment declines, even if the hires level is steady or rising. Over the 12 months ending in April, hires totaled 62.9 million and separations totaled 60.7 million, yielding a net employment gain of 2.2 million. These totals include workers who may have been hired and separated more than once during the year.

Bureau of Labor Statistics, “Job Openings and Labor Turnover. Apr 2017“, 6 Jun 2017 (10:00) 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

Currency: USD/CNY

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

Stockmarket: CSI300

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