Thu 8 Jun 2017


watch Nightly Business Report.
watch ECB Monetary Policy Press Conference.
watch Bloomberg TV: Comey Testimony. Trump v Comey.
watch UK Election Summed Up by a 3 Year old Scottish Girl.
watch LiveWire: Buy Hold Sell (Altium, Catapult, Gentrack, Bravura)

In Portfolioticker today

Today at the stock market

bull/bearU.S. stocks ended an up-and-down session little changed, while Treasuries fell and the USD advanced as the European Central Bank decision and testimony from former FBI Director James Comey did little to impact financial markets.

The S&P 500 Index edged higher, with markets weighing his testimony for clues on the fate of the Trump administration’s policy agenda. Banks advanced as the 10-year Treasury yield climbed to 2.20%. U.K. assets were weighed down by risks of shock outcomes as British voters head to polls in a general election. The EUR weakened after Mario Draghi signaled that inflation in the region remains tepid, overshadowing improved prospects for the economy. Crude closed at a 5-week low.

  • The S&P 500 rose less than one point to 2,433.78 at 16:00 in New York, for a second day of gains. It briefly rose above its closing record during Comey’s testimony but faded in afternoon trading.
  • Banks led gains for a second day, while energy shares slid. Rate-sensitive shares fell the most.
  • Small caps rallied 1.4% to the highest since 27 Apr 2017. It closed 0.2% below a record.
  • The Stoxx Europe 600 Index edged lower, while the FTSE 100 dropped 0.4%.
  • The MSCI Emerging Market Index added 0.4%.

The ousted FBI director called Trump’s explanations for firing him “lies,” though his comments had little implications for financial markets. The ECB’s earlier decision failed to have any lasting impact on assets as investors now turn to the results of the U.K. election, due at 17:00. in New York.

At a press conference after the ECB rates decision, President Draghi said risks to the euro-area economy were “broadly balanced,” while revising inflation forecasts weaker. Until they see stronger evidence of a recovery and a pickup in prices, policy makers will hesitate to shut off stimulus taps, Aberdeen Asset Management Senior Investment Manager Patrick O’Donnell, said before Draghi’s briefing.Bloomberg

Market indices

Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,433.79 +0.02% 2,238.83 +8.70%
DJIA INDU 21,182.53 +0.04% 19,762.60 +7.18%
NASDAQ IXIC 6,321.76 +0.38% 5,383.12 +17.43%

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 2.775 -0.10% 2.105 +31.87%
Valuation Rate USD/AUD 0.75982 -0.03% 0.72663 +4.56%
AUD-denominated Index AUD 3.654 -0.07% 2.895 +26.20%

Portfolio stock prices

:-) Alphabet closed on a record high of $1,987.69 beating the record of $1,987.56 set on 5 Jun 2017:

  • Class A shares (GOOGL) closed at $1,004.28 beating the record of $1,003.88 set on 5 Jun 2017.

:-) Ebay closed on a record high of $36.14, beating the record of $35.77 set on 7 Jun 2017.
:-) Facebook closed on a record high of $154.71, beating the record of $153.63 set on 5 Jun 2017.
:-) PayPal closed on a record high of $54.39, beating the record of $53.85 set on 7 Jun 2017.

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $1004.28 +0.27% $792.45 +26.73%
Alphabet C GOOG $983.41 +0.24% $771.82 +27.41%
Apple AAPL $154.99 -0.24% $115.82 +33.81%
Amazon AMZN $1010.27 +0.02% $749.87 +34.72%
Ebay EBAY $36.14 +1.03% $29.69 +21.72%
Facebook FB $154.71 +1.04% $115.05 +34.47%
PayPal PYPL $54.39 +1.00% $39.47 +37.80%
Twitter TWTR $17.59 +0.92% $16.30 +7.91%
Visa V $96.09 +0.02% $78.02 +23.16%
VMware VMW $90.61 -2.41% $78.73 +15.08%

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 added 0.2%.
The EUR fell 0.4% to USD 1.12108, while Britain’s GBP weakened 0.2% to USD 1.294.
Bloomberg

AUD

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

Oil and Gas Futures

Futures prices

Oil fell to the lowest level in 5 weeks in New York after an unexpected increase in U.S. crude stockpiles cast doubt on OPEC’s ability to rebalance world crude markets. Futures settled lower by 0.2% to $45.72. The contract fell as much as 0.9% in New York after sinking 5.1% Wednesday.Bloomberg

Prices are as at 15:48 ET

  • NYMEX West Texas Intermediate (WTI): $45.64/barrel -0.17% Chart
  • ICE (London) Brent North Sea Crude: $47.88/barrel -0.37% Chart
  • NYMEX Natural gas futures: $3.03/MMBTU +0.26% Chart

Yahoo! Will Disappear After Its Asset Sale to Verizon

In Jul 2016 Verizon agreed to purchase Yahoo’s assets and real estate for $4.8 billion, reduced to $4.5 billion in Feb 2017. What remained were Yahoo’s investments in Alibaba Group and Yahoo Japan and its will convertible notes and non-core patents. These were temporarily named RemainCo, and will become Altaba.

Yahoo today announced that it: “anticipates that the Sale Transaction will close on June 13, 2017. As previously announced, following the closing of the Sale Transaction, the Company will change its name to “Altaba Inc.” and register as an investment company under the Investment Company Act of 1940.Press Release

Today’s Special Meeting of Stockholders also agreed to extend Yahoo’s previously announced modified “Dutch auction” self-tender offer to purchase for cash up to $3 billion of shares of its common stock until June 16, 2017. Press Release

Press Report

In a vote today, Yahoo’s stockholders formally approved the sale of sad former internet company Yahoo to telecoms giant Verizon. The sale values Yahoo at about $4.5 billion, a price that was reduced by hundreds of millions in Feb 2017, after details of a major Yahoo security breach leaked.

As the vote took place today, details also leaked out about staff reductions that Verizon is imposing on its new acquisition. Around 2,100 positions are reportedly being cut across Yahoo and AOL, the current Verizon subsidiary that Yahoo is being merged with.

Verizon’s post-acquisition plan for Yahoo is to merge it with AOL, which these days is mostly a media company. The combined monstrosity will be called “Oath,” presumably because Verizon has realized that neither AOL nor Yahoo are particularly well-regarded brands these days. Oath may be an attempt to imply security and reliability, something that Yahoo is not known for after hundreds of millions of customer accounts were hacked.

The job losses account for around 15% of Yahoo and AOL’s workforce, and will reportedly be applied across the globe. Some of those positions will be duplicate roles in finance, HR, and other admin departments, but cuts to editorial and product teams are also possible.

In unrelated news, Yahoo also voted today to approve the final compensation for its executive team. Marissa Mayer, Yahoo’s outgoing CEO, stands to make $186 million from the sale. During her five-year tenure as CEO, she made a number of dubious moves, like a $1.1-billion acquisition of Tumblr and paying a teenager $30 million for an app with no underlying technology or code.Yahoo Finance

flag_australia AU: International Trade in Goods and Services. Apr 2017

msc_containership

Press Release Extract [ser_45]

BALANCE ON GOODS AND SERVICES

While remaining in surplus, the balance on goods and services has fallen to the lowest point in six months to $555 million, a decrease of $2,614 million on the surplus in March 2017. The decline was largely due to a reduction in exports, with imports relatively unchanged.

The reduction in exports in April was driven in large part by a fall in seasonally adjusted coal, coke and briquettes exports, which were down $2,521 million (45 per cent). In late March 2017, a category four tropical cyclone, Tropical Cyclone Debbie, crossed the North Queensland coast. Strong wind and storm surges caused significant damage to transport infrastructure to the ports resulting in a significant decrease in export quantities of coal in April 2017.

  • In trend terms, the balance on goods and services was a surplus of $3,224m in April 2017, a decrease of $70m (2%) on the surplus in March 2017.
  • In seasonally adjusted terms, the balance on goods and services was a surplus of $555m in April 2017, a decrease of $2,614m (82%) on the surplus in March 2017.
Feb 2017 Mar 2017 Apr 2017 Change
EXPORTS of goods and services (Credits)
Trend estimates $32,970m $33,170m $33,201m +0%
Seasonally adjusted $32,592m $33,374m $30.590m -8%
IMPORTS of goods and services (Debits)
Trend estimates $29,715m $29,976m $29,977m +0%
Seasonally adjusted $28,856m $30,206m $30,035m -1%
BALANCE on goods and services
Trend estimates +$3,255m +$3,294m +$3,224m -2%
Seasonally adjusted +$3,737m +$3.169m +$555m -82%

CREDITS (EXPORTS OF GOODS AND SERVICES)

  • Between March and April 2017, the trend estimate of goods and services credits rose $31m to $33,201m.
  • In seasonally adjusted terms, goods and services credits fell $2,784m (8%) to $30,590m. Non-rural goods fell $2,497m (12%), non-monetary gold fell $373m (20%) and rural goods fell $73m (2%). Net exports of goods under merchanting rose $3m (8%). Services credits rose $156m (2%).

DEBITS (IMPORTS OF GOODS AND SERVICES)

  • Between March and April 2017, the trend estimate of goods and services debits rose $101m to $29,977m.
  • In seasonally adjusted terms, goods and services debits fell $171m (1%) to $30,035m. Intermediate and other merchandise goods fell $198m (2%), non-monetary gold fell $153m (27%) and consumption goods fell $102m (1%). Capital goods rose $130m (2%). Services debits rose $152m (2%).

Australian Bureau of Statistics, “5368.0 – International Trade in Goods and Services. Apr 2017“, 8 Jun 2017 More

flag_europe EU: UK Election

Exit Poll: Tories Lose Majority The Conservatives are set to be the largest party but without an overall majority according a joint NOP/Ipsos MORI poll for BBC/ITV/Sky: Tories (314), Labour (266), SNP (34), Lib Dems (14), UKIP (0). A majority requires 326 seats in a Parliament of 650 seats. The exit poll is based on interviews of 30,450 people from 144 polling stations across the UK. About 45.8 million people entitled are to vote, and 63.52% of those voted (voting is not compulsory in the UK). BBC

gbp_20170608

Live Results Election Result Tracker

flag_europe EU: GDP. Q1/2017

Press Release Extract [ser_52]

Seasonally adjusted GDP rose by 0.6% in both the euro area (EA19) and the EU28 during the first quarter of 2017, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the fourth quarter of 2016, GDP grew by 0.5% and 0.6% respectively.

eu_gdp_20170608

Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.9% in the euro area and by 2.1% in the EU28 in the first quarter of 2017, after +1.8% and +2.0% respectively in the previous quarter.

During the first quarter of 2017, GDP in the United States increased by 0.3% compared with the previous quarter (after +0.5% in the fourth quarter of 2016). Compared with the same quarter of the previous year, GDP grew by 2.0% (after +2.0% also in the previous quarter).

GDP growth by Member State

Among Member States for which data are available for the first quarter of 2017, Romania (+1.7%), Latvia (+1.6%), Slovenia (+1.5%) and Lithuania (+1.4%) recorded the highest growth compared with the previous quarter, while the United Kingdom (+0.2%) recorded the lowest growth.

eu_gdp_states_20170608

GDP components and contributions to growth

During the first quarter of 2017, household final consumption expenditure rose by 0.3% in the euro area and by 0.4% in the EU28 (after +0.4% and +0.5% respectively in the previous quarter). Gross fixed capital formation increased by 1.3% in the euro area and by 1.4% in the EU28 (after +3.4% and +2.5%). Exports rose by 1.2% in the euro area and by 1.0% in the EU28 (after +1.7% and +2.0%). Imports increased by 1.3% in the euro area and by 1.7% in the EU28 (after +3.8% and +2.8%).

Household final consumption expenditure had a positive contribution to GDP growth in both the euro area and the EU28 (both +0.2 percentage points – pp) as had gross fixed capital formation (+0.3 pp in both zones). The contribution of the external balance to GDP growth was neutral for the euro area and negative for the EU28. The contribution of changes in inventories was neutral for the euro area and positive for the EU28.

Eurostat, “GDP and main aggregates estimate for the first quarter of 2017“, 8 Jun 2017 More

flag_europe ECB: Monetary Policy Decision (Interest Rates)

Press Release Extract [ser_41]

At today’s meeting, which was held in Tallinn, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.

European Central Bank, “Monetary Policy Decision“, 8 Jun 2017 More

Press Conference Introductory Statement

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We expect them to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases. Regarding non-standard monetary policy measures, we confirm that our net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme.

Our monetary policy measures have continued to preserve the very favourable financing conditions that are necessary to secure a sustained convergence of inflation rates towards levels below, but close to, 2% over the medium term. The information that has become available since our last monetary policy meeting in late April confirms a stronger momentum in the euro area economy, which is projected to expand at a somewhat faster pace than previously expected. We consider that the risks to the growth outlook are now broadly balanced.

At the same time, the economic expansion has yet to translate into stronger inflation dynamics. So far, measures of underlying inflation continue to remain subdued. Therefore, a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to build up and support headline inflation in the medium term. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase programme in terms of size and/or duration.

Let me now explain our assessment in greater detail, starting with the economic analysis. Euro area real GDP increased by 0.6%, quarter on quarter, in the first quarter of 2017, after 0.5% in the last quarter of 2016. Incoming data, notably survey results, continue to point to solid, broad-based growth in the period ahead. The pass-through of our monetary policy measures has facilitated the deleveraging process and should continue to support domestic demand. In particular, the recovery in investment continues to benefit from very favourable financing conditions and improvements in corporate profitability. Employment gains, which are also benefiting from past labour market reforms, are supporting real disposable income and private consumption. Moreover, the global recovery is increasingly supporting trade and euro area exports. However, economic growth prospects continue to be dampened by a sluggish pace of implementation of structural reforms, in particular in product markets, and by remaining balance sheet adjustment needs in a number of sectors, notwithstanding ongoing improvements.

This assessment is broadly reflected in the June 2017 Eurosystem staff macroeconomic projections for the euro area, finalised in late May, which are conditional on the full implementation of all our monetary policy measures. These projections foresee annual real GDP increasing by 1.9% in 2017, by 1.8% in 2018 and by 1.7% in 2019. Compared with the March 2017 ECB staff macroeconomic projections, the outlook for real GDP growth has been revised upwards over the projection horizon.

The risks surrounding the euro area growth outlook are considered to be broadly balanced. On the one hand, the current positive cyclical momentum increases the chances of a stronger than expected economic upswing. On the other hand, downside risks relating to predominantly global factors continue to exist.

According to Eurostat’s flash estimate, euro area annual HICP inflation was 1.4% in May, following 1.9% in April and 1.5% in March. As expected, the recent volatility in inflation rates was mainly due to energy prices and temporary increases in services prices over the Easter period. Looking ahead, on the basis of current futures prices for oil, headline inflation is likely to remain around current levels in the coming months. At the same time, measures of underlying inflation remain low and have yet to show convincing signs of a pick-up, as unutilised resources are still weighing on domestic price and wage formation. Underlying inflation is expected to rise only gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion and the corresponding gradual absorption of economic slack.

This assessment is also broadly reflected in the June 2017 Eurosystem staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 1.5% in 2017, 1.3% in 2018 and 1.6% in 2019. By comparison with the March 2017 ECB staff macroeconomic projections, the outlook for headline HICP inflation has been revised downwards, mainly reflecting lower oil prices.

Turning to the monetary analysis, broad money (M3) continues to expand at a robust pace, with an annual rate of growth of 4.9% in April 2017, after 5.3% in March. As in previous months, annual growth in M3 was mainly supported by its most liquid components, with the narrow monetary aggregate M1 expanding at an annual rate of 9.2% in April 2017, after 9.1% in March.

The recovery in loan growth to the private sector observed since the beginning of 2014 is proceeding. The annual growth rate of loans to non-financial corporations increased to 2.4% in April 2017, from 2.3% in the previous month, while the annual growth rate of loans to households remained stable at 2.4% in April. The pass-through of the monetary policy measures put in place since June 2014 continues to significantly support borrowing conditions for firms and households, access to financing, notably for small and medium-sized enterprises, and, hence, credit flows across the euro area.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for a continued very substantial degree of monetary accommodation to secure a sustained return of inflation rates towards levels that are below, but close to, 2%.

In order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively to strengthening economic growth. The implementation of structural reforms needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost productivity and potential output growth. Regarding fiscal policies, all countries would benefit from intensifying efforts towards achieving a more growth-friendly composition of public finances. A full, transparent and consistent implementation of the Stability and Growth Pact and of the macroeconomic imbalances procedure over time and across countries remains essential to bolster the resilience of the euro area economy.

Mario Draghi, President of the ECB; Vítor Constâncio, Vice-President of the ECB; “Introductory Statement“, Statement 8 Jun 2017

flag_usa USA: Unemployment Insurance Weekly Claims Report

Press Comment: Reuters

The number of Americans filing for unemployment benefits fell last week, unwinding half of the prior period’s jump and suggesting the labor market was tightening despite a recent slowdown in job growth.

Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 245,000 for the week ended 3 Jun 2017, the Labor Department said on Thursday. Economists polled by Reuters had forecast first-time applications for jobless benefits falling to 240,000 in the latest week.

Claims surged by 20,000 in the prior week, with California, Tennessee, Kansas, and Missouri accounting for the bulk of the increase. Some of that increase was related to school summer breaks in which bus drivers and cafeteria workers were left temporarily unemployed.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 118 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at a 16-year low of 4.3%.Reuters

Press Release Extract [ser_4]

insurance

In the week ending June 3, the advance figure for seasonally adjusted initial claims was 245,000, a decrease of 10,000 from the previous week’s revised level. The previous week’s level was revised up by 7,000 from 248,000 to 255,000. The 4-week moving average was 242,000, an increase of 2,250 from the previous week’s revised average. The previous week’s average was revised up by 1,750 from 238,000 to 239,750.

unemployment

The advance seasonally adjusted insured unemployment rate was 1.4 percent for the week ending May 27, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending May 27 was 1,917,000, a decrease of 2,000 from the previous week’s revised level. The previous week’s level was revised up 4,000 from 1,915,000 to 1,919,000. The 4-week moving average was 1,914,750, a decrease of 750 from the previous week’s revised average. This is the lowest level for this average since January 12, 1974 when it was 1,881,000. The previous week’s average was revised up by 1,000 from 1,914,500 to 1,915,500.

Employment and Training Administration, “Unemployment Insurance Weekly Claims Report“, 8 Jun 2017 (08:30) More

flag_usa US: Former FBI Director Comey’s Testimony

Former FBI Director James B. Comey gives testimony to the Senate Select Committee on Intelligence

Former FBI Director Comey gives testimony to the Senate Select Committee on Intelligence

Press Release Extract [ser_comey]

During 2½ hours of testimony Thursday before the Senate Intelligence Committee, Comey said Trump’s shifting explanations for dismissing him were “lies, plain and simple.” He said he wrote detailed memos of their conversations because he feared the president – who ultimately fired him on 9 May 2017 – would paint a false picture of their encounters.

Trump’s personal lawyer, Marc Kasowitz, fired back hours later. He disputed Comey’s claim that Trump demanded loyalty from the FBI chief or directed him to back off a probe of former National Security Adviser Michael Flynn, which was part of the broader inquiry into Moscow’s role in the presidential campaign. But he also said the former FBI chief’s testimony proved Trump was innocent of wrongdoing.Bloomberg

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