In Portfolioticker today
- Today at the stock market
- The portfolio today
- Japan Update
- China Update
Today at the stock market
“The S&P 500 Index lost 0.7% for its biggest decline since 17 May 2017 as energy producers and companies whose profits are most linked to economic growth, including makers of non-essential consumer goods and industrial producers, led declines:
U.S. stocks retreated from all-time highs as crude oil slid into a bear market on concern the global supply glut will persist. The USD rose as Fed officials continued to reiterate a moderately hawkish stance on monetary policy. Yields on 10-year Treasuries slipped as the Fed’s Charles Evans said the economy was in good shape even as inflation remains stubbornly below targets.
The British GBP weakened a second day as Bank of England Governor Mark Carney said he is still worried about the impact of Brexit on the economy. European stocks gave up advances as a slump in copper dragged down miners. Hong Kong shares retreated ahead of MSCI Inc.’s decision on whether to include China’s domestic equities in its main indexes.
The weakness in crude and other commodities dents arguments from American central bankers that weak inflation rates will be transitory, even as the economy shows few signs distress. Treasuries fell Monday after Fed Bank of New York President William Dudley said halting the tightening cycle now would imperil the economy. The Fed raised rates last week.
Stocks had barreled to fresh highs after a series of geopolitical concerns seems to have faded, though formal negotiations over Britain’s exit from the European Union began somewhat contentiously. MSCI’s announcement is due after the market close in the U.S.” Bloomberg
|Index||Ticker||Today||Change||31 Dec 16||YTD|
|S&P 500||SPX (INX)||2,437.03||-0.67%||2,238.83||+8.85%|
The portfolio today
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting
|Index||Currency||Today||Change||31 Dec 16||YTD|
Portfolio stock prices
|Stock||Ticker||Today||Change||31 Dec 16||YTD|
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg
“The Bloomberg Dollar Spot Index (DXY) rose 0.3% after advancing 0.4% on Monday. The DXY touched the lowest level since Oct 2016 last week.
Britain’s GBP fell 0.8% to USD 1.2631.
The euro was down 0.2% to USD 1.1126.
Japan’s JPY gained 0.1% to 111.445 per USD. The JPY retreated 0.6% on Monday.” Bloomberg
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com
Oil and Gas Futures
“Oil prices fell to seven-month lows on Tuesday after news of increases in supply by several key producers, a trend that has undermined attempts by OPEC and others to support the market through reduced output.
Benchmark Brent dropped $1.29 to a low of $45.62/barrel, its weakest since 15 Nov 2016, 2 weeks before OPEC and other producers agreed to cut output by 1.8 million barrels per day (bpd) for six months from January.
Brent was trading around $45.81, down $1.10, by 1330 GMT.
The U.S. crude futures contract for Jul 2017, due to expire later on Tuesday, fell $1.27 to $42.93, its lowest since 14 Nov 2016, before recovering to around $43.10.
Both benchmarks are down more than 15% since late May 2017, when the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers extended limits on output until the end of Mar 2018.
“At the moment sentiment is bearish and traders seem happy to keep selling into every rally,” said Fawad Razaqzada, financial markets technical analyst at Forex.com.
OPEC supplies jumped in May 2017 as output recovered in Libya and Nigeria, both exempt from the production reduction agreement.
Libya’s oil production rose more than 50,000 bpd to 885,000 bpd after the state oil company settled a dispute with Germany’s Wintershall, a Libyan source told Reuters.
Nigerian oil supply is also rising. Exports of Nigeria’s Bonny Light crude are set to reach 226,000 bpd in Aug 2017, up from 164,000 bpd in Jul 2017, loading programs show.” Reuters
“West Texas oil fell more than 20% from its highest close this year. It was down more than 2% Tuesday to settle at $43.23/barrel, the lowest since Aug 2016.” Bloomberg
Prices are as at 15:49ET
- NYMEX West Texas Intermediate (WTI): $43.23/barrel -2.19% (14:29)Chart
- ICE (London) Brent North Sea Crude: $45.97/barrel -2.00% Chart
- NYMEX Natural gas futures: $2.90/MMBTU +0.26% Chart
AU: Residential Property Price Indexes. Mar 2017
Press Release Extract [ser_37]
“Residential property prices rose 2.2 per cent in the March quarter 2017, the fourth consecutive quarter of growth, according to figures released today by the Australian Bureau of Statistics (ABS).
Program Manager for Prices Branch, Marcel van Kints, said; “While residential property prices rose in most capital cities this quarter, Sydney and Melbourne continue to drive the national result.”
The price rises in Sydney (3.0 per cent) and Melbourne (3.1 per cent) were partially offset by falls in Perth (1.0 per cent) and Darwin (0.9 per cent).
Through the year growth in residential property prices reached 10.2 per cent in the March quarter 2017. Sydney recorded the largest through the year growth of all capital cities at 14.4 per cent, followed closely by Melbourne at 13.4 per cent.
The total value of Australia’s 9.9 million residential dwellings increased $163.1 billion to $6.6 trillion. The mean price of dwellings in Australia is now $669,700.
RESIDENTIAL PROPERTY PRICES:
Capital City Q4/16 to Q1/17 Q1/16 to Q1/17 Weighted average of eight capital cities +2.2% +10.2% Sydney +3.0% +14.4% Melbourne +3.1% +13.4% Brisbane +0.0% +3.5% Adelaide +1.5% +5.0% Perth -1.0% -3.5% Hobart +3.4% +11.3% Darwin -0.9% -5.9% Canberra +2.8% +8.9%
TOTAL VALUE OF THE DWELLING STOCK: MARCH QUARTER 2017
- Value of dwelling stock (all sectors): $6,602,132.3m (about $6.6 trillion)
- Mean price of residential dwellings: $669,700
- Number of residential dwellings: 9,858,400“
Australian Bureau of Statistics, “6416.0 – Residential Property Price Indexes: Eight Capital Cities, Mar 2017“, 20 Jun 2017 More
US: U.S. International Transactions. Q1/2017
Press Comment: Reuters
“The U.S. current account deficit widened slightly in Q1/2017, as the country imported more crude oil, car parts and supplies for its factories.
The Commerce Department said on Tuesday the current account deficit, which measures the flow of goods, services and investments into and out of the country, expanded by 2.4% to $116.8 billion.
The current account deficit for Q4/2016 was revised up to $114.0 billion from the previously reported $112.4 billion. Economists polled by Reuters had forecast the deficit rising to $123.8 billion in Q1/2017.” Reuters
“The U.S. current-account deficit increased to $116.8 billion (preliminary) in the first quarter of 2017 from $114.0 billion (revised) in the fourth quarter of 2016, according to statistics released by the Bureau of Economic Analysis (BEA). The deficit increased to 2.5 percent of current- dollar gross domestic product (GDP) from 2.4 percent in the fourth quarter.
The $2.8 billion increase in the current-account deficit reflected a $5.3 billion increase in the deficit on goods and a $3.6 billion decrease in the surplus on primary income that were partly offset by a $5.8 billion decrease in the deficit on secondary income and a $0.3 billion increase in the surplus on services.
Exports of goods and services and income receipts
Exports of goods and services and income receipts increased $22.5 billion in the first quarter to $830.3 billion.
- Goods exports increased $13.2 billion to $383.7 billion, mostly reflecting increases in exports of industrial supplies and materials, largely petroleum and products, and in exports of automotive vehicles, parts, and engines.
- Secondary income receipts increased $4.3 billion to $39.2 billion, largely reflecting an increase in U.S. government transfers, mostly fines and penalties.
- Primary income receipts increased $3.5 billion to $216.5 billion, reflecting increases in other investment income and in direct investment income.
Imports of goods and services and income payments
Imports of goods and services and income payments increased $25.2 billion to $947.1 billion.
- Goods imports increased $18.4 billion to $584.0 billion, mostly reflecting increases in industrial supplies and materials, mostly crude oil, in capital goods except automotive, and in automotive vehicles, parts, and engines.
- Primary income payments increased $7.1 billion to $168.8 billion, mostly reflecting increases in direct investment income and in other investment income, primarily interest on loans and deposits.
Net U.S. borrowing measured by financial-account transactions was $191.4 billion in the first quarter of 2017, an increase from net borrowing of $74.8 billion in the fourth quarter of 2016. A shift to net U.S. incurrence of liabilities excluding financial derivatives from fourth-quarter net U.S. repayment was partly offset by a shift to net U.S. acquisition of financial assets excluding financial derivatives from net U.S. liquidation.
Transactions in financial assets excluding financial derivatives shifted to net U.S. acquisition of $282.7 billion in the first quarter from net U.S. liquidation of $84.5 billion in the fourth quarter.
- Transactions in other investment assets shifted to net U.S. acquisition of $50.9 billion in the first quarter from net liquidation of $115.9 billion in the fourth quarter, mostly reflecting a shift to net U.S. placement of deposits abroad from fourth-quarter net U.S. withdrawal and a shift to net U.S. provision of loans to foreigners from net foreign repayment.
- Transactions in portfolio investment assets shifted to net U.S. purchases of $120.3 billion in the first quarter from net sales of $13.4 billion in the fourth quarter, mostly reflecting a shift to net purchases from net sales of equity and investment fund shares.
- Net U.S. acquisition of direct investment assets increased $68.4 billion to $111.7 billion in the first quarter, mostly reflecting a shift to net acquisition by U.S. parents of debt instrument claims on their foreign affiliates.
Transactions in liabilities excluding financial derivatives shifted to net U.S. incurrence of $471.1 billion in the first quarter from net U.S. repayment of $16.7 billion in the fourth quarter.
- Transactions in other investment liabilities shifted to net U.S. incurrence of $149.6 billion in the first quarter from net U.S. repayment of $96.8 billion in the fourth quarter, mostly reflecting a shift to net incurrence of loan liabilities from fourth-quarter repayment.
- Net U.S. incurrence of portfolio investment liabilities increased $169.0 billion to $231.5 billion, mostly reflecting a shift to net foreign purchases of equity and investment funds shares from net foreign sales in the fourth quarter.
- Net U.S. incurrence of direct investment liabilities increased $72.5 billion to $90.1 billion, mostly reflecting a decrease in net repayment of U.S. parents’ debt instrument liabilities and an increase in net incurrence of equity liabilities.
Transactions in financial derivatives other than reserves reflected first-quarter net borrowing of $3.0 billion, a $4.0 billion decrease from the fourth quarter.“
Bureau of Economic Analysis, “U.S. International Transactions: First Quarter 2017 and Annual Update“, 20 Jun 2017 (08:30) More
US: Speaker Ryan vows tax reform during 2017
Press Report: Reuters
“The top Republican in the U.S. House of Representatives vowed on Tuesday to complete tax reform in 2017, saying that President Donald Trump and his fellow Republicans in Congress cannot allow the chance to overhaul the U.S. tax code to slip.
In remarks for a speech to U.S. manufacturers released by his office, House Speaker Paul Ryan said that Congress and the Trump administration are moving “full speed ahead” to deliver fundamental tax reform for individuals, corporations and small businesses.
Ryan and other Republicans are under mounting pressure from U.S. businesses and voters to make progress on tax reform, a top 2016 Republican campaign pledge that could determine whether Ryan’s party retains control of the House and the Senate in the 2018 midterm elections.
But it is not clear whether Republicans in Congress can overcome infighting over healthcare legislation and government spending to move forward on tax reform legislation.
“We are going to get this done in 2017. We need to get this done in 2017. We cannot let this once-in-a-generation moment slip,” Ryan said in remarks prepared for a Tuesday afternoon speech to the National Association of Manufacturers, a powerful Washington lobby group.
“Transformational tax reform can be done, and we are moving forward. Full speed ahead,” he added.
Major stock indexes hit multiple record highs from Trump’s Nov 2016 election to the end of Q1/2017, on bets that he would improve economic growth by cutting taxes and boosting infrastructure spending.
The tax reform debate has largely moved behind closed doors, where Ryan is trying to hammer out an agreement with Senate Republican leader Mitch McConnell, Treasury Secretary Steven Mnuchin, White House economic adviser Gary Cohn and the Republican chairmen of two congressional tax committees. The aim is to unveil tax reform legislation in Sep 2017.”
David Morgan, “House speaker vows to complete tax reform in 2017“, 20 Jun 2017 Reuters
Extract of Paul Ryan‘s Speech
“We are going to fix this nation’s tax code once and for all. You may recall that the last time we did this was three decades ago … Yes, a lot has changed since then. Our economy is more interconnected with the rest of the world than ever before. The Internet has transformed the way we do business and go about our lives. But as the world changed, our tax code has remained stuck in neutral. It has ballooned to 70,000 pages of rules and regulations that few people today actually understand …
President Trump recently introduced a set of principles for tax reform, and right now we—the House and Senate—are working with the administration to turn them into a transformational tax reform plan. Chairman Kevin Brady and our Ways and Means Committee members are holding open hearings and meeting with stakeholders on this right now.
I want to take a few minutes to walk you through what that kind of reform will look like.
Let’s start with families and individuals.
At some point along the way, our tax system started working for the tax collectors rather than the hardworking taxpayers. Look at what happens during tax season. I could describe the complexity of the code all day, but what really defines our tax code is that sense of dread that you feel. You know that feeling?
You have to navigate long, complicated forms to file your returns. You need to wade through a seemingly endless amount of deductions and credits, each with its own rules and eligibility requirements. And then, after you tally up those deductions, you are placed in up to seven different federal tax brackets based on your income level. And at the end you hope—I mean really hope—that you do not owe a bunch this year. You hope, because you do not really know ahead of time. How could you? This whole system is too confusing, and just too darn expensive.
We have got to stop this madness. Don’t you agree? So let’s start over.
First, we will eliminate harmful, burdensome taxes including the death tax and Alternative Minimum Tax.
Next, we will clear out special interest carve outs and excessive deductions, and focus on keeping those that make the most sense: home ownership, charitable giving, and retirement savings.
We will consolidate the existing seven brackets into three, double the standard deduction, and simplify things to the point that you can do your taxes on a form the size of a postcard …
And finally — and most importantly — we will use the savings from eliminating these loopholes to lower tax rates. Let me say that again: We are going to cut taxes.
But if we are going to truly fix our tax code, we have to fix all of it—both for individuals and businesses. Why? Because this will create jobs. That is what this is all about: jobs, jobs, jobs. Good, high-paying jobs. As a matter of fact, the nonpartisan Tax Foundation has estimated that our blueprint would create 1.7 million new full-time jobs.
How do we do it? Well, right now, we have the worst business tax system in the industrialized world.
Most people do not realize this, but here in America, 8 out of 10 businesses file their taxes as individuals. In fact, most of our jobs come from these new and small businesses. And under our crazy system, successful small businesses pay a top marginal tax rate of 44.6 percent.
Look, you all know this. Manufacturing employs more than 12 million Americans and adds more than $2 trillion to our economy every year. And the overwhelming majority of these companies are small businesses. At the same time, our corporate tax rate — for the rest of American companies — is 35 percent.
To put this into a global perspective, overseas — which where I come from means Lake Superior — companies in Canada pay just 15 percent. Heck, the average tax rate on businesses in the industrialized world is 22.5 percent. Yet our corporations pay 35 percent and our successful small businesses pay 44.6 percent. How can we compete like that? We can’t.
But it actually gets worse. You see, the status quo encourages companies to move operations overseas, to make things abroad, and to then sell them back into the U.S. This makes no sense, and it is costing us jobs.
We are actually very unique in the world in the way we discourage capital from coming back to America and how we incentivize off-shoring jobs. This is not the kind of exceptionalism we should aspire to. Today, U.S. companies are leaving to become foreign companies, when it should be the other way around. We want foreign companies to become U.S. companies.
We must think differently, so that once again we make things here and export them around the world. There are a number of ways to achieve this—we in the House have our own idea—and that is one of the things that we are discussing with the administration. But the bottom line here is this: We cannot accept a system that perpetuates the drain of American businesses overseas.
My view is this: We should not just try to play catch up with the rest of the world. We should not just aim for the middle of the pack. Let’s not accept following in any other country’s wake. Let’s be the best once again.
Part of this is moving to what we call a territorial system that reverses this trend of corporate inversions, and enables businesses to bring back cash stranded overseas without being taxed. Right now, if an American company makes money overseas, it gets taxed over there. But we also tax it again if the company tries to bring that money back to the U.S. Almost no other country does this. And as a result, it is preventing many companies from bringing that money home. They just keep it over there. It is literally stranding trillions of dollars that could come into our economy. We have to fix this. And we will.
And of course, real tax reform means slashing our corporate tax rate as low as possible.
This means eliminating special-interest carve-outs and replacing them with lower tax rates for all businesses. And this means creating a new, lower tax, specifically for small businesses, so they can compete fairly, on a level playing field.
There is one last piece to this puzzle, and it goes back to the idea that all of this is about looking down the road, and planning for the future. These reforms – these tax cuts – they need to be permanent. Every expert agrees that temporary reforms will only have a negligible impact on wages and economic growth. Businesses need to have confidence that we will not pull the rug out from under them. They need the certainty from permanent tax cuts to hire more workers, invest in their businesses, and plan for the future.
So that is an overview of our plan, which will we begin to turn into legislation to put before the Congress. It is ambitious, yes, but it has to be.
Now I know that the cynics and naysayers are out in full force. You will hear that tax reform is coming along. You will hear that it is dead. Then you will hear it is back on track. Then you will hear it is on life support. Sometimes you will hear all of this in the same week, the same day, or heck, even the same hour. Do not be surprised by any of it.
But I am here to tell you: We are going to get this done in 2017. We need to get this done in 2017. We cannot let this once-in-a-generation moment slip by.
Yes, the defenders of the status quo — and there are many—are counting on us to lose our nerve, to fall back, or put this off altogether. But we will not wait for a path free of obstacles, because it does not exist. And we will not cast about for quick fixes and half-measures.
Transformational tax reform can be done, and we are moving forward. Full speed ahead. I promise you that we will give it all we have.“
Paul Ryan, Speaker of the United States House of Representatives, “Speech to National Association of Manufacturers (NAM) 2017 Manufacturing Summit“, 20 Jun 2017 More
Lloyd Comments: There’s nothing new in this speech – it is very similar to joint speech made by Steven Mnuchin and Gary Cohn on 26 Apr 2017. The value is that there is a commitment from the majority leader in the House of Representatives to the same issues and a target of passing this during 2017.
US Companies With the Most Cash and Marketable Securities Outside USA
These companies are among those with large amounts of cash and marketable securities (CMS) outside USA (OS) which stand to gain if the US government tax reform package “enables businesses to bring back cash stranded overseas without being taxed” (or at least taxed at a lower rate than the current repatriation tax rate).
|OS Rank||Company||Total CMS||OS 2017||OS 2016||OS/Total|
|1||Apple||$256.8 bn||$239.6 bn||$208.9 bn||93.3%|
|2||Microsoft||$126.0 bn||$122.2 bn||$102.8 bn||97.0%|
|3||Cisco Systems||$68.0 bn||$65.1 bn||$57.2 bn||95.7%|
|4||Alphabet||$92.4 bn||$55.7 bn||$45.4 bn||60.3%|
|5||Oracle||$59.4 bn||$52.2 bn||$46.8 bn||87.9%|
|13||Intel||$24.1 bn||$14.2 bn||$14.0 bn||58.9%|
|15||Amazon||$26.0 bn||$8.6 bn||$5.8 bn||33.1%|
|16||Visa||$10.8 bn||$8.4 bn||$7.7 bn||77.7%|
|19||$32.3 bn||$7.5 bn||$2.2 bn||23.2%|
Source: Laurie Meisler, “The 50 Largest Stashes of Cash Companies Keep Overseas“, 13 Jun 2017 Bloomberg
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
Stockmarket: Nikkei 225
^ Nikkei N225 movements over the past week Chart: Google Finance
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
^ Shanghai CSI300 movements over the past week (moveover for SSE) Chart: Google Finance