In Portfolioticker today
- Today at the stock market
- The portfolio today
- Japan Update
- China Update
Today at the stock market
“U.S. stocks halted a three-day slide, while Treasury yields and the USD edged lower as a week dominated by crude’s tumble into a bear market ended with the 3 major American assets largely unchanged. The S&P 500 Index finished the period virtually where it began, as rallies in health-care and tech shares offset a rout in energy producers.
U.S. investors rotated back into technology shares 2 weeks after pummeling the high flying group.
Weakness in energy prices was the theme of the week, with oil in New York and London dropping into a bear market on concerns that expanding supply in the U.S. and Libya will counter OPEC output cuts. Few signs of contagion emerged though, leaving everything from gold to the USD to U.S. equities to churn in tight ranges as the traditionally slow summer season began.
Europe focused on the negotiations to untangle Britain from the union.” Bloomberg
|Index||Ticker||Today||Change||31 Dec 16||YTD|
|S&P 500||SPX (INX)||2,438.30||+0.15%||2,238.83||+8.90%|
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
Facebook closed on a record high of $155.07, beating the previous record of $154.71 set on 8 Jun 2017.
|Stock||Ticker||Today||Change||31 Dec 16||YTD|
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg
“The USD fell against a basket of major currencies on Friday, recording its biggest one-day fall in 3 weeks, on persistent doubts whether the Federal Reserve would raise interest rates again this year due to softening inflation data. The Bloomberg Dollar Spot Index (DXY), fell 0.35% at 97.248, retreating further from a one-month peak reached on Tuesday.
The USD also broadly weakened versus commodity-linked currencies, which got a boost as global benchmark Brent futures recovered from a 7-month low.
The USD had risen earlier this week on comments from New York Fed President William Dudley, who said a tightening labor market would push up wages and cause U.S. inflation to reverse upward toward the Fed’s 2% goal. On Friday, St. Louis Fed chief President James Bullard said the central bank should wait on further rate hikes, while Cleveland Fed chief Loretta Mester said recent inflation weakness should not defer another rate rise this year.
Traders, however, were doubtful about another rate increase later this year as recent U.S. data on balance have fallen short of forecast.
On Friday, Markit’s flash June reports on U.S. factory and services activity was weaker than expected, while the government said new-home sales rebounded more than expected in May.
“This has been largely a week of consolidation among major currency pairings given the lack of economic data this week,” said Omer Esiner, chief market strategist at Commonwealth Foreign Exchange in Washington.
Britain’s GBP rose for a third consecutive day, gaining 0.4% to USD 1.2725 and paring its drop this week to 0.5% after soon-to-depart Bank of England policymaker Kristin Forbes late on Thursday urged hiking UK rates immediately on fears that the pound’s weakness could have a lasting upward effect on inflation. Trading volume was muted in the absence of major economic data.
The EUR was up 0.44% at $1.1198, while the USD slipped nearly 0.1% against the JPY, to JPY 111.25 per USD.” Reuters
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com
Oil and Gas Futures
“Oil futures edged higher on Friday with a lift from a weaker dollar, but finished a fifth straight week lower as OPEC-led production cuts have failed to substantially reduce a global crude glut.
Brent futures LCOc1 settled up 32 cents, or 0.7%, to $45.54/barrel. U.S. West Texas Intermediate crude (WTI) CLc1 ended up 27 cents, or 0.6%, at $43.01 per barrel.
For the week, both benchmarks lost 3.9%, and oil currently sits just off 10-month lows, beset by ongoing worries about rising production. The 5-week slide represents the longest stretch of weekly declines for the front-month contracts since Aug 2015.
Prices pared earlier gains after oil services firm Baker Hughes showed U.S. drillers added 11 oil rigs this week, the biggest increase in 3 weeks.
“The higher rig count this week reflects decisions made a couple of months ago when oil prices were higher,” said James Williams, president of WTRG Economics in Arkansas. He said he expects the current low prices to cause the count to fall in some weeks over the next month or two.
The U.S. dollar index (DXY) was down 0.3% against a basket of currencies, on track for its biggest daily percentage decline since early June after weaker-than-expected U.S. economic data. This boosted USD-denominated oil.
Still, oil prices remain down about 20% this year despite an effort led by the Organization of the Petroleum Exporting Countries (OPEC) to cut production 1.8 million barrels per day (bpd).
It puts the market on course for its biggest first-half percentage fall since the late 1990s, when rising output and the Asian financial crisis led to sharp losses.
“We doubt that demand growth will accelerate sufficiently to break the current downward price momentum,” analysts at Bank of America Merrill Lynch said in a note on Friday, citing surprisingly weak recent economic data in the United States, China and Asia.
OPEC-led efforts to reduce production and end the oil glut have been frustrated by soaring output from the United States and OPEC members Libya and Nigeria, which are exempt from the cuts.
Thanks to shale drillers, U.S. oil production C-OUT-T-EIA has risen more than 10% in the past year to 9.35 million bpd, close to the level of top exporter Saudi Arabia.
“Rising U.S. output continues to stress markets, with increasing evidence that improved efficiency and technology makes many of the shale plays profitable below $40/barrel,” analysts at Cenkos Securities wrote.” Reuters
Prices are as at 15:49 ET
- NYMEX West Texas Intermediate (WTI): $43.03/barrel +0.68% Chart
- ICE (London) Brent North Sea Crude: $45.59/barrel +0.82% Chart
- NYMEX Natural gas futures: $2.93/MMBTU +1.21% Chart
EU: Eurozone Flash Composite PMI. Jun 2017
Press Comment: Reuters
“Roaring euro zone business growth tailed off unexpectedly toward the end of the first half of 2017 following a sudden slowing in the pace of expansion by services firms, a survey showed on Friday.
But with inflation relatively resilient and overall growth still quite strong, pressure will likely be maintained on policymakers at the European Central Bank to pare back soon on their ultra-loose monetary policy.
Earlier this month, the ECB gave up its bias for more rate cuts in a small step towards normalization.
IHS Markit’s Flash Composite Purchasing Managers’ Index for June fell to 55.7 from the 56.8 it registered in April and May, which was its highest since April 2011. A reading above 50 indicates growth.
A Reuters poll had predicted no change to the index, seen as a good guide to growth, and none of the economists polled had predicted such a big fall.
“At the moment I’m not too worried about it,” said Chris Williamson, chief business economist at IHS Markit. “We may be reaching the stage where growth has been strong for quite a few months and we are hitting a few ceilings in terms of degrees to which firms can expand capacity.” Williamson said the PMI pointed to second quarter GDP growth of 0.7 percent, faster than the 0.5 percent predicted in a Reuters poll earlier this month. The PMIs had correctly indicated a 0.6 percent expansion last quarter.
Economic data points to solid growth in the euro zone in the second quarter and inflation will hover near current levels in coming months, the ECB said in a regular economic bulletin on Thursday.
As they have done for the previous seven months, firms increased prices in June, albeit at a weaker pace as input cost pressures eased. The output prices index dipped to 51.8 from 52.4.
Firms operating in the bloc’s dominant service industry did not perform as expected. The services PMI fell to 54.7 from 56.3, well below even the most pessimistic forecaster in a Reuters poll of over 40 economists.
In one bright spot, the employment index held at May’s 53.8. It has only been higher than that once since early 2008, in March of this year.
Factories had a better month than predicted. The manufacturing PMI climbed to a more than six-year high of 57.3 from 57.0. The Reuters poll suggested it would dip to 56.8.
An index measuring output nudged up to 58.5 from 58.3, its highest since April 2011.
Implying the momentum would continue into July, new orders surged and factories ran down stocks of finished goods at the fastest rate for nine months. The related subindex sank to 47.9 from 49.1.” Reuters
Press Release Extract [ser_71]
- Flash Eurozone PMI Composite Output Index at 55.7 (56.8 in May). 5-month low.
- Flash Eurozone Services PMI Activity Index at 54.7 (56.3 in May). 5-month low.
- Flash Eurozone Manufacturing PMI Output Index at 58.5 (58.3 in May). 74-month high.
- Flash Eurozone Manufacturing PMI at 57.3 (57.0 in May). 74-month high.
A further solid rise in business activity in June rounded off the strongest quarter of economic expansion for over six years, according to flash PMI® survey data.
Although the rate of growth waned to a five-month low, high order book inflows and elevated levels of business confidence meant job creation remained one of the strongest recorded over the past decade as firms continued to expand capacity to meet rising demand. Price pressures eased, however, largely reflecting lower global commodity prices.
The headline IHS Markit Eurozone PMI fell from a joint six-year high of 56.8 in May to a five-month low of 55.7 in June, according to the preliminary ‘flash’ estimate (based on approximately 85% of final replies).
However, at 56.4, the average PMI reading for the second quarter was above the reading of 55.6 seen in the first three months of the year and was the highest since the first quarter of 2011.
While the June survey showed manufacturing output rising at the steepest rate since April 2011, service sector growth waned to a five-month low, albeit still remaining robust to indicate a broad- based upturn.
Overall new order growth eased to the slowest in four months, reflecting weaker inflows of new business into the service sector. In contrast, factories reported the highest influx of new orders since February 2011, in part due to strong export sales. Overall exports (including intra-regional trade) continued to rise at one of the fastest rates seen over the past six years, buoyed by strengthening demand in key sales markets and recent euro weakness.
Companies continued to report rising backlogs of work, which in turn encouraged the recruitment of extra staff at a rate unchanged on May, which was one of the highest seen over the past ten years. Manufacturing employment growth was just shy of the two-decade high seen in May. The service sector meanwhile continued to enjoy its best spell of employment growth since early-2008.
The strong jobs growth was also a reflection of ongoing elevated levels of optimism about future growth, with optimists continuing to exceed pessimists, albeit to the lowest degree for five months. A moderation in service sector confidence about the year ahead contrasted with manufacturing optimism hitting a new high.
Despite signs of capacity being strained, average prices charged for goods and services rose at the slowest rate for five months. Price pressures were cooled by slower growth of costs. Input cost inflation dipped to a seven-month low, easing especially markedly in the manufacturing sector due to lower prices for many commodities, notably oil. However, with supplier delivery delays worsening to the greatest extent for just over six years, the survey suggests that inflationary pressures persist in supply chains.
Slower growth in France and Germany
Slower growth was recorded in both France and Germany, down to five- and four-month lows respectively, largely reflecting weaker rates of service sector expansion. Headline PMI readings for manufacturing were the second-highest since April 2011 in both countries. Both nations nevertheless continued to record strong overall rates of expansion, with second quarter composite PMI averages above those seen in the opening quarter of 2017. There was greater variation in labour market trends: while jobs growth in Germany slipped to a six-month low, employment rose in France at the steepest pace since July 2007.
Growth eased across the rest of the single currency area for a second successive month, but the performances in terms of both business activity and hiring remained among the best seen over the past ten years.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
‘Although the PMI data point to some loss of growth momentum in June, the latest reading needs to be looked at in the context of recent elevated levels. Despite the June dip, the average expansion in the second quarter has been the strongest for over six years and is historically consistent with GDP growth accelerating from 0.6% in the first quarter to 0.7%.
‘The upturn is also broad-based, with the surveys signalling an acceleration of GDP growth in both France and Germany in the second quarter, as well as across the rest of the region as a whole, albeit with some loss of momentum seen across the board in June.
‘Job creation continued to run at one of the highest rates seen over the past decade as firms expanded capacity to meet demand. Factory jobs growth remained particularly buoyant, thanks in part to production requirements surging higher on the back of rising exports.
‘Despite the rise in employment, the surveys found some evidence of growth being constrained, especially in manufacturing, where supply delays have spiked to the highest in six years in recent months. However, with prices for many globally- traded commodities falling, notably oil, price pressures continued to ease in June.’”
IHS Markit, “IHS Markit Flash Eurozone PMI®“, 23 Jun 2017 More
US: IHS Markit Flash US Composite PMI. Jun 2017
Press Release Extract [ser_152]
- Flash U.S. Composite Output Index at 53.0 (53.6 in May). 3-month low.
- Flash U.S. Services Business Activity Index at 53.0 (53.6 in May). 3-month low.
- Flash U.S. Manufacturing Output Index at 52.9.
- Flash U.S. Manufacturing PMI at 52.1 (52.7 in May). 9-month low.
U.S. private sector firms recorded a further solid expansion of business activity in June, but there was a loss of momentum since May. This was highlighted by the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index falling from 53.6 to 53.0 in June. The latest reading signalled the slowest upturn in business activity for three months.
Companies operating in both the service economy (‘flash’ business activity index at 53.0 in June) and manufacturing sector (‘flash’ output index at 52.9) experienced a growth slowdown since May. The latest increase in manufacturing output was the least marked since September 2016.
There were more positive developments in terms of client spending, with private sector companies recording the sharpest rise in new work since January. Greater sales volumes contributed to a rebound in business optimism to its strongest level since the start of 2017, with service providers particularly confident about their growth prospects for the next 12 months.
Staff recruitment also picked up in June, with payroll numbers expanding at the strongest pace for four months. Meanwhile, input cost inflation remained softer than the 22-month peak seen in April. However, average prices charged by private sector firms increased at the fastest pace so far this year. A number of survey respondents cited efforts to alleviate squeezed margins in June.
The composite index is based on original survey data from the IHS Markit U.S. Services PMI and the IHS Markit U.S. Manufacturing PMI.
IHS Markit Flash U.S. Services PMI™
The seasonally adjusted IHS Markit Flash U.S. Services PMI™ Business Activity Index eased to 53.0 in June, from 53.6 in May, to signal the slowest upturn in service sector output since March.
June data pointed to a robust and accelerated rise in new business intakes across the service economy. The latest increase in new work was the fastest since January, which contributed to a further rebound in job creation from April’s low. Meanwhile, service providers indicated an upturn in their expectations for business activity growth during the next 12 months, with the degree of confidence the strongest since January.
Input cost pressures intensified in June, which survey respondents linked to higher staff salaries and rising raw material prices. Measured overall, the rate of input cost inflation was the strongest for two years. Efforts to alleviate pressures on margins led to a further solid increase in prices charged by service sector firms. The latest rise in output prices was the fastest since April 2015.
IHS Markit Flash U.S. Manufacturing PMI™
At 52.1 in June, down from 52.7 in May, the seasonally adjusted IHS Markit Flash U.S. Manufacturing Purchasing Managers’ IndexTM (PMITM)2 pointed to the slowest improvement in overall business conditions since September 2016.
The weaker PMI reading largely reflected softer rates of output and new business growth in June, which more than offset stronger contributions from job creation and inventory building.
Meanwhile, latest survey data revealed a marked slowdown in input price inflation to its weakest since March 2016. Lower cost pressures led to a moderation in factory gate price inflation in June. The latest rise in manufacturers’ output charges was the least marked since September 2016.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
‘The economy ended the second quarter on a softer note. The June PMI surveys showed some pay-back after a strong May, indicating the second- weakest expansion of business activity since last September.
‘The average expansion seen in the second quarter is down on that seen in the first three months of the year, indicating a slowing in the underlying pace of economic growth. While official GDP data are expected to turn higher in the second quarter after an especially weak start to the year (our recent GDP tracker based on various official and survey data points to 3.0% growth), the relatively subdued PMI readings suggest there are some downside risks to the extent to which GDP will rebound.
‘Historical comparisons of the PMI against GDP indicates that the PMI is running at a level broadly consistent with the economy growing at a 0.4% quarterly rate (1.5% annualized) in the second quarter, or just over 2% once allowance is made for residual seasonality in the official GDP data.
‘There are signs, however, that growth could pick up again: new orders showed the largest monthly rise since January, business optimism about the year ahead perked up and hiring remained encouragingly resilient. The survey is indicative of non-farm payroll growth of approximately 170,000.
‘Average prices charged for goods and services meanwhile showed one of the largest rises in the past two years, pointing to improved pricing power amid healthy demand.’”
IHS Markit, “Flash US Composite PMI. Jun 2017“, 23 Jun 2017 (09:45) More
US: New Residential Sales. May 2017
Press Comment: Bloomberg
“Record prices for new U.S. homes amid a sales pickup indicate the supply of houses may be tight at the lower end of the market, pinching first-time buyers, government data showed Friday. Low mortgage rates, a solid labor market and rising wages continue to drive steady demand for housing while scarce inventory sends prices to the highest ever, a trend that could squeeze first-time buyers. The industry faces headwinds including a lack of available workers and a limited number of plots to build on. Even with the gain, the pace of sales remains at less than half the peak seen in 2005. Any supply rebound may be a ways off, as new-home construction starts are down in recent months and permits were at a one-year low in May, according to government data” Bloomberg
Press Release Extract [ser_12]
“New Home Sales
Sales of new single-family houses in May 2017 were at a seasonally adjusted annual rate of 610,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.9 percent (±13.0 percent) above the revised April rate of 593,000 and is 8.9 percent (±21.9 percent) above the May 2016 estimate of 560,000.
The median sales price of new houses sold in May 2017 was $345,800. The average sales price was $406,400.
For Sale Inventory and Months’ Supply
The seasonally-adjusted estimate of new houses for sale at the end of May was 268,000. This represents a supply of 5.3 months at the current sales rate.”
U.S. Census Bureau and the U.S. Department of Housing and Urban Development, “New Residential Sales. May 2017“, 23 Jun 2017 (10:00) More
Nikkei Flash Japan Manufacturing PMI
Press Release Extract [ser_29]
- Flash Japan Manufacturing PMI® down to seven-month low of 52.0 in June (53.1 in May).
- Flash Manufacturing Output Index at 52.1 (54.0 in May). Slowest growth for nine months.
- Exports rise further and job creation sustained.
Commenting on the Japanese Manufacturing PMI survey data, Paul Smith, Senior Economist at IHS Markit, which compiles the survey, said:
‘Slower growth was signalled in June, with both orders and output rising at the weakest rates since late last year amid reports of a slight softening in market conditions.
‘That said, external demand is holding up well, and the sector continues to operate within a solid growth range. This is helping support employment gains, whilst also enabling firms to pass costs on to clients to the greatest degree in over two-and-a-half years.’”
IHS Markit, “Nikkei Flash Japan Manufacturing PMI. Jun 2017“, 23 Jun 2017 More
^ 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 Chart: Google Finance