Tue 29 Aug 2017

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In Portfolioticker today

Today at the stock market

bull/bearU.S. stocks rebounded from a sharply lower open on Tuesday and helped an index of global equity markets pare losses as investors shrugged off concerns over North Korea’s latest missile test.

  • The S&P 500 gained 2.06 points, or 0.08%, to close at 2,446.3
  • The Dow Jones Industrial Average rose 56.97 points, or 0.26%, to finish at 21,865.37
  • The Nasdaq Composite added 18.87 points, or 0.3%, to end at 6,301.89.

Treasury yields were off early lows and Bloonberg’s USD Spot Index (DXY) traded little changed on the day.

The dip in risk appetite that dominated most of the trading session and sent benchmark 10-year U.S. Treasury yields lower and gold to a more-than-9-month peak gave way as the U.S. trading session progressed.

MSCI’s world index, which tracks shares in 46 countries, was down 0.29%, after earlier falling as much as 0.57% to a one-week low on heightened worries about North Korea. North Korea fired a ballistic missile over Japan’s northern Hokkaido island into the sea on Tuesday, prompting a warning from U.S. President Donald Trump that “all options are on the table” as the United States considers its response.

“When the President says ’All options are on the table,’ the best strategy for investors is sometimes to do nothing,” said Brian Jacobsen, senior investment strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

Market analysts were relieved that the rift did not escalate further, with Trump’s focus on the devastation caused by Tropical Storm Harvey, the most powerful hurricane to strike Texas in 50 years when it made landfall last week.

“While it’s possible all these unfortunate events can add up to something more consequential, the economy is pretty darn big and resilient,” Jacobsen said.

Geopolitical tensions and a surging euro sent European shares to their lowest in 6 months. The pan-European STOXX 600 ended the session down 1%.

Benchmark 10-year Treasury prices rose on safety buying, but some reluctance to buy bonds at their lowest yields of the year capped the rally.

Benchmark 10-year Treasury yields fell as low as 2.086%, before edging back up to 2.1292.Reuters

Market indices


Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,446.30 +0.08% 2,238.83 +9.26%
DJIA INDU 21,865.37 +0.26% 19,762.60 +10.64%
NASDAQ IXIC 6,301.89 +0.30% 5,383.12 +17.06%

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

:-) Our USD-denominated index closed at a record high of 2.858, up 0.32% on its 15 Aug 2017 record of 2.849.
:-( Our AUD-denominated index is underperforming because of a 10% appreciation of the AUD against the USD in 2017 YTD.

Index Currency Today Change 31 Dec 16 YTD
USD-denominated Index USD 2.857 +0.81% 2.105 +35.76%
Valuation Rate USD/AUD 0.79962 -0.22% 0.72663 +10.04%
AUD-denominated Index AUD 3.577 +1.02% 2.895 +23.54%

Portfolio stock prices

:-) Apple closed at a record high of $162.91, beating its 15 Aug 2017 record of $161.60.
:-) PayPal closed at a record high of $61.01, beating its 22 Aug 2017 record of $60.84.

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $935.75 +0.82% $792.45 +18.08%
Alphabet C GOOG $921.29 +0.82% $771.82 +19.36%
Apple AAPL $162.91 +0.89% $115.82 +40.65%
Amazon AMZN $954.06 +0.85% $749.87 +27.23%
Ebay EBAY $35.20 +1.12% $29.69 +18.55%
Facebook FB $168.05 +0.48% $115.05 +46.06%
PayPal PYPL $61.01 +0.79% $39.47 +54.57%
Twitter TWTR $16.93 +0.95% $16.30 +3.86%
Visa V $103.77 -0.01% $78.02 +33.00%
VMware VMW $104.93 +0.24% $78.73 +33.27%



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

The Bloomberg Dollar Spot Index (DXY) was 0.22 higher at 92.406 after earlier hitting 91.621, its lowest since mid-Jan 2015.

The rebound in U.S. stock appears to have calmed some of the fears that were weighing on the dollar, said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York. “All that Korea news you can still classify in the ‘known unknown’ category. None of it is anything the market has never seen before, so the market’s capacity to bounce back from that was really high,” he said.Reuters


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

Oil and Gas Futures

USA’s largest refinery in Port Arthur, Texas, said Tuesday it has cut production rates to 60% capacity, as refineries up and down the Texas coast continue to battle the effects of Tropical Storm Harvey, which first hit the state Friday as a hurricane.

Motiva, owned by Saudi Arabia state oil giant Saudi Aramco, can produce some 603,000 barrels/day, so that would mean some 240,000 barrels/day has been taken offline. The move brings the total amount of refining capacity offline to around 2.3 million barrels/day, well over 15% of total U.S. refining capacity. The shutdowns or rate-reductions are causing fuel prices to rise, especially in the Gulf region.

In a statement, Motiva said its operations remain stable but indicated a significant problem is getting crude oil and processed fuel in and out of the refinery due to industrywide problems with shipping, pipelines and other transportation.WSJ

Futures prices

Crude oil prices, which dropped more than 1.5% as the market grappled with the shutdown of more than 16% of refining capacity in the United States after a tropical storm ripped through the heart of the country’s oil industry, recovered ground to settle little changed on the day.

Brent crude futures rose 11 cents to settle at $52.00/barrel, while U.S. crude futures settled at $46.44, down 13 cents.Reuters

Prices are as at 15:47 EDT

  • NYMEX West Texas Intermediate (WTI): $46.41/barrel -0.34% Chart
  • ICE (London) Brent North Sea Crude: $51.92/barrel +0.06% Chart
  • NYMEX Natural gas futures: $2.96/MMBTU +1.23% Chart

flag_europe EU: Google Must Report Its Proposal For Compliance With EU Ruling

Google faces a Tuesday deadline to tell the European Union how it plans to comply with an order to stop discriminating against rival shopping search services under threat of new fines that would add to a record EUR 2.4 billion (USD 2.9 billion) penalty.

The EU gave the Alphabet Inc. unit 60 days to propose how it would “stop its illegal content” and 90 days to make changes to how the company displays shopping search results when users start seeking a product. Those changes need to be put in place by 28 Sep 2017 to stave off a risk that the EU could fine the company 5% of daily revenue for each day it fails to comply.

“The obligation to comply is fully Google’s responsibility,” the European Commission said in an emailed statement, without elaborating on what the company must do to comply. Google declined to comment. The onus is on Google to find a solution that satisfies regulators, who’ve learned from past battles with Microsoft Corp. and Intel. Corp. Microsoft’s failure to obey a 2004 antitrust order and charge reasonable fees for software licenses saw it fined EUR 899 million 4 years later. Microsoft argued that its prices were fair and it shouldn’t be compelled to give away patented innovation.

Intel’s lawyer said in 2009 that he was “mystified” on what regulators wanted the company to do to comply with an order to halt anti-competitive rebates for chip sales to computer makers. Intel may finally receive clarity when the EU’s top court rules on its legal challenge to a EUR 1.06 billion fine on 6 Sep 2017.

The EU now has a month to check if Google’s planned changes will fit the bill. Regulators are also expected to levy fines in separate investigations into Google’s Android mobile-phone software — possibly later this year – and the AdSense advertising service. Margrethe Vestager, the EU’s antitrust chief, has also threatened further probes on travel or map services.

Regulators sought technical help in June to evaluate how Google complies with the order, setting a budget of up to EUR 10 million to pay for experts in search engine optimization and search engine marketing.Bloomberg

Alphabet Releases ARCore for Android

The Alphabet Inc. company released a mobile developer tool on Tuesday to get more AR features on Android phones without those costly hardware tweaks. Called ARCore, the software helps mobile apps and websites better track physical objects and overlay them with virtual images. Google will now pitch Android partners on its software, rather than courting them to be compatible with Tango.

ARCore will be available for developers to preview on Tuesday with Google’s own Pixel phones and Samsung Electronics Co.’s S8 smartphone. Google plans to add more Android devices over time and fully launch the software this winter. “We have a path to getting this on north of 100 million phones very quickly,” said Clay Bavor, who leads Google’s virtual reality and AR efforts.

So far, AR has mostly showed up inside games such as the mobile hit Pokemon Go. Social media firms, like Facebook Inc. and Snap Inc., are using the technology to jazz up and share photos and videos inside their apps. Apple Inc. is trying to make the technology more mainstream: it’s new AR software, ARKit, will be available on about half a billion iPhones and iPads later this year.

Google imagines a broad array of applications for its AR technology. Bavor highlighted potential improvements to some of the company’s main digital services. Instead of tracking a bobbing blue dot on Google Maps, people could situate themselves in a panoramic view of the street. Instead of typing search queries into a phone, people will simply point a camera that can “understand everything around you,” Bavor said. “All of this is going to be made better with AR.”

Google has also hinted at commerce uses. Earlier this year, it showed off trials with Gap Inc. and BMW where the retailers used the Tango system to build apps that functioned as virtual showrooms.

Tango’s specialized cameras and depth sensors give it more capabilities than ARCore and Apple’s ARKit. However, Google executives said they’ve developed features in ARCore, like light detection and the ability to place and manipulate virtual objects easily on real surfaces, that come close to matching Tango’s abilities. Bavor said he also expects more handset makers to adopt depth sensor cameras as AR widens in popularity, giving Tango a chance to reach more users. Google plans tools for developers to build AR experiences on mobile web browsers, including those for iPhones.Bloomberg

IDC Predicts Continued SmartPhone Growth Through 2021

Media Release Extract: IDC

According to a new forecast from the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker, worldwide smartphone shipments are expected to maintain positive growth through 2021. IDC expects shipments to grow from 1.47 billion in 2016 to just over 1.7 billion in 2021. In 2016, the market experienced its first-ever single-digit growth year with shipments up just 2.5% over 2015. IDC believes the combination of new user demand as well as a somewhat stagnant 2-year replacement cycle will be enough to keep the market at a 5-year compound annual growth rate (CAGR) of 3.3%.

“The big inflection point that everyone is watching for is when the smartphone market experiences its first year-over-year decline,” said Ryan Reith, program vice president with IDC’s Worldwide Quarterly Mobile Device Trackers. “We believe the two main catalysts for continued growth are bringing first-time users onto a smartphone and maintaining life cycles that are close to two years. At the end of 2016, we estimated that about half of the world’s population was using a smartphone, which leaves plenty of room for additional first-time users. And, despite very high saturation levels in mature markets like North America, Western Europe, Korea, and Japan, we still see the majority of users replacing their handsets roughly every two years. We expect these trends will hold through the forecast.”

The story around operating system market share hasn’t changed much in the past couple of years and this recent forecast doesn’t call for much change. To summarize, Apple has generally held 14-15% share and Android 85% with the the bits and pieces spread across a few dying platforms. When analyzing this by market value based on non-subsidized device retail pricing the story is quite different. By 2021, IDC expects Apple to own 36% of the device market value, equaling roughly $180 billion. This is over half the combined value of all other Android OEMs combined and does not include revenue from services or its app ecosystem.

“The high-end spectrum of the smartphone market shows no signs of slowing down as we expect the average selling price of a smartphone to increase over 7% in 2017,” said Anthony Scarsella, research manager with IDC’s Worldwide Quarterly Mobile Phone Tracker. “Premium phablet offerings from a variety of vendors look to be the main driving force behind the growth of devices with screens 5.5 inches and larger, which are set to grow over 34% in 2017 across all operating systems. The average selling price of these devices is also expected to increase 9.0% as we await the arrival of ultra-premium devices such as the iPhone 8, Note 8, V30, Essential Phone, and the second-generation Pixel. The large screen phenomenon shows no signs of slowing down as phablets will make up 40% of the smartphone market by the end of 2017. By 2021, phablets will control slightly over 51% of the market proving that bigger is most often better to most consumers.”

Platform Highlights

Android: The Android OS continues to dominate on a global level and IDC expects shipments on the platform to slightly outperform the market with 2.3% year-over-year growth in 2017. In terms of volume, Asia/Pacific (excluding Japan) continues to lead the way consuming nearly 55% of shipments throughout the forecast period. Growth at the high end from brands such as OPPO, Vivo, and Huawei have also led to a 17% increase in average selling price (ASP) within the region, showing that the high end has more room to grow. Android ASP’s have also risen in other big markets like Latin America, the United States, and Western Europe. With many brands opting to push premium phablet offerings to combat the likes of the larger iPhone, devices with screen sizes larger than 5.5 inches should grow 34.5% year over year in 2017 with ASPs growing 9.2% as a result.

iOS: Apple is expected to demonstrate nominal 1.5% year-over-year growth in 2017 despite the steadily growing hype around the September iPhone launch. This is a considerable improvement from the 7% decline in iPhone shipments in 2016. From there, things only get better for Apple as IDC anticipates the arrival of the iPhone 8 will spur a major upgrade cycle come 2018. Despite the new device launching later this year, IDC expects a majority of the shipments are likely to land early in 2018. IDC projects 9.1% growth in 2018 with the iPhone 8 and the new 7S/7S+ models playing a pivotal part in the near double-digit growth next year.


International Data Corporation (IDC), “Smartphone Growth Expected to Remain Positive as Shipments Forecast to Grow to 1.7 Billion in 2021More

AMZN: Target fights back against Amazon by moving from AWS

Press Report: CNBC

Target is struggling mightily to compete with Amazon in retail, but it’s finding other ways to fight back.

The discount retailer is scaling back its use of Amazon Web Services, according to sources familiar with the matter, as the company aims to take greater control over its infrastructure and stop financing its chief rival. Amazon’s purchase of Whole Foods is the latest sign of how deep the e-commerce giant is moving into all forms of retail.

Microsoft Azure is among the rival cloud vendors vying to nab Target’s cloud business, said the sources, who asked not to be named because the plans are confidential. Google and Oracle are also beefing up their cloud offerings.

Like all big box stores, Target is being trounced by Amazon, which is selling more items for cheaper and delivering them faster. Target’s annual revenue is lower than it was five years ago, and the company has lost % percent of its market value in the past 12 months.More

flag_usa US: Consumer Expenditures. 2016

Press Release Extract [ser_bls1]

Average expenditures per consumer unit for 2016 were $57,311, a 2.4-percent increase from 2015 levels, the U.S. Bureau of Labor Statistics reported today. During the same period, the Consumer Price Index (CPI-U) rose 1.3 percent, and average pre-tax income per consumer unit increased 7.2 percent to $74,664. In 2015, spending increased 4.6 percent from 2014 levels.

Six of the eight major components of household spending increased in 2016, as shown in table A. Of these, cash contributions expenditures showed the greatest percentage increase, 14.4 percent. This was followed by expenditures for personal insurance and pensions, rising 7.6 percent, healthcare, rising 6.2 percent, food and housing, both rising 2.6 percent, and entertainment, rising 2.5 percent. Expenditures on transportation fell 4.8 percent, while expenditures on apparel and services fell 2.3 percent.

Spending patterns by selected component

Expenditures on cash contributions rose again this year, up 14.4 percent after rising 1.7 percent in 2015.

Personal insurance and pensions expenditures rose 7.6 percent to $6,831. This was primarily driven by the 8.2-percent increase in pensions and Social Security expenditures. The non-payroll deposits in retirement plans subcomponent was up over 26 percent in 2016 and up over 83 percent since 2014. The subcomponent life and other personal insurance fell 3.3 percent.
Healthcare expenditures rose 6.2 percent. This was primarily driven by increased health insurance expenditures, up 6.1 percent.

Housing expenditures increased 2.6 percent. The largest subcomponent, shelter, rose 3.6 percent. The change was driven by rented dwellings, up 6.1 percent. Owned dwellings, which includes mortgage interest, property taxes, and maintenance, repairs, and insurance increased 1.4 percent.

Expenditures on the discretionary categories of food away from home and entertainment continued increasing in 2016, up 4.9 percent and 2.5 percent respectively, after increasing 7.9 percent and 4.2 percent in 2015.

Transportation expenditures fell 4.8 percent primarily driven by the 9.1-percent decline in vehicle purchases expenditures and the 8.7-percent decline in gasoline and motor oil expenditures. Gasoline and motor oil expenditures have declined each year since 2012. The second largest subcomponent of transportation, other vehicle expenses, which includes finance charges, maintenance, insurance, and rentals/leases/licenses, rose 4.6 percent.


Bureau of Labor Statistics, “Consumer Expenditures. 2016“, 29 Aug 2017 (10:00) More

flag_usa US: Conference Board Consumer Confidence Index. Aug 2017

Press Release Extract [ser_cci]

The Conference Board Consumer Confidence Index®, which had increased in July, improved further in August. The Index now stands at 122.9 (1985=100), up from 120.0 in July. The Present Situation Index increased from 145.4 to 151.2, while the Expectations Index rose marginally from 103.0 last month to 104.0.

“Consumer confidence increased in August following a moderate improvement in July,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ more buoyant assessment of present-day conditions was the primary driver of the boost in confidence, with the Present Situation Index continuing to hover at a 16-year high (July 2001, 151.3). Consumers’ short-term expectations were relatively flat, though still optimistic, suggesting that they do not anticipate an acceleration in the pace of economic activity in the months ahead.”

Consumers’ appraisal of current conditions improved further in August. Those saying business conditions are “good” increased from 32.5 percent to 34.5 percent, while those saying business conditions are “bad” moderated from 13.5 percent to 13.1 percent. Consumers’ assessment of the labor market was also more upbeat. Those stating jobs are “plentiful” rose from 33.2 percent to 35.4 percent, while those claiming jobs are “hard to get” decreased from 18.7 percent to 17.3 percent.

Consumers’ optimism about the short-term outlook was relatively flat in August. The percentage of consumers expecting business conditions to improve over the next six months decreased from 22.4 percent to 19.6 percent, but those expecting business conditions to worsen declined from 8.4 percent to 7.3 percent.

Consumers’ outlook for the labor market was also mixed. The proportion expecting more jobs in the months ahead declined from 18.5 percent to 17.1 percent, while those anticipating fewer jobs decreased marginally from 13.2 percent to 13.0 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement increased moderately from 20.0 percent to 20.9 percent, while the proportion expecting a decline decreased from 9.5 percent to 7.8 percent.

The Conference Board, “The Conference Board Consumer Confidence Index Increased in August“, 29 Aug 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