Mon 4 Sep 2017


watch Nightly Business Report. watch PBS NewsHour. [No Bloomberg Technology today]

In Portfolioticker today

Today at the stock market

The NASDAQ and NYSE are closed today for the Labor Day public holiday. In other countries Labor Day is 1 May (the target date set for the introduction of an 8-hour day by the Federation of Organized Trades and Labor Unions in Oct 1884), but in the USA they set it later to separate the public holiday from the Haymarket bombing in Chicago on 4 May 1886, when a workers’ demonstration for an 8-hour day turned violent.

Market Concerns: US Debt Ceiling

A potential standoff over the U.S. federal debt ceiling is raising alarm bells among fund managers who fear a repeat of 2011 when a protracted showdown over increasing the government’s borrowing limit and subsequent downgrade of U.S. credit quality led to a more than 15% slump in the S&P 500 stock index.

U.S. investors are raising cash and buying protection, bracing for a messy fight ahead of the Treasury Department’s 29 Sep 2017 deadline to raise the debt limit, a legal cap on how much the U.S. government is allowed to borrow.

Failure to increase the debt ceiling could lead to a recession and prompt the first significant sell-off of the Trump administration. The benchmark S&P 500 has not fallen by 5% or more in over a year, the longest streak without such a decline in more than 20 years.Reuters 2 Sep 2017

Market Concerns: North Korean Hydrogen Bomb Test

North Korea conducted its sixth and most powerful nuclear test on Sunday, which it said was a successful detonation of an advanced hydrogen bomb, technically known as a two-stage thermonuclear device.

All of North Korea’s six nuclear tests including the one on Sunday have taken place at its underground testing site in Punggye-ri, deep in mountainous terrain, and it is hard to independently verify the claims.

But experts who studied the impact of the earthquake caused by the explosion – measured by the U.S. Geological Survey at magnitude 6.3 – said there was enough strong evidence to suggest the reclusive state has either developed a hydrogen bomb or was getting very close.

The detonation produced 10 times more power than the fifth nuclear test a year ago, South Korean and Japanese officials said. NORSAR, a Norwegian earthquake monitoring agency, estimated the yield at 120 kilotons, significantly above the 15 kiloton “Little Boy” bomb dropped on Hiroshima and the 20 kiloton “Fat Man” dropped on Nagasaki at the end of World War Two.

North Korea’s Nuclear Weapons Institute said Sunday’s test verified the functioning of a hydrogen bomb, including the “fission to fusion power rate and all other physical specifications reflecting the qualitative level of a two-stage thermo-nuclear weapon,” according to the official KCNA news agency.

North Korea also specifically mentioned the possibility of a electromagnetic pulse, or EMP, attack. Such a strike would involve detonating a bomb in the atmosphere, instead of firing a long-range missile at a major U.S. city.

Some U.S. policymakers and experts have raised concerns about such an attack, which could cause a massive power surge and deal a devastating blow to U.S. electric grid and critical infrastructure.Reuters 3 Sep 2017

Market Concerns: Closure of Russian Consulate and Other Diplomatic Facilities

Moscow denounced the American decision to close three Russian diplomatic facilities in the United States as a “blatantly hostile act” that violated international law and demanded Washington reverse the order on Sunday.

The United States has ordered the closure of the Russian consulate in San Francisco and two buildings housing trade missions in Washington and New York. It is the latest broadside in a tit-for-tat exchange between the countries that has helped push relations towards a new post-Cold War low.

Russian diplomats were working to vacate the properties over the weekend, including the six-story consulate.Reuters 3 Sep 2017

read_this Portfolio Indices

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 2.889 +0.00% 2.105 +37.26%
Valuation Rate USD/AUD 0.79949 -0.28% 0.72663 +10.02%
AUD-denominated Index AUD 3.617 +0.27% 2.895 +24.93%

FX: USD/AUD

USD

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

AUD

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

Oil and Gas Futures

Futures prices

U.S. crude oil prices edged higher on Monday while gasoline prices slumped to pre-Hurricane Harvey levels, as oil refineries and pipelines in the U.S. Gulf Coast slowly resumed activity, easing supply concerns.

U.S. West Texas Intermediate (WTI) crude futures were 8 cents higher at $47.37/barrel at 1351 EDT (1751 GMT) as U.S. demand recovered after being hit by reduced refinery activity since Harvey made landfall on 25 Aug 2017.

Brent crude futures settled 41 cents lower at $52.34/barrel, due in part to a shift away from crude markets to assets perceived to be safer, such as gold, after a powerful North Korean nuclear test.

NYMEX gasoline futures were down 3.28% at $1.6906/gallon, a level last seen on 25 Aug 2017.

Damage by Harvey to the oil infrastructure in the Gulf Coast appeared less extensive than some had feared.Reuters

Prices are as at 13:00 EDT

  • NYMEX West Texas Intermediate (WTI): $47.37/barrel +0.17% Chart
  • ICE (London) Brent North Sea Crude: $52.34/barrel -0.78% (13:29) Chart
  • NYMEX Natural gas futures: $3.02/MMBTU -1.66% Chart

flag_australia AU: Business Indicators. Jun 2017

Press release extract [ser_abs1]
June Key Figures Q1/17-Q2/17 Q2/16-Q2/17
Sales of goods and services (Chain volume measures): Manufacturing
Trend -0.2% -2.7%
Seasonally Adjusted +0.9% -2.8%
Sales of goods and services (Chain volume measures): Wholesale trade
Trend +0.2% +4.9%
Seasonally Adjusted -1.6% +3.3%
Inventories (Chain volume measures)
Trend +0.3% +1.7%
Seasonally Adjusted -0.4% +1.5%
Company gross operating profits
Trend +3.2% +31.0%
Seasonally Adjusted -4.5% +21.2%
Wages and salaries
Seasonally Adjusted +1.2% +1.6%

Australian Bureau of Statistics, “5676: Business Indicators. Jun 2017“, 4 Sep 2017 More

flag_europe EU: Industrial Producer Prices, Domestic Market (PPI). Jul 2017

Press release extract [ser_73]

In July 2017, compared with June 2017, industrial producer prices remained stable in the euro area (EA19), while they rose by 0.1% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In June 2017 prices decreased by 0.2% in the euro area and by 0.3% in the EU28.

In July 2017, compared with July 2016, industrial producer prices rose by 2.0% in the euro area and by 2.3% in the EU28.

eu_ipp_20170804

Monthly comparison by main industrial grouping and by Member State

Industrial producer prices in total industry remained stable in the euro area in July 2017, compared with June 2017, as prices increased by 0.2% for non-durable consumer goods and by 0.1% in the energy sector, while they remained stable for capital goods and durable consumer goods and decreased by 0.1% for intermediate goods. Prices in total industry excluding energy rose by 0.1%.

In the EU28, the 0.1% increase is due to rises of 0.2% for non-durable consumer goods and of 0.1% in the energy sector, while prices remained stable for capital goods and durable consumer goods and decreased by 0.1% for intermediate goods. Prices in total industry excluding energy also rose by 0.1%.

The highest increases in industrial producer prices were observed in Bulgaria (+2.4%), Estonia (+1.4%), Denmark and Sweden (both +0.9%), and the largest decreases in Hungary (-1.0%), Ireland (-0.7%) and Slovakia (-0.6%).

Annual comparison by main industrial grouping and by Member State

The 2.0% increase in industrial producer prices in total industry in the euro area in July 2017, compared with July 2016, is due to rises of 2.7% for intermediate goods, of 2.4% for non-durable consumer goods, of 2.0% in the energy sector, of 0.9% for capital goods and of 0.5% for durable consumer goods. Prices in total industry excluding energy rose by 2.1%.

In the EU28, the 2.3% price increase is due to rises of 2.8% for intermediate goods, the energy sector and non- durable consumer goods, of 1.0% for capital goods and of 0.9% for durable consumer goods. Prices in total industry excluding energy also rose by 2.3%.

Industrial producer prices rose in all Member States. The largest increases were recorded in Belgium (+5.9%), Estonia (+5.4%) and Bulgaria (+5.2%).

Eurostat, “Industrial Producer Prices, Domestic Market (PPI). Jul 2017“, 4 Sep 2017 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