Fri 13 Oct 2017


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  • Today at the stock market Opinion
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  • Today at the stock market

    bull/bearTreasury yields were lower on Friday after muted underlying U.S. inflation data offset higher gasoline prices and strong retail sales while the USD regained ground but was set for its worst week in five. Stocks on major world markets, however, hit their fourth record high in a row, with Wall Street moving higher as some investors bet the inflation data could curb future rate hikes while others eyed trade discussions and retail data.

    Markets: U.S. stocks rose on Friday following upbeat economic data and gains in technology shares, pushing the Dow and the S&P 500 to a fifth straight week of gains.

    • The S&P 500 gained 4.63 points, or 0.18%, to 2,555.56. For the week the S&P 500 was up 0.2%
    • The Dow Jones Industrial Average rose 44.28 points, or 0.19%, to 22,885.29. For the week the Dow was up 0.4%.
    • The Nasdaq Composite added 19.10 points, or 0.29%, to 6,610.61, a record closing high. For the week the Nasdaq rose 0.2%, registering a third week of gains.
    • Advancing issues outnumbered declining ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.08-to-1 ratio favored decliners.
    • About 5.8 billion shares changed hands on U.S. exchanges. That compares with the 6.1 billion daily average for the past 20 trading days, according to Thomson Reuters data.
    • The CBOE volatility index (VIX) remains at historically depressed levels, closing at 9.61 on Friday.

    Technology:

    • Netflix shares closed 1.9% higher after hitting an intraday record high at $200.82 on a slew of price target increases ahead of its earnings report on Monday.More
    • Apple, up 0.6%, gave the S&P 500 its biggest boost, while the S&P technology index was up 0.5%.

    Banks: The reports from the Wall Street banks kicked off the third-quarter earnings season, with investors hoping profit growth will help justify valuations after a rally that has sent the S&P 500 up about 14 percent so far this year. Shares of big banks were mixed following reports from Bank of America and Wells Fargo:

    • Bank of America, the second-biggest U.S. bank by assets, rose 1.5% after the lender’s profit topped estimates due to higher interest rates and a drop in costs. More
    • Wells Fargo fell 2.8% after it reported lower-than-expected revenue for the fourth straight quarter due to a decline in mortgage banking revenue.

    Retail: U.S. retail sales recorded their biggest increase in 2½ years in Sep 2017 as demand rose for building materials and motor vehicles in areas hurt by hurricanes Harvey and Irma. U.S. consumer prices recorded their biggest increase in 8 months in Sep 2017 as gasoline prices soared in the wake of hurricane-related refinery disruptions, but underlying inflation remained muted. The University of Michigan’s consumer sentiment index hit its highest since Jan 2004.

    Healthcare: Limiting the day’s gains, the healthcare sector was down 0.3% as health insurers and hospital operators tumbled on news that President Donald Trump scrapped billions of dollars in Obamacare subsidies to private insurers for low-income Americans. Significant impacts included: Centene -3.3%, Molina Healthcare -3.4%, Anthem -3.1%, Tenet Healthcare -5.1% and Community Health System -4%. Bloomberg 1 Bloomberg 2 Bloomberg 3 Bloomberg 4 Bloomberg 5

    Trade: The Trump administration is seeking to use NAFTA to propose automotive content rules that require the use of North American-made steel, aluminum, copper and plastic resins according to a Reuters report citing three unnamed sources.

    Wall Street had a variety of drivers ranging from those trade talks, which helped the materials sector, to oil prices, which boosted the energy sector, and retail data that helped consumer stocks, according to Tim Ghriskey, chief investment officer of Solaris Asset Management in New York. “It’s a risk-on day. You’ve multiple levers here in multiple sectors. Earnings is almost taking a back seat today,” he said also citing a jump in technology stocks.

    “We’re seeing a continuation of the strength in the market combined with low volatility. There seems to be money searching for stocks and looking for investments, simply because the momentum is still positive. Also we’re entering a seasonal period where it’s difficult to fight the tape. So I imagine there’s cash coming in off the sidelines,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

    European shares rose to their highest in nearly 4 months, helped by corporate earnings updates. The pan-European FTSEurofirst 300 index rose 0.22% and MSCI’s gauge of stocks across the globe gained 0.29%.Reuters and Reuters

    Market indices

    :-) NASDAQ’s Composite Index closed at a record 6,605.80 – beating Wednesday’s record of 6,603.55.

    Market indices
    ^ Market indices today (mouseover for 12 month view) Chart: Google Finance

    Index Ticker Today Change 31 Dec 16 YTD
    S&P 500 SPX (INX) 2,553.17 +0.08% 2,238.83 +14.04%
    DJIA INDU 22,871.72 +0.13% 19,762.60 +15.73%
    NASDAQ IXIC 6,605.80 +0.21% 5,383.12 +22.71%

    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 2.842 +0.52% 2.105 +35.04%
    Valuation Rate USD/AUD 0.7937 +0.81% 0.72663 +9.23%
    AUD-denominated Index AUD 3.584 -0.29% 2.895 +23.79%

    Portfolio stock prices

    :-) Alphabet Class A (GOOGL) closed at a record high of $1,007.87 – beating Wednesday’s record of $1,005.65.
    :-) Alphabet Class C (GOOG) closed at a record high of $989.68 – beating Wednesday’s record of $989.25.
    :-) The combined Class A and Class C shares closed at a record $1,997.55 after spending some time today above $2,000.
    :-) Facebook closed at a record $173.74 – beating Wednesday’s record of $173.51. Facebook’s market cap is again above a half trillion dollars: $504.575 billion. Facebook is now about 8.4 times our USD 20.75 buyin price, and more than 11 times our AUD 19.987 buyin price.
    :-) Visa closed at a record $108.66 – beating Wednesday’s record of $108.44.

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1007.87 +0.22% $792.45 +27.18%
    Alphabet C GOOG $989.68 +0.19% $771.82 +28.22%
    Apple AAPL $156.99 +0.63% $115.82 +35.54%
    Amazon AMZN $1002.94 +0.20% $749.87 +33.74%
    Ebay EBAY $38.35 +0.68% $29.69 +29.16%
    Facebook FB $173.74 +0.69% $115.05 +51.01%
    PayPal PYPL $68.66 -0.29% $39.47 +73.95%
    Twitter TWTR $18.63 +0.98% $16.30 +14.29%
    Visa V $108.66 +0.51% $78.02 +39.27%
    VMware VMW $113.62 +0.41% $78.73 +44.31%

    FX: USD/AUD

    USD

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

    The USD was little changed against major currencies in the late afternoon, shaking off early weakness from the inflation data. The Bloomberg Dollar Spot Index (DXY) rose 0.03%, with the EUR down 0.1% to USD 1.1817.

    “We did see a knee-jerk reaction that was perhaps overdone. On more sober reflection, traders are coming to bid up the dollar,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.

    European Central Bank policymakers broadly agreed to extend asset purchases at a lower volume at their Oct 2017 policy meeting with views converging on a nine-month extension, sources at the central bank told Reuters.

    Benchmark 10-year U.S. Treasury notes were last up 12/32 in price to yield 2.2819%, from 2.323% late on Thursday. The 30-year bond was last up 25/32 to yield 2.8144%, from 2.853% Thursday.Reuters

    AUD

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

    Oil and Gas Futures

    Futures prices

    Oil prices on Friday closed at their highest level in October on bullish news from strong Chinese oil imports, U.S. President Donald Trump’s decision not to certify that Iran is complying with a nuclear agreement and other tensions in the Middle East.

    Brent futures gained 92 cents, or 1.6%, to settle at $57.17/barrel, while WTI crude rose 85 cents, or 1.7%, to settle at $51.45/barrel.

    That put both contracts at their highest settlements since 29 Sep 2017. For the week, Brent was up almost 3% and WTI was up over 4%.

    Traders said the oil market pulled back from even higher gains – both contracts were up over 2% – earlier in the day out of relief that Trump did not immediately seek to impose sanction on Iran. Instead, he gave the U.S. Congress 60 days to decide whether to reimpose sanctions.

    “The market is relieved that the U.S. is not going to pull out of the Iran nuclear deal today and they will instead kick the can down the road,” said Phil Flynn, senior energy analyst at Price Futures Group in Chicago.

    Chinese oil imports hit 9 million barrels per day (bpd) in Sep 2017, data showed. Imports averaged 8.5 million bpd between Jan 2017 and Sep 2017, solidifying China’s position as the world’s biggest oil importer.

    “We woke up with the strong data from China. That’s on the supportive side,” said Olivier Jakob, managing director of oil consultancy PetroMatrix.

    China’s robust imports have been driven by purchases for its strategic petroleum reserves. The nation has spent around $24 billion building its crude reserves since 2015 and now holds around 850 million barrels of oil in inventory, according to the International Energy Agency (IEA).

    Unrest in Iraq also underpinned prices.

    Tensions between the two, which traders fear could impinge on oil exports from the region, have been building since Iraq’s Kurds overwhelmingly backed independence in a 25 Sep 2017 vote.

    Kurdish authorities have sent thousands more troops to the oil region of Kirkuk to confront “threats” from Iraq’s central government, the vice president of the autonomous Kurdistan region said.

    Despite the bullish signals, analysts warned that the Organization of the Petroleum Exporting Countries needed to extend its agreement to reduce oil output beyond its current March 2018 expiry date in order to clear stocks.

    OPEC, with other producers including Russia, has agreed to production cuts of 1.8 million bpd.

    “OPEC-led cuts have breathed new life into oil bulls but unless the organization digs deeper, the drawdown in global oil stockpiles will soon fizzle out,” broker PVM’s Stephen Brennock wrote.

    Separately, Saudi Aramco said it was considering shelving plans for an international public offering (IPO) in favor of a private share sale to world sovereign funds and institutional investors, the Financial Times reported, citing people familiar with the matter.

    Many oil traders have said the reason OPEC has been compliant with the production cut agreement was because Saudi Arabia wanted the cuts to work to prop up oil prices ahead of the Aramco IPO.

    “If the IPO is not going to happen, some traders may see that as Saudi Arabia’s excuse to start increasing production again,” Flynn at Price Futures said, noting he, however, thinks Saudi Arabia has a larger mission to get the market in balance.

    “(Saudi Arabia) may need oil prices to go even higher if the IPO does not go through,” Flynn said.Reuters

    Prices are as at 15:48 EDT

    • NYMEX West Texas Intermediate (WTI): $51.34/barrel +1.46% Chart
    • ICE (London) Brent North Sea Crude: $57.12/barrel +1.55% Chart
    • NYMEX Natural gas futures: $2.99/MMBTU +0.03% Chart

    flag_australia AU: Australian Retailers Sign Up To Amazon Marketplace

    The Australian Retailers Association, the SME Association of Australia, and Amazon have teamed up for the first ever Amazon Marketplace Seller Summit in Australia.

    This free event is open to Australian businesses ranging from established retailers and e-commerce businesses, through to new start-ups looking to bring their products to millions of customers across Australia and around the world.

    The event will feature keynote presentations from Amazon Australia Country Manager, Rocco Braeuniger, and Head of Amazon Marketplace in Australia, Fabio Bertola, as well as insights from experts and entrepreneurs alike.

    The Amazon team will also offer practical guidance on how Australian businesses can increase sales and reach new customers using Amazon Marketplace. Sales from Marketplace sellers now represent over 50% of all items sold on Amazon websites globally.

    Venue: Mon. 13 Nov 2017 8:30 am – 2:00 pm AEDT: Doltone House – Jones Bay Wharf, 26-32 Pirrama Road, Pyrmont, NSWEventBrite

    flag_australia AU: Housing and Occupancy Costs 2015-16

    Press Release Extract [ser_au_housing]

    The proportion of income mortgagees are using for housing has declined over the last decade, according to new figures released today by the Australian Bureau of Statistics (ABS).

    “In 2005-06, owners with a mortgage paid 19 per cent of their total household income on housing costs. By 2015-16 this had fallen to 16 per cent. This is likely driven by lower interest rates coupled with growth in household incomes over the last decade, ” Dean Adams, Director of Household Characteristics and Social Reporting, said.

    In 2005-06, owners with a mortgage paid $434 per week in housing costs, similar to the $452 paid in 2015-16 in real terms. But over the same period, average total household incomes for mortgagees rose from $2,272 to $2,759 per week.

    “Mortgage and property values have also increased in the last decade. Ten years ago, the real median mortgage value was $171,000 which rose to $230,000 in 2015-16. Meanwhile, the real median dwelling value increased from $449,000 to $520,000,” Mr Adams explained.

    Going back another decade, the results also reveal that households are entering into a mortgage at older ages. The proportion of younger households (with a reference person aged under 35 years) represented 69 per cent of first home buyers in 1995-96 which dropped to 63 per cent by 2015-16.

    “Having a mortgage is now the most common form of ownership for households whose reference person was aged between 35 and 54 years. Among this group, ownership with a mortgage increased by 15 percentage points over the last two decades, from 41 per cent to 56 per cent. Meanwhile, the rate of outright ownership in 2015-16 (12 per cent) was one-third the 1995-96 rate (36 per cent),” Mr Adams said.

    The rate of older households (with a reference person aged 55 years and over) who were still paying off a mortgage has tripled between 1995-96 and 2015-16 (from 7 per cent to 21 per cent). Older households are spending more of their income on housing costs than two decades ago, increasing from 8 per cent to 14 per cent for those aged between 55 and 64, and from 5 per cent to 9 per cent for those aged 65 and over.

    Australian Bureau of Statistics, “4130.0 Housing Occupancy and Costs, 2015-16“, 13 Oct 2017 More

    flag_usa US: Consumer Price Index. Sep 2017

    Press Release Extract [ser_us_cpi]

    The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.5 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.2 percent.
    The gasoline index increased 13.1 percent in September and accounted for about three-fourths of the seasonally adjusted all items increase. Other major energy component indexes were mixed, and the food index rose slightly.

    The index for all items less food and energy increased 0.1 percent in September. The shelter index continued to increase, and the indexes for motor vehicle insurance, recreation, education, and wireless telephone services also rose. These increases more than offset declines in the indexes for new vehicles, household furnishings and operations, medical care, and used cars and trucks.

    us_cpi_20171013_month

    The all items index rose 2.2 percent for the 12 months ending September; the 12-month change has been accelerating since it was 1.6 percent in June. The 12-month change in the index for all items less food and energy remained at 1.7 percent for the fifth month in a row. The energy index rose 10.1 percent over the past 12 months, its largest 12-month increase since the period ending March 2017. The food index increased 1.2 percent over the last year.

    Not seasonally adjusted CPI measures

    The Consumer Price Index for All Urban Consumers (CPI-U) increased 2.2 percent over the last 12 months to an index level of 246.819 (1982-84=100). For the month, the index increased 0.5 percent prior to seasonal adjustment.

    us_cpi_20171013_year

    The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.3 percent over the last 12 months to an index level of 240.939 (1982-84=100). For the month, the index increased 0.6 percent prior to seasonal adjustment.

    The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 2.2 percent over the last 12 months. For the month, the index increased 0.6 percent on a not seasonally adjusted basis. Please note that the indexes for the past 10 to 12 months are subject to revision.

    Bureau of Labor Statistics, “Consumer Price Index. Sep 2017“, 13 Oct 2017 (08:30) More

    flag_usa US: Real Earnings. Sep 2017

    Press Release Extract [ser_us_realer]

    All employees

    Real average hourly earnings for all employees decreased 0.1 percent from August to September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from a 0.5- percent increase in average hourly earnings being offset by a 0.5-percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

    Real average weekly earnings decreased 0.1 percent over the month due to the change in real average hourly earnings combined with no change in the average workweek.

    us_realer_20171013_month

    Real average hourly earnings increased 0.7 percent, seasonally adjusted, from September 2016 to September 2017. The increase in real average hourly earnings combined with no change in the average workweek resulted in a 0.6-percent increase in real average weekly earnings over this period.

    Production and nonsupervisory employees

    Real average hourly earnings for production and nonsupervisory employees decreased 0.2 percent from August to September, seasonally adjusted. This result stems from a 0.4-percent increase in average hourly earnings being more than offset by a 0.7-percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

    us_realerns_20171013_month

    Real average weekly earnings decreased 0.3 percent over the month due to the decrease in real average hourly earnings combined with no change in average weekly hours.

    From September 2016 to September 2017, real average hourly earnings increased 0.2 percent, seasonally adjusted. The increase in real average hourly earnings combined with no change in the average workweek resulted in a 0.2-percent increase in real average weekly earnings over this period.

    Bureau of Labor Statistics, “Real Earnings. Sep 2017“, 13 Oct 2017 (08:30) More

    flag_usa US: Advance Monthly Sales for Retail and Food Services. Sep 2017

    Press Release Extract [ser_us_retail]

    Advance Estimates of U.S. Retail and Food Services

    Advance estimates of U.S. retail and food services sales for September 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $483.9 billion, an increase of 1.6 percent (±0.5 percent) from the previous month, and 4.4 percent (±0.7 percent) above September 2016. Total sales for the July 2017 through September 2017 period were up 3.9 percent (±0.5 percent) from the same period a year ago. The July 2017 to August 2017 percent change was revised from down 0.2 percent (±0.5 percent)* to down 0.1 percent (±0.1 percent).

    Retail trade sales were up 1.7 percent (±0.5 percent) from August 2017, and up 4.7 percent (±0.7 percent) from last year. Gasoline Stations were up 11.4 percent (±1.4 percent) from September 2016, while Building Materials and Garden Equipment and Supplies Dealers were up 10.7 percent (±2.1 percent) from last year.

    US Census Bureau, “Advance Monthly Sales for Retail and Food Services, Oct 2017“, 13 Oct 2017 (08:30) More

    flag_usa US: Manufacturing and Trade: Inventories and Sales. Aug 2017

    Press Release Extract [ser_us_manufacturing]

    Sales

    The combined value of distributive trade sales and manufacturers’ shipments for August, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,369.2 billion, up 0.7 percent (±0.1 percent) from July 2017 and was up 5.5 percent (±0.4 percent) from August 2016.

    Inventories

    Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,889.0 billion, up 0.7 percent (±0.1 percent) from July 2017 and were up 3.6 percent (±0.3 percent) from August 2016.

    Inventories/Sales Ratio

    The total business inventories/sales ratio based on seasonally adjusted data at the end of August was 1.38. The August 2016 ratio was 1.40.

    US Census Bureau, “Manufacturing and Trade: Inventories and Sales. Aug 2017“, 13 Oct 2017 (10:00) More

    flag_usa US: UOM Consumer Confidence Index (Preliminary). Oct 2017

    Press Release Extract [ser_11]
    Index Oct 17 Sep 17 Oct 16 M-M% Y-Y%
    Index of Consumer Sentiment 101.1 95.1 87.2 +6.3% +15.9%
    Current Economic Conditions 116.4 111.7 103.2 +4.2% +12.8%
    Index of Consumer Expectations 91.3 84.4 76.8 +8.2% +18.9%

    Consumer sentiment surged in early October, reaching its highest level since the start of 2004. The October gain was broadly shared, occurring among all age and income subgroups and across all partisan viewpoints. The data indicate a robust outlook for consumer spending that extends the current expansion to at least mid 2018, which would mark the 2nd longest expansion since the mid 1800′s. While the early October surge indicates greater optimism about the future course of the economy, it also reflects an unmistakable sense among consumers that economic prospects are now about as good as could be expected. This “as good as it gets” outlook is supported by a moderation in the expected pace of growth in both personal finances and the overall economy, accompanied by a growing sense that, even with this moderation, it would still mean the continuation of good economic times. Although such an outlook is typically recorded in the late phase of an expansion, its occurrence is independent of the ultimate length of an expansion. Indeed, nothing in the latest survey indicates that consumers anticipate an economic downturn anytime soon – which contrarians may consider a clear warning sign of trouble ahead. Nonetheless, consumers anticipate low unemployment, low inflation, small increases in interest rates, and most importantly, modest income gains in the year ahead. It is this acceptance of lackluster growth rates in personal income and in the overall economy that signifies that consumers have accepted, however reluctantly, limits on the pace of improving prospects for living standards.

    University of Michigan, “UOM Consumer Confidence Index (Preliminary). Oct 2017“, 13 Oct 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