Fri 20 Oct 2017


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  • Today at the stock market Opinion
  • The portfolio today Opinion
  • News
  • flag_japan Japan Update
  • flag_china China Update
  • Today at the stock market

    bull/bearU.S. stocks hit record closing highs on Friday and the S&P 500 posted a sixth week of gains after the U.S. Senate passed a budget resolution, lifting hopes that President Donald Trump’s tax-cut plan may move forward.

    All three indexes posted record closing highs, extending their recent run of records, and the Dow, which broke above 23,000 this week, gained 2% for the week. The Dow also registered a 6th week of gains while the Nasdaq posted 4 weeks of gains. The S&P 500 was up 0.9% for the week while the Nasdaq added 0.4%.

    • The S&P 500 index gained 13.11 points, or 0.51%, to a record 2,575.21
    • The Dow Jones Industrial Average rose 165.59 points, or 0.71%, to a record 23,328.63.
    • The Nasdaq Composite index added 23.99 points, or 0.36%, to a record 6,629.05.
    • Advancing issues outnumbered declining ones on the NYSE by a 1.55-to-1 ratio; on Nasdaq, a 1.58-to-1 ratio favored advancers.
    • About 6.2 billion shares changed hands on U.S. exchanges. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

    The Senate’s approval late Thursday of a 2018 budget blueprint could pave the way for Republicans to pursue a tax-cut package without Democratic support.

    “It’s just a reaction to the thought that just maybe there might be something coming from Congress in the way of tax reform. Everybody had kind of given up hope, and after the comments over the last 24 hours, people are like, shoot, this may actually happen,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

    Stocks rallied following the Nov 2016 election of Trump, partly on his promises to cut taxes and reduce regulations.

    Shares of General Electric reversed sharp early losses to end 1.1% higher, and the S&P industrials index also finished up 1.1%. GE’s new chief executive vowed to shed more than $20 billion worth of assets after the company’s quarterly results badly missed Wall Street’s expectations.

    The S&P index of financials which are expected to benefit from the administration’s proposed policies, rose 1.2% and its components were among the day’s best performers.

    The small-cap Russell 2000 index gained 0.5%. Small-cap companies are likely to get a boost from tax reform.

    Some investors saw little reason to worry about the extended climb. “This has been a healthy advance. It has been a slow, steady grind upward. There’s been extraordinarily low volatility,” said Hank Smith, co-chief investment officer at Haverford Trust in Radnor, Pennsylvania.

    Focus remains on third-quarter earnings as well, though results so far have been mixed. PayPal’s stock rose 5.5% after upbeat earnings.Bloomberg

    Market indices

    :-) The S&P500, Dow Jones Industrial Average, and NASDAQ Composite indices closed on record highs today.

    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) 2,575.21 +0.51% 2,238.83 +15.02%
    DJIA INDU 23,328.63 +0.71% 19,762.60 +18.04%
    NASDAQ IXIC 6,629.05 +0.36% 5,383.12 +23.14%

    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 2.830 +0.17% 2.105 +34.40%
    Valuation Rate USD/AUD 0.78652 -0.74% 0.72663 +8.24%
    AUD-denominated Index AUD 3.601 +0.90% 2.895 +24.31%

    Portfolio stock prices

    :-) PayPal closed on a record high after reporting its earnings yesterday. It closed at $70.97, beating its 12 Oct 2017 record of $68.86.
    :-) VMware closed on a record high of $118.34, up 0.80% on yesterday’s record of $117.40.

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1005.07 +0.32% $792.45 +26.83%
    Alphabet C GOOG $988.20 +0.38% $771.82 +28.03%
    Apple AAPL $156.25 +0.17% $115.82 +34.91%
    Amazon AMZN $982.91 -0.38% $749.87 +31.07%
    Ebay EBAY $37.61 +0.86% $29.69 +26.67%
    Facebook FB $174.98 +0.24% $115.05 +52.09%
    PayPal PYPL $70.97 +5.53% $39.47 +79.80%
    Twitter TWTR $17.87 -0.11% $16.30 +9.63%
    Visa V $107.55 +0.50% $78.02 +37.84%
    VMware VMW $118.34 +0.80% $78.73 +50.31%

    FX: USD/AUD

    USD

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

    The Bloomberg Dollar Spot Index gained 0.6%.
    The EUR fell 0.7% to USD 1.1774.
    Britain’s GBP increased 0.2% to USD 1.3185.
    Japan’s JPY decreased 0.9% to 113.52 per USD , the weakest in 14 weeks.
    Bloomberg

    AUD

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

    Oil and Gas Futures

    Futures prices

    Prices are as at 15:47 EDT

    • NYMEX West Texas Intermediate (WTI): $51.47/barrel +0.35% (14:49) Chart
    • ICE (London) Brent North Sea Crude: $57.83/barrel +1.05% Chart
    • NYMEX Natural gas futures: $2.91/MMBTU +1.43% Chart

    flag_usa US: Existing Home Sales. Sep 2017

    Press Release Extract [ser_nar]

    After three straight monthly declines, existing-home sales slightly reversed course in September, but ongoing supply shortages and recent hurricanes muted overall activity and caused sales to fall back on an annual basis, according to the National Association of Realtors®.

    Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 0.7 percent to a seasonally adjusted annual rate of 5.39 million in September from 5.35 million in August. Last month’s sales pace is 1.5 percent below a year ago and is the second slowest over the past year (behind August).

    Lawrence Yun, NAR chief economist, says closings mustered a meager gain in September, but declined on an annual basis for the first time in over a year (July 2016; 2.2 percent). “Home sales in recent months remain at their lowest level of the year and are unable to break through, despite considerable buyer interest in most parts of the country,” he said. “Realtors® this fall continue to say the primary impediments stifling sales growth are the same as they have been all year: not enough listings – especially at the lower end of the market – and fast-rising prices that are straining the budgets of prospective buyers.”

    Added Yun, “Sales activity likely would have been somewhat stronger if not for the fact that parts of Texas and South Florida – hit by Hurricanes Harvey and Irma – saw temporary, but notable declines.”

    The median existing-home price for all housing types in September was $245,100, up 4.2 percent from September 2016 ($235,200). September’s price increase marks the 67th straight month of year-over-year gains.

    Total housing inventory at the end of September rose 1.6 percent to 1.90 million existing homes available for sale, but still remains 6.4 percent lower than a year ago (2.03 million) and has fallen year-over-year for 28 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.5 months a year ago.

    “A continuation of last month’s alleviating price growth, which was the slowest since last December (4.5 percent), would improve affordability conditions and be good news for the would-be buyers who have been held back by higher prices this year,” said Yun.

    First-time buyers were 29 percent of sales in September, which is down from 31 percent in August, 34 percent a year ago and matches the lowest share since September 2015. NAR’s 2016 Profile of Home Buyers and Sellers – released in late 20164 – revealed that the annual share of first-time buyers was 35 percent.

    According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage dipped to 3.81 percent in September from 3.88 percent in August and is the lowest since November 2016 (3.77 percent). The average commitment rate for all of 2016 was 3.65 percent.

    “Nearly two-thirds of renters currently believe now is a good time to buy a home, but weakening affordability and few choices in their price range have made it really difficult for more aspiring first-time buyers to reach the market,” said Yun.

    President William E. Brown, a Realtor® from Alamo, California, says Congress should keep in mind the barriers affecting prospective first-time buyers as they move forward with tax reform in the coming months.

    “There’s no way around the fact that any proposal that marginalizes the mortgage interest deduction and eliminates state and local tax deductions essentially disincentives homeownership and is a potential tax hike on millions of middle-class homeowners,” said Brown. “Reforming the tax code is a worthy goal, but it should not lead to the middle class, who primarily build wealth through owning a home, footing the bill. Instead, Congress should be looking at ways to ensure more creditworthy prospective buyers are able to achieve homeownership and enjoy its personal and wealth-building benefits.”

    Properties typically stayed on the market for 34 days in September, which is up from 30 days in August but down from 39 days a year ago. Forty-eight percent of homes sold in September were on the market for less than a month.

    Inventory data from realtor.com® reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in September were San Francisco-Oakland-Hayward, Calif., 30 days; San Jose-Sunnyvale-Santa Clara, Calif., 32 days; Salt Lake City, Utah, 35 days; and Seattle-Tacoma-Bellevue, Wash., and Vallejo-Fairfield, Calif., both at 36 days.

    All-cash sales were 20 percent of transactions in September, unchanged from August and down from 21 percent a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in September (unchanged from last month and a year ago).

    Distressed sales – foreclosures and short sales – were 4 percent of sales in September, unchanged from last month and a year ago. Three percent of September sales were foreclosures and 1 percent were short sales.

    Single-family and Condo/Co-op Sales

    Single-family home sales climbed 1.1 percent to a seasonally adjusted annual rate of 4.79 million in September from 4.74 million in August, but are still 1.2 percent under the 4.85 million pace a year ago. The median existing single-family home price was $246,800 in September, up 4.2 percent from September 2016.

    Existing condominium and co-op sales decreased 1.6 percent to a seasonally adjusted annual rate of 600,000 units in September, and are now 3.2 percent below a year ago. The median existing condo price was $231,300 in September, which is 4.1 percent above a year ago.

    Regional Breakdown

    September existing-home sales in the Northeast were at an annual rate of 720,000 (unchanged from August), and are now 1.4 percent below a year ago. The median price in the Northeast was $274,100, which is 4.8 percent above September 2016.

    In the Midwest, existing-home sales rose 1.6 percent to an annual rate of 1.30 million in September, but are 1.5 percent below a year ago. The median price in the Midwest was $195,800, up 5.4 percent from a year ago.

    Existing-home sales in the South slipped 0.9 percent to an annual rate of 2.13 million in September, and are now 2.3 percent lower than a year ago. The median price in the South was $215,100, up 4.6 percent from a year ago.

    Existing-home sales in the West increased 3.3 percent to an annual rate of 1.24 million in September (unchanged from a year ago). The median price in the West was $362,700, up 5.0 percent from September 2016.

    The National Association of Realtors, “Existing-Home Sales Inch 0.7 Percent Higher in September“, 9 Oct 2017 More

    Comment: Reuters

    U.S. home resales unexpectedly increased in Sep 2017 as the effects of Hurricanes Harvey and Irma began to dissipate, but a persistent dearth of properties for sale continued to weigh on overall activity.

    The National Association of Realtors said on Friday existing home sales rose 0.7% to a seasonally adjusted annual rate of 5.39 million units last month. The Aug 2017 sales pace was unrevised.

    Economists polled by Reuters had forecast sales falling 1.0% to a rate of 5.30 million units last month. Sales were down 1.5% from Sep 2016, the first year-over-year decline since Jul 2016.

    Analysts expect that sales in the hurricane-affected areas will rebound further once delays in sales fade. However, the overall housing sector has been slowing as the number of properties available has not kept up with demand.

    The Commerce Department reported earlier this week that new U.S. single-family home sales fell to a one-year low in Sep 2017, as Harvey and Irma disrupted the construction of single-family homes in the South.Reuters

    flag_usa US: Tax Reform Partially Supported By Senate Budget Vote

    President Donald Trump’s tax reform plans won partial support on Friday when Republican U.S. Senator Rand Paul said he was “all in” for massive tax cuts, but the party was still far from united over how to achieve the main item on its domestic agenda.

    Trump’s drive to overhaul the U.S. tax code cleared a critical hurdle on Thursday when the Senate approved (51 to 49) a budget measure that will allow Republicans to pursue a tax-cut package without Democratic party support.

    But Republicans, who control both the Senate and House of Representatives, have yet to produce a tax reform bill as a self-imposed deadline to overhaul the U.S. tax code by the end of the year approaches. The party’s lawmakers differ widely on what cuts to make and how to pay for them.

    They are under intense pressure to succeed on tax reform after failing so far to make good on their other main legislative ambition: scrapping Obamacare, the signature healthcare law of former President Barack Obama.

    On major world markets, stock prices advanced on Friday, bond yields rose, and the USD strengthened on increased hopes that Trump could make progress on his fiscal plans.Reuters

    flag_usa US: Federal Fiscal Deficit. 2016/7

    Fiscal Year ended 30 Sep 2017:

    • Receipts: $3,314.894 billion, up 1.47% from $3,266.774 billion in 2016, but below Jul 2017 estimate of $3,343.640 billion:
      • Individual income taxes: $1,587 billion
      • Social security and other payroll taxes: $1,162 billion
      • Corporate income taxes: $297 billion
      • Other taxes and duties: $269 billion
    • Outlays: $3,980.605 billion, up 3.33% from $3,852.420 billion in 2016, but below Jul 2017 estimate of $4,045.306 billion:
      • Social Security: $945 billion
      • Defense: $600 billion
      • Medicare: $597 billion
      • Interest on debt: $263 billion
      • Other: $1,575 billion
    • Deficit: $665.712 billion, up 13.67% from $585.646 billion in 2016, but below Jul 2017 estimate of $701.666 billion:
      • Calendar adjusted: $644 billion, up from $546 billion in 2016

    Month of Sep 2017:

    • Receipts: $348.722 billion, down 2% from Sep 2016
      • Individual income taxes: $165 billion
      • Social security and other payroll taxes: $96 billion
      • Corporate income taxes: $63 billion
      • Other taxes and duties: $24 billion
    • Outlays: $340.722 billion, up 5% from Sep 2016
      • Social Security: $80 billion
      • Defense: $57 billion
      • Medicare: $78 billion
      • Interest on debt: $-12 billion
      • Other: $138 billion
    • Surplus: $8.000 billion.

    Outlays by Department/Agency:

    • Legislative Branch: $4.499 billion, up from $4.344 billion
    • Judicial Branch: $7.566 billion, up from $7.497 billion
    • Department of Agriculture: $127.563 billion, down from $138.162 billion
    • Department of Commerce: $10.304 billion, up from $9.162 billion
    • Department of Defense–Military Programs: $568.905 billion, up from $565.364 billion
    • Department of Education: $111.702 billion, up from $76.981 billion
    • Department of Energy: $25.796 billion, down from $25.852 billion
    • Department of Health and Human Services: $1,116.764 billion, up from $1,102.965 billion
    • Department of Homeland Security: $50.502 billion, up from $45.195 billion
    • Department of Housing and Urban Development: $55.474 billion, up from $26.393 billion
    • Department of the Interior: $12.141 billion, down from $12.584 billion
    • Department of Justice: $30.977 billion, up from $29.523 billion
    • Department of Labor: $40.120 billion, down from $41.371 billion
    • Department of State: $27.061 billion, down from $29.448 billion
    • Department of Transportation: $79.440 billion, up from $78.419 billion
    • Department of the Treasury: $1.590 billion.
      • Interest on Treasury Debt Securities (Gross): $456.955 billion, up from $429.963 billion
      • Other: $87.889 billion, down from $96.153 billion
    • Department of Veterans Affairs: $176.050 billion, up from $174.018 billion
    • Corps of Engineers: $6.453 billion, up from $6.388 billion
    • Other Defense Civil Programs: $58.695 billion, down from $64.505 billion
    • Environmental Protection Agency: $8.088 billion, down from $8.729 billion
    • Executive Office of the President: $0.411 billion, up from $0.395 billion
    • General Services Administration: -$0.664 billion up from -$0.735 billion
    • International Assistance Programs: $18.922 billion, up from $16.241 billion
    • National Aeronautics and Space Administration: $18.698 billion, up from $18.829 billion
    • National Science Foundation: $7.215 billion, up from $6.904 billion
    • Office of Personnel Management: $95.461 billion, up from $91.316 billion
    • Small Business Administration: $0.439 billion, up from -$0.444 billion
    • Social Security Administration: $1,000.812 billion, up from $976.783 billion
    • Independent Agencies: $11.589 billion, up from $11.414 billion
    • Undistributed Offsetting Receipts:
      Interest: -$147.059 billion, up from -$146.117 billion
      Other: -$89.825 billion, up from -$95.251 billion
    • Total Outlays: $3,980.605 billion, up from $3,852.420 billion

    Bureau of the Fiscal Service, “Final Monthly Treasury Statement of Receipts and Outlays of the United States Government for Fiscal Year 2017 through September 2017 and Other PeriodsStatement

    Comment: Reuters

    The 2017 deficit increased to 3.5% of GDP. The previous fiscal year deficit was $586 billion, with a deficit-to-GDP ratio of 3.2%.

    In addition to the annual deficit, the national debt – the accumulation of past deficits and interest due to lenders to the Treasury – now exceeds $20 trillion. The non-partisan Congressional Budget Office has said the ever-rising debt levels are unsustainable as the government pays for the medical and retirement costs of the aging Baby Boomer generation.

    For Sep 2017, the U.S. government recorded an $8 billion surplus, a 76% drop from the same month last year. Economists polled by Reuters had forecast the Treasury reporting a $6 billion surplus for Sep 2017.

    The latest fiscal year, which ended 30 Sep 2017, straddled the presidencies of Barack Obama, a Democrat, and Donald Trump, a Republican.

    Since taking office in Jan 2017, the Trump administration has sought to overhaul the U.S. tax code with precise details currently being worked on in Congress. The Republican tax plan currently calls for as much as $6 trillion in tax cuts, which would sharply reduce government revenues.

    It has prompted criticism that it favors tax breaks for business and the wealthy and could add trillions of dollars to the deficit. The administration contends tax cuts will pay for themselves by boosting economic growth.Reuters

    flag_japan Japan update

    Election: Abe Victory Expected

    Japanese Prime Minister Shinzo Abe’s early election gamble looks like it will pay off.

    Only a few months ago his popularity tumbled over a series of cronyism scandals, prompting some allies to weigh challenging him as party leader. Then a cabinet reshuffle and North Korean missile launches over Japan helped stop the bleeding, giving him a window to secure a fresh mandate that could end up making him the country’s longest serving prime minister.

    Polls show Abe sailing to an easy victory in Sunday’s election, potentially putting him on track to govern Japan until 2021 if he wins a party leadership vote next year. Retaining his two-thirds majority in parliament would boost his chances of changing Japan’s pacifist constitution, as well as approving gambling resorts and pushing forward with a sales tax increase.

    A convincing victory would also keep in place the ultra-easy monetary policy that weakened the yen, propped up exports and helped stocks rise to heights not seen since before the financial crisis. Diplomatic policies, including cozying up to President Donald Trump to keep the U.S. alliance strong in the face of North Korea’s threat, will also be maintained.

    For a while, it looked as if Tokyo Governor Yuriko Koike might pose a serious threat to Abe. Her new Party of Hope quickly gained popularity, and took in a wave of disaffected opposition lawmakers. Then the new Constitutional Democratic Party formed, and has risen to become the second most popular opposition group in most polls.

    A survey published by the Nikkei newspaper on Friday forecast the LDP would win between 210 and 306 of the 465 seats up for grabs, while its coalition partner Komeito would secure 32-38. The paper’s most likely scenario gives the alliance 297 seats, short of the 310 needed for a two-thirds majority.Bloomberg

    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

    The Nikkei 225 closed up 9 points, or less than 0.1%, at 21,458 on Friday, extending its winning streak to 14 days, as investors believe Japanese Prime Minister Shinzo Abe’s coalition will win a two-thirds majority in Sunday’s election. Historically, the Japan Nikkei 225 Stock Market Index reached an all time high of 38915.87 in Dec 1989 and a record low of 85.25 in Jul 1950.TradingEconomics

    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