Mon 6 Nov 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/bearOil prices surged to their highest since July 2015 on Monday as Saudi Arabia’s crown prince cemented his power with a crackdown on corruption, while shares worldwide were little changed and key currencies stayed in tight ranges. Story

    All three major U.S. equity indexes closed at record highs, with investors focused on what could be the biggest merger ever in the technology sector.

    • The S&P 500 index gained 3.29 points, or 0.13%, to 6,786.44.
    • The Dow Jones Industrial Average rose 9.23 points, or 0.04%, to 23,548.42.
    • The Nasdaq Composite Index hit a record high above its 6,786.436 close following news that chip maker Broadcom Ltd made an unsolicited bid to buy peer Qualcomm Inc for $103 billion.

    The USD was little changed after investors took profits on its best weekly performance this year, with wariness about the status of the U.S. economy and tax reform plans setting the tone.

    Facing pockets of discontent in their own Republican ranks, tax negotiators in the U.S. House of Representatives will seek to bridge differences over their far-reaching tax bill and stick to a self-imposed deadline of passage this month.Bloomberg

    Market indices

    :-) The three major 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) 2,591.13 +0.12% 2,238.83 +15.73%
    DJIA INDU 23,548.42 +0.03% 19,762.60 +19.15%
    NASDAQ IXIC 6,786.44 +0.32% 5,383.12 +26.06%

    Portfolio Indices

    :-) Our USD-denominated index closed on a record high of 3.106, up 0.77% on Friday’s record of 3.082.
    :-) Our AUD-denominated index closed on a record high of 4.016, up 0.26% on Friday’s record of 4.005.

    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 3.105 +0.77% 2.105 +47.53%
    Valuation Rate USD/AUD 0.77370 +0.51% 0.72663 +6.47%
    AUD-denominated Index AUD 4.015 +0.26% 2.895 +38.69%

    Portfolio stock prices

    :-) Apple closed on a record high of $174.25, up 1.01% on Friday’s record of $172.50.
    :-) Amazon closed on a record high of $1,121.38, up 0.88% on Friday’s record of $1,111.60.
    :-) PayPal closed on a record high of $74.74, up 1.84% on Friday’s record of $73.39.
    :-) Visa closed on a record high of $111.92, up 0.50% on Friday’s record of $111.36.

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1042.68 -0.70% $792.45 +31.57%
    Alphabet C GOOG $1025.90 -0.62% $771.82 +32.91%
    Apple AAPL $174.25 +1.01% $115.82 +50.44%
    Amazon AMZN $1121.38 +0.87% $749.87 +49.54%
    Ebay EBAY $37.37 -0.35% $29.69 +25.86%
    Facebook FB $180.18 +0.70% $115.05 +56.61%
    PayPal PYPL $74.74 +1.83% $39.47 +89.35%
    Twitter TWTR $19.39 -2.57% $16.30 +18.95%
    Visa V $111.92 +0.50% $78.02 +43.45%
    VMware VMW $119.21 +1.07% $78.73 +51.41%

    FX: USD/AUD

    USD

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

    Bloomberg’s Dollar Spot Index (DXY) fell 0.24%, with the EUR up 0.03% to USD1.1611.

    Japan’s JPY strengthened 0.30% to 113.75 per USD.
    Britain’ GBP was last trading at USD 1.3173, up 0.76% on the day.

    The spread between two-year and 10-year U.S. Treasury yields was the narrowest in more than a decade as sluggish domestic inflation underpinned demand for longer-maturity government bonds.

    Benchmark 10-year Treasury notes were last up 7/32 in price to yield 2.3181%, from 2.343% late on Friday. The Federal Reserve confirmed on Monday that William Dudley, one of the most influential monetary policymakers throughout the 2008 financial crisis and its aftermath, expects to retire by mid-2018, leaving the leadership of the U.S. central bank unusually wide open.

    The 30-year bond was last up 16/32 in price to yield 2.7973%, from 2.822 percent late on Friday.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 broke above $56/barrel for the first time in more than two years as Mohammed bin Salman’s clampdown on graft led to arrests of royals, ministers and investors, including prominent billionaire investor Alwaleed bin Talal. Brent crude futureswere trading about 3.5% higher at $64.23/barrel by 4:30 p.m. ET.

    Prince Mohammed’s reforms include a plan to list parts of state-owned oil company Saudi Aramco next year, with higher oil prices seen as beneficial for the market capitalization of the future listed company.Reuters

    Prices are as at 15:49 ET

    • NYMEX West Texas Intermediate (WTI): $57.35/barrel +3.07% Chart
    • ICE (London) Brent North Sea Crude: $64.25/barrel +3.51% Chart
    • NYMEX Natural gas futures: $3.12/MMBTU +4.46% Chart

    flag_europe EU: Industrial Producer Prices (PPI). Sep 2017

    Press Release Extract [ser_eu_ppi]

    In September 2017, compared with August 2017, industrial producer prices rose by 0.6% in both the euro area (EA19) and the EU28, according to estimates from Eurostat, the statistical office of the European Union. In August 2017, prices increased by 0.3% in the euro area and by 0.4% in the EU28.

    eu_ipp_20171106

    In September 2017, compared with September 2016, industrial producer prices rose by 2.9% in the euro area and by 3.3% in the EU28.

    Monthly comparison by main industrial grouping and by Member State

    The 0.6% increase in industrial producer prices in total industry in the euro area in September 2017, compared with August 2017, is due to rises of 1.5% in the energy sector, of 0.4% for intermediate goods and of 0.2% for durable consumer goods, while prices remained stable for capital goods and non-durable consumer goods. Prices in total industry excluding energy rose by 0.1%.

    In the EU28, the 0.6% increase is due to rises of 2.0% in the energy sector, of 0.4% for intermediate goods, of 0.2% for durable consumer goods and of 0.1% for non-durable consumer goods, while prices remained stable for capital goods. Prices in total industry excluding energy rose by 0.2%.

    The highest increases in industrial producer prices were observed in the Netherlands (+2.9%), Denmark (+1.4%), Belgium (+1.3%) and Greece (+1.2%), while a decrease was recorded in Cyprus (-1.4%).

    Annual comparison by main industrial grouping and by Member State

    The 2.9% increase in industrial producer prices in total industry in the euro area in September 2017, compared with September 2016, is due to rises of 4.6% in the energy sector, of 3.3% for intermediate goods, of 2.3% for non- durable consumer goods, of 1.0% for capital goods and of 0.7% for durable consumer goods. Prices in total industry excluding energy rose by 2.2%.

    In the EU28, the 3.3% price increase is due to rises of 6.0% in the energy sector, of 3.5% for intermediate goods, of 2.7% for non-durable consumer goods, of 1.1% for capital goods and of 1.0% for durable consumer goods. Prices in total industry excluding energy rose by 2.5%.

    Industrial producer prices rose in all Member States. The largest increases were recorded in Belgium (+7.0%), the Netherlands (+6.4%), Bulgaria (+6.0%), Estonia (+5.5%) and the United Kingdom (+5.4%).

    Eurostat, “Industrial Producer Prices, Domestic Market. Sep 2017“, 6 Nov 2017 More

    flag_europe EU: Eurozone Composite PMI. Oct 2017

    Press Release Extract [ser_eu_psi]

    Key findings:

    • Final Eurozone Composite Output Index: 56.0 (Flash: 55.9, September Final: 56.7)
    • inal Eurozone Services Business Activity Index: 55.0 (Flash: 54.9, September Final: 55.8)

    eu_pmi_20171106

    The eurozone economy made a strong start to the final quarter. Although the rate of output growth eased slightly, it remained among the fastest registered over the past six-and-a-half years, while the pace of job creation was the best in over a decade. Both were underpinned by the strongest inflows of new business since April 2011.

    The final IHS Markit Eurozone PMI® Composite Output Index posted 56.0 in October, down from 56.7 in September, but above the earlier flash estimate of 55.9. The headline index has signalled expansion in each of the past 52 months.

    The manufacturing sector continued to record sharper rates of increase in output, new orders and employment than its services counterpart in October. Nonetheless, the latter continued to register strong increases in all three measures.

    National PMI data showed that France moved to the top of the output growth rankings in October, the first time it has held that position since August 2011. French economic activity rose at the quickest pace in almost six-and-a-half years.

    The remaining four nations monitored all saw their respective rates of output expansion slow during the latest survey month. Growth eased to a two- month low in Germany, an 11-month low in Ireland and nine-month lows in both Spain and Italy. Rates of increase remained above long-run averages in all cases though.

    Strong inflows of new business continued to test capacity in October. Backlogs of work rose for the twenty-ninth successive month and at a rate close to September’s six-and-a-half year record.

    Companies responded to the combination of strong growth of output, new work and outstanding business by raising employment at the quickest pace in over a decade. Job creation accelerated in Germany, France, Spain and Ireland.

    Price pressures continued to build at the start of the final quarter. Input costs rose at the steepest pace in six months, with rates of inflation accelerating across the manufacturing and service sectors. Part of the rise was passed on to clients in the form of higher charges. Average output price rose at the quickest pace since March, as charges increased across the ‘big-four’ nations and Ireland.

    Services

    The euro area service sector remained a positive spur for broader economic growth in October. At 55.0, up slightly from the earlier flash estimate of 54.9, the final IHS Markit Eurozone PMI® Services Business Activity Index signalled expansion for the fifty-first successive month. The rate of growth was among the best registered during that sequence, albeit slower than in September.

    Output growth was recorded across all five nations covered in October. Ireland saw the fastest rate of expansion, albeit the weakest since November 2016. France was in second position, with its rate of growth accelerating to a seven-month high. Rates of increase slowed in Germany (two-month low), Spain (nine-month low) and Italy (12-month low).

    The outlook for the sector also remained positive. The growth rate in new orders steadied at September’s six-month high, while business confidence regarding output levels one year from now was slightly above its long-run trend level. This encouraged firms to take on additional staff, with employment rising to one of the greatest extents in over nine-and-a-half years (bettered only during that sequence by that registered in March).

    Staffing levels increased across all of the nations covered by the survey. Rates of job creation picked up in Germany (five-month high), France (four- month high) and Spain (two-month high), but slowed in Italy and Ireland. Ireland nonetheless saw the steepest pace of growth overall.

    Price pressures continued to build at the start of the final quarter. Average costs rose at the steepest pace since March, reflecting strong and accelerated increases in Germany, France, Spain and Ireland. Italy also saw a solid rate of input price inflation, albeit slower than in the prior survey month.

    Average output charges also increased in October, with the rate of inflation picking up to a seven- month high. Italy was the only nation covered by the survey to not report an increase in selling prices. Rates of increase accelerated in Germany and France, but eased in Spain and Ireland.

    Comment

    Chris Williamson, Chief Business Economist at IHS Markit said:

    ‘The eurozone growth spurt retained strong momentum at the start of the fourth quarter. The October headline PMI reading matched the average seen in the third quarter and puts the region on course for another 0.6-0.7% expansion in the closing quarter of 2017.

    ‘With new business growth ticking higher, November should also prove a good month for business activity.

    ‘Political uncertainty and the stronger currency appear to have weighed only very modestly on business optimism about the year ahead, meaning confidence remains elevated. Companies are instead focusing on buoyant demand from domestic markets, remaining firmly in expansion mode in line with expectations of stronger business and consumer spending. Hence the fastest rise in employment growth in a decade.

    ‘Inflationary pressures have meanwhile lifted higher, with prices charges for goods and services rising at a rate not beaten for over six years. Some price rises merely reflect the pass-through of higher costs, but companies are also reporting stronger pricing power as demand conditions continue to improve, which suggests underlying inflationary pressures are becoming more engrained.’

    IHS Markit, “Eurozone Composite PMI. Oct 2017“, 6 Nov 2017 More

    JPMorgan Global Services PMI. Oct 2017

    Press Release Extract [ser_global_psi]

    The start of the fourth quarter saw a further solid expansion of global service sector output. At 54.1, up from 53.8 in September, the J.P.Morgan Global Services Business Activity Index – a composite index produced by J.P.Morgan and IHS Markit in association with ISM and IFPSM – posted its joint-highest reading during the past two-and-a-half years.

    global_psi_20171106

    Rates of output growth accelerated across the business, consumer and financial services sectors. The steepest increase was signalled by financial service providers and the weakest by consumer services firms.

    National PMI data also pointed to a broad-based increase in business activity. Among the countries covered, only Brazil failed to register an expansion.
    Eurozone nations continued to fare comparatively well, despite seeing growth ease (on average) over the month. Within the currency union, France saw a stronger pace of service sector expansion (seven-month high) whereas growth slowed in Germany, Italy, Spain and Ireland.

    Service sector output in the UK rose at the quickest pace in six months, while growth steadied at a robust level in the US. Rates of expansion accelerated in China, Japan and India, but remained below the global average in all three cases.

    October saw a solid increase in global service sector new business, although the rate of growth slipped to a six- month low. The upturn was nevertheless still sufficient to test capacity, as backlogs of work rose for the fifteenth consecutive month.

    Job creation was recorded again in October, with the pace of increase staying among the best registered over the past two-and-a-half years. Employment rose in almost all of the nations covered by the survey, the sole exception being Brazil.

    Price inflation eased slightly during October. Average costs rose at the slowest pace in three months, reflected in an weakening of output charge inflation to a six-month low. Rates of increase in both price measures were slightly stronger (on average) in developed nations compared to emerging markets.

    Commenting on the survey, David Hensley, Director of Global Economic Coordination at J.P.Morgan, said:

    “’Global service sector output and employment rose at quicker rates in October. Slightly slower increases in new business and backlogs of work suggest a further significant acceleration in output growth is not in the offing. However, positive business sentiment and an easing in cost inflationary pressures should ensure the upturn is sustained at its current solid clip heading into year-end.’

    J.P.Morgan and IHS Markit in association with ISM and IFPSM, “JPMorgan Global Services PMI. Oct 2017“, 6 Nov 2017 (11:00) More

    JPMorgan Global Composite PMI. Oct 2017

    Press Release Extract [ser_global_composite_pmi]

    October saw the global economy continue to make solid and steady progress, with the rate of output expansion edging higher. The J.P.Morgan Global All-Industry Output Index – which is produced by J.P.Morgan and IHS Markit in association with ISM and IFPSM – posted 54.0 in October, up slightly from 53.9 in September.

    global_pmi_composite_20171106

    The headline index has signalled growth in each of the past 61 months. Similar rates of output expansion were noted for the manufacturing and service sectors, although the pace registered by the latter nudged ahead of the former.

    Sub-sector data also pointed to a broad-based expansion, as activity rose across all six categories covered by the survey. However, output growth in the consumer-facing sectors (consumer goods and services) was weaker than in the other industries (intermediate goods, investment goods, business services and financial services).

    The euro area remained a bright spark among a cast of solid-performing regions in October. Although the rate of expansion in eurozone economic activity eased slightly, it was still one of the best registered over the past six-and-a- half years. Growth accelerated in France, but eased in Germany, Italy, Spain and Ireland.

    Rates of increase picked up in the US, Japan, the UK and India, but slowed in China and Russia. Growth held steady in Australia. Brazil slipped back into contraction, as a decrease in service sector activity more than offset a solid increase in manufacturing output.

    Global new orders increased for the hundredth month in a row in October. The pace of expansion stayed solid, despite easing to a four-month low. It also remained sufficiently robust to test capacity, leading to a further increase in backlogs of work (the fifteenth in as many months). With new business intakes and outstanding business still rising, business optimism ticked higher.

    October saw global all-industry employment increase for the ninety-second successive month. Moreover, the pace of job creation was the joint-highest during that sequence. Staffing levels rose in the US, the euro area, Japan, the UK, India, Russia and Australia. Lower employment was seen in China and Brazil.
    Price pressures eased slightly, as rates of inflation in input costs and output charges both slowed in October. The pace of increase in both price measures remained above the respective long-run survey averages, however.

    Commenting on the survey, David Hensley, Director of Global Economic Coordination at J.P.Morgan, said:

    ‘October saw rates of expansion in global economic activity and employment edge higher, despite new order growth ticking lower, suggesting that the global economy is maintaining its solid and steady growth path. Signs that price inflation eased should provide some respite to firms and ensure cost pressures will not constrain growth in the months ahead.’

    J.P.Morgan and IHS Markit in association with ISM and IFPSM, “JPMorgan Global Composite PMI. Oct 2017“, 6 Nov 2017 (11:00) More

    flag_japan Japan update

    Nikkei Japan Services PMI. Oct 2017

    Press Release Extract [jp_psi]

    Key points:

    • Headline Business Activity Index rises to 53.4
    • New business growth quickens to 53-month high
    • Business confidence rises

    jp_psi_20171106

    Growth of the Japanese service sector was maintained during October, extending the current sequence of expanding output to 13 months. This was supported by the sharpest rise in new orders since May 2013. In turn, firms accumulated further backlogs, while also adding to their payrolls for the tenth month running. On the price front, although cost pressures continued to build, output price inflation weakened to a mild pace.

    The headline index from the survey – the seasonally adjusted Business Activity Index – recorded 53.4 in October, rising from 51.0 in September to indicate a solid rate of expansion. Furthermore, the degree to which activity increased was the strongest since August 2015.

    Meanwhile, output growth in the manufacturing sector quickened to a five-month high. Consequently, the Nikkei Composite Output Index increased to 53.4 in October, up from 51.7 in September, to signal the joint-quickest rate of growth in 45 months.

    The most marked pace of business activity growth for over two years coincided with the sharpest expansion in new business since May 2013. Evidence provided by panellists indicated that the rise in new orders had underpinned greater activity levels.

    New orders placed with Japanese manufacturers rose, however the pace of expansion eased slightly from September.

    As was the case with activity, growth of new work was solid. Stronger demand conditions led to a further rise in backlogs of work. Latest survey data signalled that outstanding work increased for an eleventh month in a row. That said, the rate of backlog accumulation eased to the weakest since April.

    Rising levels of new business encouraged Japan’s service sector businesses to boost employment, extending the current sequence of increase to ten months. However, the rate of job creation was slight and weaker than that seen in September.

    In the manufacturing sector, the rate of jobs growth was modest, quickening from September’s ten- month low.

    Cost pressures intensified in October, maintaining a trend in input prices which extends to exactly five years. The rate of inflation accelerated for a third consecutive month, albeit fractionally. Companies reported that higher labour costs had driven up operating expenses.

    Higher demand for Japanese services prompted firms to raise prices charged in October for a third month running. That said, despite a stronger rate of input price inflation, the rate at which average charges increased was mild, easing from September.

    Similarly, purchase cost inflation accelerated for manufacturing firms. In turn, factory gate charges were increased in October, with output price inflation accelerating to the joint-fastest pace since November 2014.

    Finally, businesses maintained a positive outlook towards growth prospects during the latest survey period. In fact, the degree of optimism increased to the joint-highest since May, on a par with June. Panellists’ confidence was generally linked to expectations of an improved domestic economy and new client wins.

    Commenting on the Japanese Services PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

    ‘The Japanese service sector made a strong start to Q4, with the headline business activity index hitting a 26-month high. This was underpinned by new business growth accelerating to the quickest rate since May 2013.

    ‘Further to this, the composite output index signalled the joint-fastest increase in almost four years, indicating a marked improvement in private sector business conditions.

    ‘In the wake of Shinzo Abe’s election victory, confidence among Japanese service providers lifted. The level of positive sentiment strengthened to the joint-highest since May, on a par with June.’

    IHS Markit, “Nikkei Japan Services PMI. Oct 2017“, 6 Nov 2017 More

    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

    And … beyond business

    Ships at Port Melbourne on a very windy afternoon

    Ships at Port Melbourne on a very windy afternoon