Tue 7 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/bearThe Dow Jones Industrial Average eked out a fourth consecutive record high close on Tuesday, while the S&P 500 ended marginally lower after a disappointing profit forecast from Priceline and a drop in financials.

    The S&P 500 has risen about 15% in 2017, helped by strong earnings, an improving economy and promises by President Donald Trump to cut taxes. The S&P 500 financial index led decliners with a 1.33% fall.

    The U.S. 2-to-10-year Treasury yield curve hit its flattest in a decade, potentially cutting into the profits of banks, which borrow money at short-term interest rates in order to lend it out at longer terms. Goldman Sachs lost 1.51% and weighed the most on the Dow, while JPMorgan and Bank of America were among the top 3 drags on the S&P 500:

    • The S&P fell 0.02% to 2,590.64.
    • The Dow Jones Industrial Average ended up 0.04% at 23,557.23 after spending most of the day in negative territory.
    • The Nasdaq Composite fell 0.27% to 6,767.78.
    • Declining issues outnumbered advancing ones on the NYSE by a 1.39-to-1 ratio; on Nasdaq, a 2.50-to-1 ratio favored decliners.
    • About 7.0 billion shares changed hands on U.S. exchanges, above the 6.4 billion daily average over the last 20 sessions.

    Defensive sectors such as utilities and consumer staples were the top gainers on the S&P 500, both rising more than 1%. Procter & Gamble added 1.08%.

    Priceline slumped 13.52% while travel-review website operator TripAdvisor dropped 23.22% to a 5-year low after both companies gave soft quarterly profit forecasts.

    “Companies that miss expectations are being punished severely. That’s proof that there’s nervousness in the market,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

    Investors were also nervous about the potential outcome of a Republican plan to cut corporate taxes, unveiled last week. As well as slashing the corporate rate to 20% from 35%, the bill would eliminate many tax breaks and is expected to face opposition from interest groups.

    The Russell 2000 index, which tracks U.S. small-cap stocks, dropped 1.26%.

    “There is some skepticism about the tax bill going through,” said Donald Selkin, chief market strategist at Newbridge Securities in New York.

    “The fact that the Russell is down is a sign that there are worries about the fate of the tax bill because smaller companies tend to pay higher tax rates than bigger companies.”

    In extended trade, Snap Inc slumped 16% after the Snapchat owner reported lower-than-expected daily active users for Q3/2017.

    During the session, Valeant Pharmaceuticals surged 17.11% after the company’s profit beat Wall Street estimates. Mallinckrodt slumped 35.50% to an all-time low after the drugmaker reported dismal quarterly revenue and warned of slower sales for Acthar, its biggest source of revenue.Bloomberg

    Market indices

    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) 2,590.64 -0.02% 2,238.83 +15.71%
    DJIA INDU 23,557.23 +0.03% 19,762.60 +19.20%
    NASDAQ IXIC 6,767.78 -0.28% 5,383.12 +25.72%

    Portfolio Indices

    :-) Our USD-denominated index, and our AUD-denominated index both closed on record highs 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

    Index Currency Today Change 31 Dec 16 YTD
    USD-denominated Index USD 3.115 +0.30% 2.105 +47.98%
    Valuation Rate USD/AUD 0.76940 -0.56% 0.72663 +5.88%
    AUD-denominated Index AUD 4.050 +0.85% 2.895 +39.87%

    Portfolio stock prices

    :-) Alphabet Class C shares closed on a record high of $1,032.69 beating their 3 Nov 2017 record of $1,032.23.
    :-) Apple closed on a record high of $174.79, up 0.31% on yesterday’s record of $174.25.
    :-) Amazon closed on a record high of $1,123.17, up 0.16% on yesterday’s record of $1,121.38.
    :-) Visa closed on a record high of $112.09, up 0.15% on yesterday’s record of $111.92.

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1,047.20 +0.43% $792.45 +32.14%
    Alphabet C GOOG $1,032.69 +0.66% $771.82 +33.79%
    Apple AAPL $174.79 +0.30% $115.82 +50.91%
    Amazon AMZN $1,123.17 +0.15% $749.87 +49.78%
    Ebay EBAY $37.41 +0.10% $29.69 +26%
    Facebook FB $180.25 +0.03% $115.05 +56.67%
    PayPal PYPL $74.40 -0.46% $39.47 +88.49%
    Twitter TWTR $19.66 +1.39% $16.30 +20.61%
    Visa V $112.09 +0.15% $78.02 +43.66%
    VMware VMW $120.43 +1.02% $78.73 +52.96%

    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 (DXY) gained 0.3%.
    Japan’s JPY fell 0.2% to 113.94 per USDr.
    Australia’s AUD fell 0.6% to USD 0.7643, and New Zealand’s NZD fell 0.6% to USD 0.6903.
    The EUR decreased 0.2% to USD 1.1590, the weakest since Jul 2017.
    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 15:48 ET

    • NYMEX West Texas Intermediate (WTI): $57.18/barrel -0.30% Chart
    • ICE (London) Brent North Sea Crude: $63.65/barrel -0.96% Chart
    • NYMEX Natural gas futures: $3.15/MMBTU +0.48% Chart

    flag_australia AU: RBA Monetary Policy Decision

    Press Release Extract [ser_au_rba]

    At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

    Conditions in the global economy are continuing to improve. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. Australia’s terms of trade are expected to decline in the period ahead but remain at relatively high levels.

    Wage growth remains low in most countries, as does core inflation. Headline inflation rates are generally lower than at the start of the year, largely reflecting the earlier decline in oil prices. In the United States, the Federal Reserve has started the process of balance sheet normalisation and expects to increase interest rates further. In a number of other major advanced economies, monetary policy has become a bit less accommodative. Equity markets have been strong, credit spreads have narrowed and volatility in financial markets remains low.

    The Bank’s forecasts for growth in the Australian economy are largely unchanged. The central forecast is for GDP growth to pick up and to average around 3 per cent over the next few years. Business conditions are positive and capacity utilisation has increased. The outlook for non-mining business investment has improved, with the forward-looking indicators being more positive than they have been for some time. Increased public infrastructure investment is also supporting the economy. One continuing source of uncertainty is the outlook for household consumption. Household incomes are growing slowly and debt levels are high.

    The labour market has continued to strengthen. Employment has been rising in all states and has been accompanied by a rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead. The unemployment rate is expected to decline gradually from its current level of 5½ per cent. Wage growth remains low. This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time.

    Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. In underlying terms, inflation is likely to remain low for some time, reflecting the slow growth in labour costs and increased competitive pressures, especially in retailing. CPI inflation is being boosted by higher prices for tobacco and electricity. The Bank’s central forecast remains for inflation to pick up gradually as the economy strengthens.

    The Australian dollar has appreciated since mid year, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to continued subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.

    Growth in housing debt has been outpacing the slow growth in household income for some time. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures. Credit standards have been tightened in a way that has reduced the risk profile of borrowers. Housing market conditions have eased further in Sydney. In most cities, housing prices have shown little change over recent months, although they are still increasing in Melbourne. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities.

    The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

    Reserve Bank of Australia, “Statement by Philip Lowe, Governor: Monetary Policy Decision“, 7 Nov 2017 More

    flag_europe EU: Retail Trade. Sep 2017

    Press Release Extract [ser_eu_retail]

    In September 2017 compared with August 2017, the seasonally adjusted volume of retail trade rose by 0.7% in the euro area (EA19) and by 0.3% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In August, the retail trade volume decreased by 0.1% in the euro area, while it rose by 0.5% in the EU28.

    eu_retail_20171107

    In September 2017 compared with September 2016, the calendar adjusted retail sales index increased by 3.7% in the euro area and by 3.5% in the EU28.

    Monthly comparison by retail sector and by Member State

    The 0.7% increase in the volume of retail trade in the euro area in September 2017, compared with August 2017, is due to rises of 1.3% for “Food, drinks and tobacco” and of 0.5% for non-food products, while automotive fuel fell by 0.4%. In the EU28, the 0.3% increase in the volume of retail trade is due to a rise of 0.9% for “Food, drinks and tobacco”, while automotive fuel fell by 0.6% and non-food products by 0.1%.

    Among Member States for which data are available, the highest increases in the total retail trade volume were registered in Ireland (+1.4%), Denmark and Luxembourg (both +1.3%) as well as France (+1.2%), while the largest decreases were observed in the United Kingdom (-2.2%), Croatia (-1.9%) and Lithuania (-1.0%).

    Annual comparison by retail sector and by Member State

    The 3.7% increase in the volume of retail trade in the euro area in September 2017, compared with September 2016, is due to rises of 5.1% for non-food products and of 2.3% for “Food, drinks and tobacco”, while automotive fuel fell by 0.6%. In the EU28, the 3.5% increase in retail trade volume is due to rises of 5.4% for non-food products and of 1.9% for “Food, drinks and tobacco”, while automotive fuel fell by 0.1%.

    Among Member States for which data are available, the highest increases in the total retail trade volume were registered in Romania (14.0%), Malta (+9.8%) and Ireland (+8.2%), while a decrease was observed in Luxembourg (-25.3%).

    Eurostat, “Retail Trade. Sep 2017“, 7 Nov 2017 More

    flag_usa Job Openings and Labor Turnover. Sep 2017

    Press Release Extract [ser_us_jolts]

    The number of job openings was little changed at 6.1 million on the last business day of September, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were also little changed at 5.3 million and 5.2 million, respectively. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.2 percent and 1.2 percent, respectively. This release includes estimates of the number and rate of job openings, hires, and separations for the nonfarm sector by industry and by four geographic regions.

    Job Openings

    On the last business day of September, there were 6.1 million job openings, little changed from August. Job openings have been at or near record high levels since June. The job openings rate was 4.0 percent in September. The number of job openings was little changed for total private and for government. Job openings increased in professional and business services (+156,000), other services (+52,000), state and local government education (+36,000), and federal government (+15,000). Job openings decreased in accommodation and food services (-111,000) and information (-28,000). The number of job openings was little changed in all four regions.

    us_jolts1_20171107

    Hires

    The number of hires was little changed at 5.3 million in September. The hires rate was 3.6 percent. The number of hires was little changed for total private and for government. The number of hires was little changed in all industries and regions.

    us_jolts1_20171107

    Separations

    Total separations includes quits, layoffs and discharges, and other separations. Total separations is referred to as turnover. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Layoffs and discharges are involuntary separations initiated by the employer. Other separations includes separations due to retirement, death, disability, and transfers to other locations of the same firm.
    The number of total separations was little changed at 5.2 million in September. The total separations rate was 3.6 percent. The number of total separations was little changed for total private and for government. Total separations decreased in other services (-73,000) and wholesale trade (-37,000). The number of total separations was little changed in all four regions.

    The number of quits was little changed at 3.2 million in September. The quits rate was 2.2 percent. The number of quits was little changed for total private and for government. Quits rose in professional and business services (+82,000) and state and local government, excluding education (+10,000). Quits fell in other services (-45,000) and real estate and rental and leasing (-16,000). In the regions, the number of quits increased in the Midwest.

    There were 1.7 million layoffs and discharges in September, little changed from August. The layoffs and discharges rate was 1.2 percent in September. The number of layoffs and discharges was little changed for total private and for government. The layoffs and discharges level decreased in wholesale trade (-30,000) and mining and logging (-7,000). The number of layoffs and discharges was little changed in all four regions.

    The number of other separations edged down in September to 355,000. Other separations edged down for total private and was little changed for government. Other separations increased in state and local government education (+6,000). Other separations decreased in other services (-18,000), accommodation and food services (-13,000), and educational services (-5,000). The number of other separations decreased in the South region.

    Net Change in Employment

    Large numbers of hires and separations occur every month throughout the business cycle. Net employment change results from the relationship between hires and separations. When the number of hires exceeds the number of separations, employment rises, even if the hires level is steady or declining. Conversely, when the number of hires is less than the number of separations, employment declines, even if the hires level is steady or rising. Over the 12 months ending in September, hires totaled 63.9 million and separations totaled 62.1 million, yielding a net employment gain of 1.8 million. These totals include workers who may have been hired and separated more than once during the year.

    Bureau of Labor Statistics, “Job Openings and Labor Turnover Survey. September 2017“, 7 Nov 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

    It’s pick-a-number time for Japanese stock bulls after the Nikkei 225 Stock Average zoomed past 22,666.80 on Tuesday to close at the highest since 1992.

    Okasan Securities Co. sees 25,000 by Mar 2019. Martin Malone, a strategist at Mint Partners in London, says 26,000 in the medium term, while Nikko Asset Management Co. says there’s a very good chance of 30,000 in 2 years. For Andrew Clarke, who says people laughed at him in late Aug 2017 when he first predicted 25,000, this is starting to feel like vindication. “People thought I was deranged,” said Clarke, director of trading at Mirabaud Asia Ltd. in Hong Kong. The gauge was trading lower than 20,000 when he first made his prediction. “Maybe I should change to 75,000 by 2020,” he joked.

    The Nikkei 225 is powering forward in a rally that earlier saw 16 straight days of gains, the longest run on record. The index has jumped 19% since 9 Sep 2017, benefiting from everything from a strong earnings season and a weakening JPY to a global advance in equities and Prime Minister Shinzo Abe’s landslide re-election.

    The last time the Nikkei was at these levels, in Jan 1992, George H. W. Bush was in power in the White House, Kiichi Miyazawa was running Japan, and land prices were falling sharply as the Asian country headed into a cycle of deflation that became known as the lost decades.

    Now, with both the Topix index and the Nikkei 225 repeatedly setting new milestones, the mood is one of celebration. Foreign investors have been rushing back to Japan, buying JPY 2.2 trillion (USD 19.6 billion) in cash equities last month, the largest sum since Nov 2013, at the height of optimism about Abe’s policy program to revive the country’s economy.

    The rally has been backed by a better-than-expected second-quarter earnings season, with 61% of Topix-listed companies posting profit that beat analyst estimates. Sony Corp., for example, surged 11% on 1 Nov 2017 after increasing its annual operating-income forecast to a record, while Honda Motor Co. added 5.2% the next day after raising its annual profit outlook and saying it planned to buy back shares.

    Malone of Mint Partners says the Tokyo stock market has evolved since the heady days of the bubble economy, which was collapsing by 1992. In the late 1980s, Japan suffered from tight monetary policy, a strong JPY after the Plaza Accord of 1985 depreciated the USD, high bond yields and political and policy instability. That’s all different today, Malone says. Plus, the level of the Nikkei 225 — which focuses on the country’s blue-chips — hides the fact that the country’s stock market capitalization is at a record high. “Our assessment remains max bull,” Malone wrote in a note.Bloomberg

    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

    Cruise ships and the Tasmania Ferry at Port Melbourne

    Cruise ships and the Tasmania Ferry at Port Melbourne