Thu 30 Nov 2017 (EOM)


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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 S&P closed at a record high and the Dow Jones Industrial Average broke above the 24,000 mark for the first time on Thursday as investors gained confidence that the Republican party’s push for a U.S. tax overhaul would succeed.

    • The S&P 500 index gained 21.51 points, or 0.82%, to 2,647.58
    • The Dow Jones Industrial Average rose 331.67 points, or 1.39%, to 24,272.35
    • The Nasdaq Composite .IXIC added 49.63 points, or 0.73%, to 6,873.97.
    • About 9 billion shares changed hands on U.S. exchanges in the busiest trading day since 23 Jun 2017. This compares with the 6.56 billion average for the last 20 sessions.
    • Advancing issues outnumbered declining ones on the NYSE by a 1.41-to-1 ratio; on Nasdaq, a 1.13-to-1 ratio favored advancers.
    • The S&P 500 posted 119 new 52-week highs and no new lows; the Nasdaq Composite recorded 184 new highs and 23 new lows.

    Republican Senator John McCain’s decision to back the tax bill provided a new jolt of momentum for the legislation. McCain had helped defeat Republicans’ efforts to repeal Obamacare, and a “yes” vote by him on the tax measure was considered crucial. He said the tax bill would boost the economy, although it is “far from perfect.”

    “We have seen ‘no’ votes flipping to the ‘yes’ column, so that makes the passage of the bill more certain but also moves it up on the calendar,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. “The rush is on right now to get that cranked out, and investors are saying we’re ready to buy into that.”

    The Senate was due to begin voting on amendments to the bill later on Thursday, with a final vote late in the evening or early Friday.

    The blue-chip Dow index has crossed four 1,000-point milestones this year on the back of strong corporate earnings, robust economic data and hopes for corporate tax cuts. The tax bill would cut the corporate tax rate to 20% from 35%.

    The Russell 2000 , of smaller companies, closed up 0.12%, hitting its third record close in a row. However, it lagged the large cap index gains, suggesting that expectations for tax cuts were not fully priced in.

    “We haven’t seen a sustained rally in small caps, and we still don’t know the details” of the tax bill, Hellwig said. “But it’s moved forward, which is significant in terms of the planning for 2018.”

    The market has priced in only a 20% to 40% probability of tax cuts, according to UBS strategists. A reduction in the corporate tax rate to 25% could boost S&P 500 earnings by 6.5%, UBS U.S. equity strategist Keith Parker estimated.

    The S&P and the Dow have registered 8 straight months of gains, while the Nasdaq has posted 5 consecutive months of increases.

    On Wednesday, the Nasdaq posted its biggest one-day drop in more than 3 months as investors sold technology stocks. However, the S&P technology sector erased some of its losses on Thursday to end up almost 1%.

    The S&P energy index was the strongest sector, rising 1.55% after OPEC agreed to extend oil production cuts to the end of 2018.

    Industrials rose 1.53%, helped by an almost 2% jump in transportation stocks, which would get a big boost from corporate tax cuts.

    The S&P Financials sector pared earlier gains to end up 0.6%, boosted by expectations that bank tax cuts would be passed on to investors in the form of share buybacks.

    Data that pointed to a sustained increase in underlying price pressures and a drop in first-time applications for unemployment benefits last week also helped sentiment.Reuters

    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) 2,647.58 +0.81% 2,238.83 +18.25%
    DJIA INDU 24,272.35 +1.38% 19,762.60 +22.81%
    NASDAQ IXIC 6,873.97 +0.72% 5,383.12 +27.69%

    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 3.089 +1.21% 2.105 +46.76%
    Valuation Rate USD/AUD 0.76145 -0.14% 0.72663 +4.79%
    AUD-denominated Index AUD 4.058 +1.34% 2.895 +40.15%

    Portfolio stock prices

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1034.08 -0.32% $792.45 +30.49%
    Alphabet C GOOG $1020.74 -0.10% $771.82 +32.25%
    Apple AAPL $171.85 +1.39% $115.82 +48.37%
    Amazon AMZN $1176.75 +1.39% $749.87 +56.92%
    Ebay EBAY $34.65 +0.78% $29.69 +16.70%
    Facebook FB $177.18 +1.17% $115.05 +54.00%
    PayPal PYPL $75.74 +3.39% $39.47 +91.89%
    Twitter TWTR $20.58 -1.02% $16.30 +26.25%
    Visa V $112.59 +2.48% $78.02 +44.30%
    VMware VMW $120.11 +0.57% $78.73 +52.55%

    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) was little changed.
    The EUR rose 0.4% to USD 1.1898.
    britain’s GBP rose 0.9% to USD 1.3523, the strongest in more than 2 months.
    Japan’s JPY fell 0.6% to 112.6 per USD.
    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 ET

    • NYMEX West Texas Intermediate (WTI): $57.29/barrel -0.02% Chart
    • ICE (London) Brent North Sea Crude: $63.57/barrel +0.73% Chart
    • NYMEX Natural gas futures: $3.04/MMBTU -4.40% Chart

    flag_australia AU: Prime Minister Turnbull Announces Royal Commission into the Banking, Superannuation and Financial Services Industry

    Press report, AFR (James Frost)

    Banks and financial institutions have fallen sharply at the open on Thursday following the Prime Minister’s announcement of a Royal Commission into the banking, superannuation and financial services industry.

    The terms of reference is wider than anticipated with the entire financial services to be included in the inquiry but also narrower with the Prime Minister announcing the inquiry would only go for 12 months with a final report due in February 2019.

    At 8.30am, before the announcement of a Royal Commission was made by the government, the big four banks released a joint letter written to the Treasurer calling for inquiry. Each of the banks released copies of the letter to the press and published them on the ASX before the market open setting the scene for a wild day on the bourse.More: AFR Letter

    Prime Minister’s Announcement

    The Turnbull Government will establish a Royal Commission into the alleged misconduct of Australia’s banks and other financial services entities.

    All Australians have the right to be treated honestly and fairly in their dealings with banking, superannuation and financial services providers. The highest standards of conduct are critical to the good governance and corporate culture of those providers.

    We have one of the strongest and most stable banking, superannuation and financial services industries in the world, performing a critical role in underpinning the Australian economy. Our banking system is systemically strong with internationally recognised world’s best prudential regulation and oversight.

    Ongoing speculation and fear-mongering about a banking inquiry or Royal Commission is disruptive and risks undermining the reputation of Australia’s world-class financial system.

    The Government has decided to establish this Royal Commission to further ensure our financial system is working efficiently and effectively.

    Instead of the inquisition into capitalism that some have called for, the Royal Commission will take a conventional, focussed approach. It will not be a never-ending lawyers’ picnic.

    Our approach to banking and financial services reform has focussed on ensuring that our financial system is resilient, efficient and fair.

    We have moved to establish a new one-stop shop to resolve customer complaints; significantly bolstered the Australian Securities and Investments Commission’s powers and resources; created a framework to hold banking executives accountable for their actions; and acted to boost banking and financial services competition for the benefit of customers.

    We will ensure that the Inquiry will not defer, delay or limit, in any way, any proposed or announced policy, legislation or regulation that we are currently implementing.

    The Inquiry will consider the conduct of banks, insurers, financial services providers and superannuation funds (not including self-managed superannuation funds). It will also consider how well equipped regulators are to identify and address misconduct. It will not inquire into other matters such as financial stability or the resilience of our banks.

    This will be a sensible, efficient and focussed inquiry into misconduct and practices falling below community standards and expectations. Most Australians are consumers of banking and financial services, and we all have the right to be treated honestly and fairly by banking and financial services providers.

    Trust in a well-functioning banking and financial services industry promotes financial system stability, growth, efficiency and innovation over the long term.

    The proposed terms of reference will form the basis of the Letters Patent, terms of which will be recommended to His Excellency, pursuant to the Royal Commissions Act 1902.

    Prime Minister of Australia, “Royal Commission – Banks and Financial Services“, 30 Nov 2017 Media Release Draft Terms of Reference

    flag_australia AU: Private New CAPEX and Expected Expenditure. Sep 2017

    Press Release Extract [ser_abs_capex]

    Total Capital Expenditure

    The trend estimate for total new capital expenditure rose 1.1% in the September quarter 2017. By asset type, the trend estimate for buildings and structures rose 1.0% and equipment, plant and machinery rose 1.2%. The seasonally adjusted estimate for total new capital expenditure rose 1.0% in the September quarter 2017.

    Buildings and Structures

    The trend estimate for buildings and structures rose 1.0% in the September quarter 2017. Buildings and structures for Mining fell 0.9%, Other Selected Industries rose 3.1% and Manufacturing fell 3.9%. The seasonally adjusted estimate for buildings and structures rose 1.2% in the September quarter 2017. Mining fell 0.2%, Other Selected Industries rose 4.3% and Manufacturing fell 16.5% in seasonally adjusted terms.

    Australian Bureau of Statistics, “5625.0 Private New Capital Expenditure and Expected Expenditure, Australia, Sep 2017“, 30 Nov 2017 More

    flag_australia AU: Building Approvals. Oct 2017

    Press Release Extract [ser_abs_building]

    The number of dwellings approved rose 0.7 per cent in October 2017, in trend terms, and has risen for nine months, according to data released by the Australian Bureau of Statistics (ABS) today.

    “Dwelling approvals have continued to strengthen in recent months, rising above 19,000 dwellings in October 2017,” said Justin Lokhorst, Director of Construction Statistics at the ABS. “This is the first time the series has reached this level since August 2016.”

    Dwelling approvals increased in October in Tasmania (4.1 per cent), Victoria (3.8 per cent), South Australia (0.6 per cent), Western Australia (0.3 per cent) and Northern Territory (0.3 per cent), but decreased in the Australian Capital Territory (5.3 per cent), Queensland (1.7 per cent) and New South Wales (0.3 per cent) in trend terms.

    In trend terms, approvals for private sector houses rose 0.6 per cent in October. Private sector house approvals rose in Queensland (1.4 per cent), Victoria (1.2 per cent) and South Australia (1.0 per cent), but fell in Western Australia (1.0 per cent) and New South Wales (0.7 per cent).

    In seasonally adjusted terms, dwelling approvals increased by 0.9 per cent in October, driven by a rise in private house approvals (1.5 per cent), while private dwellings excluding houses fell 1.0 per cent.

    The value of total building approved rose 0.5 per cent in October, in trend terms, and has risen for 10 months. The value of residential building rose 0.8 per cent while non-residential building was flat.

    Australian Bureau of Statistics, “8731.0 – Building Approvals, Australia, Oct 2017“, 30 Nov 2017 More

    flag_europe EU: Euro Area Inflation (HICP). Oct 2017

    Press Release Extract [ser_eu_cpi]

    Euro area annual inflation is expected to be 1.5% in November 2017, up from 1.4% in October 2017, according to a flash estimate from Eurostat, the statistical office of the European Union.

    Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in November (4.7%, compared with 3.0% in October), followed by food, alcohol & tobacco (2.2%, compared with 2.3% in October), services (1.2%, stable compared with October) and non-energy industrial goods (0.4%, stable compared with October).

    Eurostat, “Euro Area Inflation (HICP). Oct 2017“, 1 Dec 2017 More

    flag_europe EU: Unemployment. Nov 2017

    Press Release Extract [ser_eu_employment]

    The euro area (EA19) seasonally-adjusted unemployment rate was 8.8% in October 2017, down from 8.9% in September 2017 and from 9.8% in October 2016. This is the lowest rate recorded in the euro area since January 2009. The EU28 unemployment rate was 7.4% in October 2017, down from 7.5% in September 2017 and from 8.3% in October 2016. This is the lowest rate recorded in the EU28 since November 2008. These figures are published by Eurostat, the statistical office of the European Union.

    eu_ue_20171130

    Eurostat estimates that 18.243 million men and women in the EU28, of whom 14.344 million in the euro area, were unemployed in October 2017. Compared with September 2017, the number of persons unemployed decreased by 111 000 in the EU28 and by 88 000 in the euro area. Compared with October 2016, unemployment fell by 2.074 million in the EU28 and by 1.473 million in the euro area.

    Member States

    Among the Member States, the lowest unemployment rates in October 2017 were recorded in the Czech Republic (2.7%), Malta (3.5%) and Germany (3.6%). The highest unemployment rates were observed in Greece (20.6% in August 2017) and Spain (16.7%).

    eu_ue_states_20171130

    Compared with a year ago, the unemployment rate fell in all Member States for which data is comparable over time, except Finland where it remained stable. The largest decreases were registered in Cyprus (from 13.1% to 10.2%) and Greece (from 23.4% to 20.6% between August 2016 and August 2017).

    In October 2017, the unemployment rate in the United States was 4.1%, down from 4.2% in September 2017 and from 4.8% in October 2016.

    Youth unemployment

    In October 2017, 3.722 million young persons (under 25) were unemployed in the EU28, of whom 2.657 million were in the euro area. Compared with October 2016, youth unemployment decreased by 380 000 in the EU28 and by 201 000 in the euro area. In October 2017, the youth unemployment rate was 16.5% in the EU28 and 18.6% in the euro area, compared with 18.2% and 20.3% respectively in October 2016. In October 2017, the lowest rates were observed in Germany (6.6%) and the Czech Republic (7.2%), while the highest were recorded in Greece (40.2% in August 2017), Spain (38.2%) and Italy (34.7%).

    Eurostat, “Euro Area Unemployment. Nov 2017“, 1 Dec 2017 More

    flag_usa US: Unemployment Insurance Weekly Claims

    Press Comment: Reuters

    Data released today by the Labor Department showed a second straight weekly drop in first-time applications for unemployment benefits, pointing to a further tightening in labor market conditions that could soon generate faster wage growth and keep consumer spending supported, as well as push inflation higher.

    Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 238,000 for the week ended 25 Nov 2017.

    Last week marked the 143rd consecutive week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at a 17-year low of 4.1%.Reuters

    Press Release Extract [ser_4]

    insurance

    In the week ending November 25, the advance figure for seasonally adjusted initial claims was 238,000, a decrease of 2,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 239,000 to 240,000. The 4-week moving average was 242,250, an increase of 2,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 239,750 to 240,000.

    Claims taking procedures continue to be disrupted in the Virgin Islands.

    unemployment

    The advance seasonally adjusted insured unemployment rate was 1.4 percent for the week ending November 18, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 18 was 1,957,000, an increase of 42,000 from the previous week’s revised level. The previous week’s level was revised up 11,000 from 1,904,000 to 1,915,000. The 4-week moving average was 1,911,000, an increase of 18,250 from the previous week’s revised average. The previous week’s average was revised up by 2,750 from 1,890,000 to 1,892,750.

    Employment and Training Administration, “Unemployment Insurance Weekly Claims Report“, 30 Nov 2017 (08:30) More

    flag_usa US: Personal Income and Outlays. Oct 2017

    Press Comment: Reuters

    U.S. consumer spending slowed in October as the hurricane-related boost to motor vehicle purchases faded, while a sustained increase in underlying price pressures suggested that a recent disinflationary trend had probably run its course.

    The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3% in Oct 2017 after surging 0.9% in Sep 2017. October’s increase in consumer spending was in line with economists’ expectations.

    The jump in spending in Sep 2017 was the largest since Aug 2009 and was spurred by some drivers in Texas and Florida replacing automobiles destroyed when Hurricanes Harvey and Irma slammed the states in late Aug 2017 and early Sep 2017.

    Spending on long-lasting goods like autos fell 0.1% in Oct 2017 after accelerating 2.9% in Sep 2017. Spending on nondurable goods such as prescription drugs and recreational items rose 0.2%. Outlays on services increased 0.3% amid a rise in airline tickets for foreign travel and communication services.

    Though overall inflation subsided as disruptions to the supply chain following the hurricanes eased, underlying price pressures increased again at a steady clip in Oct 2017.

    The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose 0.2% in Oct 2017 after a similar gain in Sep 2017. The so-called core PCE increased 1.4% in the 12 months through Oct 2017, matching the 12-month rise in Sep 2017.

    The core PCE has undershot the Fed’s 2% target for nearly 5½ years. Fed Chair Janet Yellen told lawmakers on Wednesday that she believed the recent weak inflation readings likely reflected “transitory factors,” but also acknowledged the low inflation rates “could reflect something more persistent.”

    “It looks like the worst is over for this latest idiosyncratic downdraft in core consumer inflation since the start of the year, and that Yellen was right to stick with her guns and maintain that low inflation is a transitory phenomenon,” said Chris Rupkey, chief economist at MUFG in New York.

    With underlying inflation rising last month, so-called real consumer spending edged up 0.1% after increasing 0.5% in Sep 2017. The weak real consumer spending prompted economists to lower their Q4/2017 GDP growth estimates by as much as two-tenths of a percentage point to as low as a 2.2% annualized rate.

    Growth estimates for Q4/2017 have been lowered this week from around a 3% pace in the wake of data showing a large goods trade deficit in Oct 2017 and declines in wholesale and retail inventories. The economy grew at a 3.3% rate in Q3/2017, the fastest in 3 years.

    Households are dipping into savings to maintain spending amid moderate wage growth. Personal income rose 0.4% last month after advancing by the same margin in Sep 2017.

    Wages increased 0.3% in Oct 2017 following a 0.5% gain in Sep 2017. While savings climbed to $457.3 billion in Oct 2017 from a more than 9-year low of $429.9 billion in Sep 2017, they remained well below levels seen early this year.

    The saving rate increased to 3.2% in Oct 2017 after falling to 3.0% in Sep 2017, which was the lowest since Dec 2007. “The ‘savings dip’ will limit the upside to consumer spending growth in the fourth quarter,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York.

    There are, however, expectations that wage growth will accelerate as the labor market tightens further.Reuters

    Press Release Extract [ser_us_income]

    The Bureau of Economic Analysis today released these estimates for October 2017:

    • Personal income increased $65.1 billion (0.4 percent).
    • Disposable personal income (DPI) increased $66.1 billion (0.5 percent).
    • Personal consumption expenditures (PCE) increased $34.4 billion (0.3 percent).
    • Real DPI increased 0.3 percent.
    • Real PCE increased 0.1 percent.
    • The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
    • Personal outlays increased $38.7 billion.
    • Personal saving was $457.3 billion in October.
    • The personal saving rate, personal saving as a percentage of disposable personal income, was 3.2 percent.
    Jun Jul Aug Sep Oct
    Percent change from preceding month (2017):
    Personal income:
    Current dollars 0.0 0.3 0.2 0.4 0.4
    Disposable personal income (DPI):
    Current dollars 0.0 0.2 0.1 0.4 0.5
    Chained (2009) dollars -0.1 0.1 -0.1 0.0 0.3
    Personal consumption expenditures (PCE):
    Current dollars 0.1 0.4 0.2 0.9 0.3
    Chained (2009) dollars 0.1 0.3 0.0 0.5 0.1
    Price indexes:
    PCE 0.0 0.1 0.2 0.4 0.1
    PCE, excluding food and energy 0.1 0.1 0.1 0.2 0.2
    Percent change from month one year ago:
    Price indexes:
    PCE 1.4 1.4 1.4 1.7 1.6
    PCE, excluding food and energy 1.5 1.4 1.3 1.4 1.4

    The increase in personal income in October primarily reflected increases in wages and salaries and personal interest income.

    The $13.1 billion increase in real PCE in October reflected an increase of $11.4 billion in spending for goods and a $2.7 billion increase in spending for services (table 7). Within goods, other nondurable goods, which includes prescription drugs and recreational items, was the leading contributor to the increase. Within services, the largest contributor to the increase was spending for other services, which includes passenger fares for foreign travel and communication services.

    US Bureau of Economic Analysis, “Personal Income and Outlays, October 2017“, 30 Nov 2017 (08:30) 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

    And … Before Work

    beach_20171130