Mon 11 Dec 2017

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

    bull/bearWall Street indexes closed higher on Monday and the biggest drivers were technology and energy sectors as oil prices rose and investors waited for an expected U.S. Federal Reserve rate hike later in the week.

    • The S&P 500 index rose 8.49 points, or 0.32%, to 2,659.99
      • The S&P energy index rose 0.71% as oil prices rose after a North Sea pipeline shut for repairs.
      • The S&P’s financial and industrial sectors were the benchmark’s only decliners for the day with losses of around 0.2%.
    • The Dow Jones Industrial Average rose 56.87 points, or 0.23%, to 24,386.03
    • The Nasdaq Composite index rose 35.00 points, or 0.51%, to 6,875.08
    • Most of the 11 major S&P sectors ended higher, with the biggest boost from a 0.8% gain in information technology stocks.
    • Advancing issues outnumbered declining ones on the NYSE by a 1.18-to-1 ratio; on Nasdaq, a 1.14-to-1 ratio favored decliners.
    • The S&P 500 posted 31 new 52-week highs and no new lows; the Nasdaq Composite recorded 84 new highs and 55 new lows.
    • More than 5.85 billion shares changed hands on U.S. stock exchanges compared with the 6.5 billion average for the last 20 sessions.

    The equity market appeared to shrug off an early morning explosion that officials called an attempted terrorist attack at one of New York’s busiest commuter hubs. The suspect wounded himself and three others.

    “Investors are a little exhausted from the rise of the market and making sector moves. They’re not willing to commit a whole lot of new money at these levels but they’re rotating a bit. Some of it is year-end tax planning,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

    Traders, waiting for the Fed’s two-day rate setting meeting to begin on Tuesday, see an 85-percent probability for a 25 basis point hike to the Fed funds rate target and a 15% chance of a 50 basis point hike, which would be the third rate hike this year, according to CME Group’s Fedwatch tool.

    “Valuations are getting to the point where even good news on the economy might pose some additional risks to the market. There’s the risk that good news for the economy may be bad news for markets because the Fed is at the cusp of a level of tightening that could dampen growth,” said Mark Heppenstall, CIO at Penn Mutual Asset Management in Horsham, Pennsylvania.

    Healthcare investors focused on makers of drugs for blood disorders after clinical data presentations at the annual American Society of Hematology four-day meeting in Atlanta. Shares of Bluebird Bio closed up 17.9% at $201.8, after hitting a record high of $222.03, following news of positive responses in an early stage myeloma study of its experimental gene-modifying immunotherapy drug co-developed with Celgene. Celgene’s shares rose 1.8%.

    Interest in the surge in digital currency bitcoin and the Sunday debut of futures trading in the cryptocurrency continued to fuel bets on related stocks. Shares of Marathon Patent rose 42.9% while Xunlei climbed 29.4%. Riot Blockchain rose about 45.5%.Reuters

    Market indices

    Index Ticker Today Change 31 Dec 16 YTD
    S&P 500 SPX (INX) 2,659.99 +0.32% 2,238.83 +18.81%
    DJIA INDU 24,386.03 +0.23% 19,762.60 +23.39%
    NASDAQ IXIC 6,875.08 +0.51% 5,383.12 +27.71%

    Portfolio Indices

    USD and AUD denominated indices over the past 52 weeks (Chart: Bunting)
    ^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting

    Index values

    Index Currency Today Change 31 Dec 16 YTD
    USD-denominated Index USD 3.105 +1.40% 2.105 +47.54%
    Valuation Rate USD/AUD 0.75793 +0.31% 0.72663 +4.30%
    AUD-denominated Index AUD 4.098 +1.08% 2.895 +41.54%

    Portfolio stock prices

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1,051.97 +0.24% $792.45 +32.74%
    Alphabet C GOOG $1,041.10 +0.39% $771.82 +34.88%
    Apple AAPL $172.67 +1.94% $115.82 +49.08%
    Amazon AMZN $1,168.92 +0.59% $749.87 +55.88%
    Ebay EBAY $37.52 -0.35% $29.69 +26.35%
    Facebook FB $179.04 +0.02% $115.05 +55.61%
    PayPal PYPL $73.29 +0.52% $39.47 +85.68%
    Twitter TWTR $22.05 +4.50% $16.30 +35.27%
    Visa V $112.37 -0.21% $78.02 +44.02%
    VMware VMW $121.09 +1.27% $78.73 +53.80%



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

    The Bloomberg Dollar Spot Index (DXY) rose less than 0.1%.
    The EUR was little changed at USD 1.1772.
    Britain’s GBP fell 0.4% to USD 1.3338, the weakest in two weeks.
    Japan’s JPY fell less than 0.1% to 113.55 per USD.


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

    Oil and Gas Futures

    Futures prices

    Prices are as at 15:49 ET

    • NYMEX West Texas Intermediate (WTI): $57.98/barrel +1.08% Chart
    • ICE (London) Brent North Sea Crude: $64.67/barrel +2.00% Chart
    • NYMEX Natural gas futures: $2.80/MMBTU +0.97% Chart

    Apple is Buying Shazam

    After we broke the story last week that Apple was acquiring London-based music and image recognition service Shazam, Apple confirmed the news today. It is purchasing the startup — one of earliest players in the world of mobile music — as part of its bigger ambitions in the music business.

    Here is the statement that Apple provided us.

    “We are thrilled that Shazam and its talented team will be joining Apple. Since the launch of the App Store, Shazam has consistently ranked as one of the most popular apps for iOS. Today, it’s used by hundreds of millions of people around the world, across multiple platforms. Apple Music and Shazam are a natural fit, sharing a passion for music discovery and delivering great music experiences to our users. We have exciting plans in store, and we look forward to combining with Shazam upon approval of today’s agreement.”

    Apple did not disclose the price but we have several sources that have confirmed to us that the deal is in the region of $400 million.

    Sources also tell us that Apple’s deal had been in the works for about five months and came after Shazam had been in talks with others, including Snapchat and Spotify.

    Apple generally does not spell out the details of how it plans to use acquisitions, but there are a number of areas where Shazam’s current business overlaps with that of Apple’s, making for an interesting range of possibilities for where and how the two will work together.

    Shazam’s core business is in music recognition: people use its app to capture a clip of music that is playing, and then it matches that against its large database to tell you what you are listening to, a business that has brought the company over 1 billion downloads of its app to date.

    Over the years Shazam has augmented this with a number of other services: it sends users through to other sites to download and listen to the music at their leisure; it provides more information to users about the music and the artists behind it; it keeps charts of popular music based on the clips that it hears and that people want to identify. It’s also branched out into more marketing services based on visual recognition — essentially augmented reality plays where users can capture snaps of images that lead them to more content from a brand or another organization.

    Through all of this, Shazam has developed some interesting partnerships, specifically with Apple and Spotify (who together get around 1 million referrals each month via Shazam), and Snapchat, which currently has an integration with Shazam where Snapchat users can “recognize music, engage with Shazam content, and send their music and artist discoveries as Snaps to their friends.” It is no surprise that these are also the three names that we heard were all approached and discussed an acquisition of the startup.

    Shazam provided us with the below statement.

    We are excited to announce that Shazam has entered into an agreement to become part of Apple. Shazam is one of the highest rated apps in the world and loved by hundreds of millions of users and we can’t imagine a better home for Shazam to enable us to continue innovating and delivering magic for our users.

    Notably, Shazam had a post-money valuation in its last round of over $1 billion — a far cry from the roughly $400 million that is being paid by Apple. The reason for this, one source says, is that for all of Shazam’s popularity and move into revenue-generating areas like marketing, the company never really found a solid business model for the long-term future.

    “Shazam should have moved into streaming music years ago,” the source said, “which is one reason why the Apple deal makes so much sense.” Spotify, as a point of comparison, has healthy recurring revenues from subscriptions and Apple Music has both subscriptions and downloads — not to mention the wider use of Apple Music and the ecosystem pull it gives Apple for its wider hardware business. That hints at some interesting integrations coming up.

    Some backstory about how the deal got done between the two:

    Apple and Shazam have had a friendly relationship for years, but the catalyst was that pending bid from Snap. As Recode first reported, the Snapchat parent had entertained buying the company.

    It turns out that the conversations with Snap began about six months ago, after advisor Goldman Sachs drummed up interest. Snap was open to acquisition talks because its integration with Shazam’s music recognition technology had been going well. Shazam

    But Snap has had a volatile time on the stock market since it went public in March, and so Shazam was getting mixed messages about how much the social media platform would be willing to pay.

    Shazam’s conversations with Apple began the following month, and they became exclusive about two months ago. From what we understand, the Spotify talks were earlier and couldn’t progress because of the price, and likely also the fact that Spotify, which is gearing up for a public listing, has a lot on its plate right now.

    Eddy Cue, Apple’s senior vice president of Internet Software and Services, saw an opportunity for Shazam to help build out its music business. Since the days of the iPod, music has long been a priority for the company. Lately, it’s been focused on enhancing its Spotify competitor, Apple Music.

    Cue believes that Shazam could help improve its offering and liked that the app had moved beyond music discovery, building out artist pages and other music-related content.

    Shazam already integrates with Apple Music, referring many of its 100 million users to play songs on its platform. It also lets users buy the music directly via iTunes.TechCrunch

    flag_usa US: Job Openings and Labor Turnover. Oct 2017

    Press Release Extract [ser_us_jolts]

    The number of job openings was little changed at 6.0 million on the last business day of October, the U.S. Bureau of Labor Statistics reported today. Over the month, hires increased to 5.6 million and separations were little changed at 5.2 million. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.2 percent and 1.1 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 October, there were 6.0 million job openings, little changed from September. Job openings have been at or near record high levels since June. The job openings rate was 3.9 percent in October. The number of job openings edged down for total private and was little changed for government. Job openings increased in accommodation and food services (+94,000), construction (+48,000), and real estate and rental and leasing (+40,000). Job openings decreased in wholesale trade (-90,000), finance and insurance (-47,000), information (-32,000), and nondurable goods manufacturing (-26,000). The number of job openings was little changed in all four regions.


    The number of hires increased to 5.6 million in October (+232,000), and the hires rate was 3.8 percent. The number of hires increased to 5.2 million for total private (+247,000) and was little changed for government. At the industry level, the number of hires increased in other services (+55,000) and health care and social assistance (+45,000). Hires decreased for state and local government, excluding education (-32,000). The number of hires increased in the Northeast region.


    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 October. The total separations rate was 3.5 percent. The number of total separations was little changed for total private and for government. Total separations increased in finance and insurance (+40,000) and in mining and logging (+11,000). Total separations decreased in accommodation and food services (-78,000), information (-32,000), and state and local government, excluding education (-21,000). The number of total separations decreased in the Northeast region.

    The number of quits was unchanged at 3.2 million in October. The quits rate was 2.2 percent. The number of quits was little changed for total private, for government, and in all industries. In the regions, the number of quits increased in the South and decreased in the Midwest.

    There were 1.6 million layoffs and discharges in October, little changed from September. The layoffs and discharges rate was 1.1 percent in October. The number of layoffs and discharges was little changed for total private and for government. The layoffs and discharges level increased in finance and insurance (+37,000) and in mining and logging (+7,000). Layoffs and discharges decreased in construction (-69,000) and in state and local government, excluding education (-15,000). The number of layoffs and discharges decreased in the Northeast region.

    The number of other separations edged up in October to 367,000. Other separations edged up for total private and was little changed for government. Other separations increased in professional and business services (+53,000), construction (+20,000), and educational services (+5,000). Other separations decreased in information (-9,000). The number of other separations increased 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 October, hires totaled 64.3 million and separations totaled 62.2 million, yielding a net employment gain of 2.1 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. Oct 2017” 11 Dec 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:

    flag_china China update

    Currency: USD/CNY

    CNY movements
    ^ CNY movements against the USD over the past month (mouseover for inverse) Chart: