Mon 18 Dec 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/bearWall Street hit record closing highs on Monday as optimism increased about the likelihood of lower corporate tax rates as the Republican tax bill moved closer to passage.

    • The S&P 500 index rose 14.36 points, or 0.54%, to 2,690.17
    • The Dow Jones Industrial Average rose 140.46 points, or 0.57%, to 24,792.2
    • The Nasdaq Composite index rose 58.18 points, or 0.84%, to 6,994.76. The Nasdaq surpassed the 7,000-point mark during the session but closed below that level.
    • Advancing issues outnumbered declining ones on the NYSE by a 2.43-to-1 ratio; on Nasdaq, a 2.13-to-1 ratio favored advancers.
    • About 7.1 billion shares changed hands on U.S. exchanges. That compares with the 6.8 billion daily average for the past 20 trading days, according to Thomson Reuters data.

    Tax Bill

    The Republican-controlled U.S. Congress is expected to begin voting on sweeping tax legislation on Tuesday, aiming to get the bill to President Donald Trump to sign into law by the end of the week. Republican U.S. Senator Susan Collins said she would vote for the sweeping overhaul, all but ensuring its passage.

    “This Congress has shown an inability to pass anything over the past five years,” said Michael O‘Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “If a major piece of legislation is passed, you’d expect the markets to be happy.”

    U.S. stocks have enjoyed a near year-long rally, with the benchmark S&P 500 and the blue-chip Dow Jones Industrial Average set for their best year since 2013.

    The bill would cut corporate tax rates to 21% from 35%, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.

    Another expected outcome of lower taxes is cash repatriation, which market analysts say could boost mergers and acquisitions.

    “A lot of the things in the tax proposal are better for stocks than anything else,” said Rob Stein, chief executive officer of Astor Investment Management in Chicago.

    General

    Besides the three indexes, the Nasdaq 100 and the S&P 100 also hit record highs. The small-cap Russell 2000 rose 1.2% to a record closing high. The materials index gained 1.5%, the most among the major 11 S&P sectors. The utilities index had the largest decline, with a drop of 1.2%.

    On Monday, investors were treated to a flood of deals:

    • Amplify Snack soared 71.6% to $12.01 after Hershey said it would buy the SkinnyPop popcorn maker in a $1.6 billion deal. Hershey rose 0.1%.
    • Snyder‘s-Lance rose 6.9% after Campbell Soup said it would buy the Pretzels and Cape Cod chips maker for $4.87 billion.
    • Casino operator Penn National Gaming said it would buy Pinnacle Entertainment in a $2.8 billion deal. Penn National fell 2.2%, while Pinnacle’s shares were up 0.7%.
    • Twitter rose 11% after JPMorgan said it expects the company to post double-digit daily average user growth in 2018.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) 2,690.16 +0.53% 2,238.83 +20.15%
    DJIA INDU 24,792.20 +0.56% 19,762.60 +25.45%
    NASDAQ IXIC 6,994.76 +0.83% 5,383.12 +29.93%

    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 3.175 +1.27% 2.105 +50.85%
    Valuation Rate USD/AUD 0.77156 +0.26% 0.72663 +6.18%
    AUD-denominated Index AUD 4.117 +1.00% 2.895 +42.19%

    Portfolio stock prices

    :-) Alphabet closed on a record high of $2,162.23 beating Friday’s record of $2,136.19

    • Class A (GOOGL) closed on a record $1,085.09, beating its 27 Nov 2017 record of $1,072.26
    • Class C (GOOG) closed on a record $1,077.14, up $1.22% on Friday’s record $1,064.19

    :-) Apple closed on a record $176.42 beating its 8 Nov 2017 record of $176.24
    :-) VMware closed on a record $128.89 beating its 28 Nov 2017 record of $127.34.

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1085.09 +1.22% $792.45 +36.92%
    Alphabet C GOOG $1077.14 +1.21% $771.82 +39.55%
    Apple AAPL $176.42 +1.40% $115.82 +52.32%
    Amazon AMZN $1190.58 +0.97% $749.87 +58.77%
    Ebay EBAY $38.18 -0.50% $29.69 +28.59%
    Facebook FB $180.82 +0.35% $115.05 +57.16%
    PayPal PYPL $75.32 -0.44% $39.47 +90.82%
    Twitter TWTR $24.68 +11.02% $16.30 +51.41%
    Visa V $113.55 -0.24% $78.02 +45.53%
    VMware VMW $128.89 +4.11% $78.73 +63.71%

    FX: USD/AUD

    USD

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

    The Bloomberg dollar index (DXY) clawed back losses late in the session, closing down 0.2% Monday.
    The EUR rallied 0.3% Monday and was recently at USD 1.1782.
    Britain’s rose 0.5% Monday, and was trading at USD 1.3383.
    Japan’s JPY was little changed at 112.55 per USD Monday.
    Bloomberg

    AUD

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

    Two of Australia’s largest asset managers are at odds about whether the AUD will break below USD 0.70.

    The AUD will slide under that level by mid-2018 as the yield on the nation’s bonds falls below that on U.S. Treasuries, according to Brisbane-based QIC Ltd., which oversees the equivalent of $63 billion. The AUD is likely to stay above 70 cents due to China’s robust economy and a tailwind from commodity prices, says AMP Capital Investors Ltd., which manages about $137 billion.

    The AUD has tumbled about 6% from this year’s high in Sep 2017 as the premium on its two-year notes vanished last month for the first time since 2000. Mixed economic data means the Reserve Bank of Australia isn’t likely to raise interest rates from a record-low 1.5% any time soon, while the Federal Reserve has increased its benchmark 5 times since Dec 2015 to reach a similar level.

    “There’s a possibility that the whole yield curve up to the 10-year point will trade below the U.S.,” said Susan Buckley, managing director of global liquid strategies at QIC. “We may well be in a period where the interest-rate differential factor will start to weigh on the currency more than other factors.”

    Australia’s two-year premium is now five basis points, down from as much as 510 basis points in Feb 2008. The extra yield of 10-year bonds has shrunk to 17 basis points from as high as 277 basis points in 2008.

    The RBA will only tighten in the second half of 2018, while the Fed will probably raise rates 3 times in 2018, QIC’s Buckley said.Bloomberg

    Oil and Gas Futures

    Futures prices

    Prices are as at 15:46 ET

    • NYMEX West Texas Intermediate (WTI): $57.15/barrel -0.26% Chart
    • ICE (London) Brent North Sea Crude: $63.34/barrel +0.17% Chart
    • NYMEX Natural gas futures: $2.74/MMBTU +4.82% Chart

    flag_australia AU: CoreLogic House Prices. Q3/2017

    Press Release Extract [au_houseprices]

    Nationally, the total gross value of properties resold at a profit over the September 2017 quarter was $17.7 billion which far outweighed resales losses which amounted to $453.8 million.

    The latest CoreLogic Pain & Gain report a quarterly analysis of resold properties, looks at whether properties sell for less than, or more than their previous purchase price and provides insights into the performance of markets; typically a low proportion of loss-making resales indicates a stronger market compared to those that are experiencing relatively higher proportions of loss-making resales.

    au_paingain_20171218

    Key Findings:

    • Residential resales generated $17.7 billion worth of profit nationally
    • Residential resales generated $453.8 million worth of losses nationally
    • 90.8% of all properties resold transacted at a price at, or in excess of the previous purchase price.
    • The proportion of resales at profit virtually level with the June 2017 quarter and the September 2016 quarter, both of which recorded 90.9% of resales at a profit.
    • 92.6% of capital city properties resold for a profit compared to 87.8% of regional properties.
    • Proportion of profit-making resales across capital cities unchanged from the previous quarter but lower than the 93.3% of resales a year earlier.
    • Proportion of resales at a loss nudged a little higher recently.
    • Profit-making resales appear to have peaked in line with the peak of the housing cycle in Sydney and a slowing of growth in Melbourne.
    • Combined national non-capital city markets show 87.8% of resales at a profit unchanged over quarter and up from 86.7% a year earlier.
    • CoreLogic reported that over the first three quarters of 2017 there has been a slight increase in the proportion of properties reselling for less than their previous purchase price.

    According to report author Cameron Kusher this is largely being driven by capital city markets in which the instances of loss-making resales have trended a little higher while the regional markets are seeing a decline in loss-making resales.

    He said, “Despite ongoing commentary about the weaker unit market conditions, the Pain & Gain September quarter research showed that detached houses have actually driven the increase in lossmaking resales over the first three quarters of 2017.”

    The findings also highlight that the instances of loss-making resales of units is now lower than it was at the end of last year in a number of cities and steady in Sydney and Melbourne.

    With the housing market now broadly seeing a slowdown in the rate of value growth with values falling in Sydney, Mr Kusher anticipates that the instances of resales at a loss will likely continue to trend higher throughout the final quarter of 2017 and into 2018.

    Houses have largely driven the slight increase in loss-making resales to-date however, the supply of new units under construction remains at near record highs and investor demand continues to ease.

    Given this, Mr Kusher said, “It is reasonable to expect that the instances of loss-making resales of units may climb over the coming year as the housing market loses momentum and supply increases.”

    Resales at a loss in Sydney, Melbourne and Hobart remain exceptionally low and in Sydney in particular the proportion is likely to rise. On the other hand, more than a quarter of resales in Perth are at a loss however, market conditions appear to be improving which could lead to falls in loss-making resales over the coming year.

    Coastal markets close to capital cities saw loss-making resales trend lower over recent years. Mr Kusher said, “As values fall in Sydney, this could lead to some increases in loss-making resales in areas surrounding Sydney.”

    Meanwhile, resales at a loss are likely to remain low in Geelong and are expected to trend lower on the Gold and Sunshine Coasts.

    During the previous housing market downturn in 2010 to 2012, the proportion of loss-making resales increased from its lowest level of 5.0% in April 2010 to a peak of 13.0% in September 2012. With the housing market softening, depending on if values fall in 2018 and the magnitude of these falls we could see the previous downturn trends in the proportion of loss-making resales repeated.

    CoreLogic, “CoreLogic September 2017 Quarter Pain & Gain Report“, 18 Dec 2017 More

    flag_australia AU: Sales of New Motor Vehicles. Nov 2017

    Press Release Extract [au_motorvehicle]

    The November 2017 trend estimate (98,690) decreased by 0.3% when compared with October 2017.

    When comparing national trend estimates for November 2017 with October 2017, sales for Other vehicles increased by 0.4%. By contrast, Passenger vehicles and Sports utility vehicles decreased by 0.8% and 0.4% respectively.

    The largest upward movement across all states and territories, on a trend basis, was in Tasmania (1.6%), continuing an upward trend that began in May 2017.

    The largest downward movement across all states and territories, on a trend basis, was in the Northern Territory (-2.5%).

    Australian Bureau of Statistics, “9314.0 Sales of New Motor Vehicles, Australia, Nov 2017“, 18 Dec 2017 More

    flag_europe EU: Inflation (HICP). Nov 2017

    Press Release Extract [eu_cpi]

    Euro area annual inflation was 1.5% in November 2017, up from 1.4% in October. In November 2016, the rate was 0.6%. European Union annual inflation was 1.8% in November 2017, up from 1.7% in October. A year earlier the rate was 0.6%. These figures come from Eurostat, the statistical office of the European Union.

    eu_cpi_20171218

    The lowest annual rates were registered in Cyprus (0.2%), Ireland (0.5%) and Finland (0.9%). The highest annual rates were recorded in Estonia (4.5%), Lithuania (4.2%) and the United Kingdom (3.1%). Compared with October 2017, annual inflation fell in four Member States, remained stable in nine and rose in fifteen.

    eu_cpi+states_20171218

    The largest upward impacts to the euro area annual inflation came from fuels for transport (+0.21 percentage points), heating oil (+0.07 pp) and milk, cheese & eggs (+0.05 pp), while telecommunication (-0.11 pp), garments (-0.07 pp) and social protection (-0.04 pp) had the biggest downward impacts

    Eurostat, “November 2017: Annual inflation up to 1.5% in the euro area, Up to 1.8% in the EU“, 18 Dec 2017 More

    flag_europe EU: Job Vacancy. Q3/2017

    Press Release Extract [eu_vacancies]

    The job vacancy rate in the euro area (EA19) was 1.9% in the third quarter of 2017, stable compared with the previous quarter and up from 1.6% in the third quarter of 2016, according to figures published by Eurostat, the statistical office of the European Union. In the EU28, the job vacancy rate was 2.0% in the third quarter of 2017, stable compared with the previous quarter and up from 1.7% in the third quarter of 2016.

    eu_vacancies_20171218

    In the euro area, the job vacancy rate in the third quarter of 2017 was 1.6% in industry and construction, and 2.2% in services. In the EU28, the rate was 1.7% in industry and construction, and 2.3% in services.

    Member States

    Among the Member States for which comparable data are available, the highest job vacancy rates in the third quarter of 2017 were recorded in the Czech Republic (4.1%), Belgium (3.6%), Germany (2.7%), Austria and the United Kingdom (both 2.6%), the Netherlands (2.5%) and Hungary (2.4%). In contrast, the lowest rates were observed in Greece (0.5%), Bulgaria and Spain (both 0.8%) as well as Portugal (0.9%).

    eu_vacancies_states_20171218

    Compared with the same quarter of the previous year and among the Member States for which data are comparable over time (see country notes), the job vacancy rate in the third quarter of 2017 rose in twenty-two Member States, remained stable in two and fell in Greece (-0.3 percentage points – pp), Romania (-0.2 pp) and Cyprus (-0.1 pp). The largest increases were registered in the Czech Republic (+1.0 pp), Belgium and Austria (both +0.7 pp), Slovenia (+0.6 pp) and the Netherlands (+0.5 pp).

    Eurostat, “Third quarter of 2017: Euro area job vacancy rate at 1.9%, EU28 rate at 2.0%“, 18 Dec 2017 More

    flag_japan Japan update

    International Trade. Nov 2017

    Trading Economics Outlines

    Exports

    Exports from Japan jumped 16.2 percent year-on-year to JPY 6920.4 billion in November of 2017, above market expectations of a 14.6 percent rise. Sales of machinery went up 22.9 percent, namely semicon machinery (54.7 percent); construction machines (38.8 percent); electrical machinery (16.2 percent) like semiconductors (14.2 percent); manufactured goods (19.6 percent) such as iron and steel products (27.9 percent); chemicals (20 percent); transport equipment (7.1 percent) like motor vehicles (7.7 percent); mineral fuels (50.7 percent); raw materials (25.1 percent) and foodstuff (15.2 percent). Shipments rose for all main partners: China (25.1 percent), hitting a record high value of JPY 1379.7 billion; the US (13 percent); the EU (13.3 percent) and South Korea (20.5 percent). Exports in Japan averaged 3276.43 JPY Billion from 1963 until 2017, reaching an all time high of 7681.69 JPY Billion in March of 2008 and a record low of 105.08 JPY Billion in January of 1963.

    Imports

    Imports to Japan went up 17.2 percent year-on-year to JPY 6807 billion in November of 2017, the highest value since July of 2015. It compares with market expectations of an 18 percent rise. Main upward pressure came from purchases of electrical machinery (27.5 percent); mineral fuels (21.9 percent); manufactured goods (22.1 percent); machinery (16.5 percent); raw materials (23.9 percent) and fish (12.2 percent). Purchases rose from China (21.6 percent); the US (12.3 percent); the EU (6.8 percent) and the Middle East (23 percent). Imports in Japan averaged 2908.73 JPY Billion from 1963 until 2017, reaching an all time high of 8047.03 JPY Billion in January of 2014 and a record low of 162.06 JPY Billion in January of 1963.

    Balance of Trade

    Japan posted a JPY 113.4 billion trade surplus in November of 2017, following a JPY 146.5 billion surplus a year earlier and beating market expectations of a JPY 55 billion deficit. Exports jumped 16.2 percent year-on-year, above forecasts of a 14.6 percent rise, with sales to China hitting a record high value. Imports were the highest since July of 2015. Balance of Trade in Japan averaged 367.69 JPY Billion from 1963 until 2017, reaching an all time high of 1608.67 JPY Billion in September of 2007 and a record low of -2795.12 JPY Billion in January of 2014.

    Trading Economics, “NewsStream“, 18 Dec 2017 Exports Imports Balance

    Currency: USD/JPY

    JPY movements
    ^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

    Stockmarket: Nikkei 225

    The Nikkei 225 jumped 349 points, or 1.6%, to close at 22,902 on Monday, taking a positive lead from record highs on Wall Street on Friday on expectations US lawmakers will pass a long-awaited tax bill. Financials and exporters were among the best performers. Historically, the Japan Nikkei 225 Stock Market Index reached an all time high of 38915.87 in December of 1989 and a record low of 85.25 in July of 1950.TradingEconomics

    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