Wed 31 Jan 2018 (EOM)


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In Portfolioticker today

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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/bearU.S. stocks finished marginally higher on Wednesday as indexes gave up early gains after the Federal Reserve said it sees inflation rising this year, signaling it remains on track to boost interest rates again in March.

    • The S&P 500 index rose 1.47 points, or 0.05%, to 2,823.9
    • The Dow Jones Industrial Average rose 73.74 points, or 0.28%, to 26,150.63
    • The Nasdaq Composite index rose 9.00 points, or 0.12%, to 7,411.48.
    • Advancing issues outnumbered declining ones on the NYSE by a 1.14-to-1 ratio; on Nasdaq, a 1.61-to-1 ratio favored decliners.
    • The S&P 500 posted 34 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 82 new highs and 48 new lows.
    • Volume on U.S. exchanges was 8.05 billion shares, above the 7.18 billion average for the full session over the last 20 trading days.

    The Fed kept rates unchanged but, in a statement following its two-day policy meeting, it repeated that it expected that “further gradual” rate hikes will be warranted.

    “The subtle message is that they will continue to press rates higher,” said Scott Kimball, director and portfolio manager at BMO Global Asset Management.

    The FOMC raised rates 3 times last year and sees 3 additional hikes in 2018 even as it continues to trim its balance sheet on a largely pre-set schedule.

    “They’re more confident in their expectations of rising inflation,” said Kevin Logan, Chief U.S. Economist at HSBC Securities.

    Bolstering the Fed’s view of a solid economy, ADP published a report on Wednesday showing 234,000 private sector jobs added in January compared with 185,000 expected by analysts. The U.S. Labor Department is due to release its more comprehensive report on Friday.

    Stocks were lifted earlier Wednesday by a surge in Boeing which forecast better-than-expected full-year profits and said it expects to deliver a record number of commercial aircraft in 2018, sending its shares up 4.9%. Boeing was the biggest percentage gainer on the Dow, helping pull the blue-chip index out of its biggest 2-day plunge since Sep 2016.

    The selloff earlier in the week had been prompted by an increase in U.S. Treasury yields to multi-year highs. The U.S. yield curve flattened to a decade low following the Fed statement as traders sold more short-dated Treasuries.

    Facebook shares fell more than 4% in after-market trading after the social media giant reported results.

    Among the S&P 500’s 11 major sectors, technology gave the biggest boost to the index.

    Healthcare stocks continued to weigh on the three major U.S. indexes following a report on Tuesday that Amazon, Berkshire Hathaway and JPMorgan Chase were joining forces to cut healthcare costs for its U.S. employees. The S&P 500 healthcare index fell 1.5%.

    Analysts expect Q4/2017 S&P 500 earnings growth of 13.7%, up from 12% expected at the start of the month. So far, 37% of companies in the index have reported and 80.5% have come in above consensus estimates.Reuters

    Market indices

    Market indices
    ^ Market indices today (mouseover for 12 month view) Chart: Google Finance

    Index Ticker Today Change 31 Dec 17 YTD
    S&P 500 SPX (INX) 2,823.81 +0.04% 2,673.61 +5.61%
    DJIA INDU 26,149.39 +0.27% 24,719.22 +5.78%
    NASDAQ IXIC 7,411.48 +0.12% 6,903.39 +7.36%

    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 17 YTD
    USD-denominated Index USD 3.193 +0.44% 3.068 +4.10%
    Valuation Rate USD/AUD 0.81081 -0.25% 0.78528 +3.25%
    AUD-denominated Index AUD 3.942 +0.69% 3.909 +0.86%

    Portfolio stock prices

    :-) Amazon closed on a record high of $1,450.89, up 0.91% on yesterday’s record $1,437.82.
    :-) For the month of January 2018 Amazon rose 24.06%

    Stock Ticker Today Change 31 Dec 17 YTD
    Alphabet A GOOGL $1,182.22 +0.41% $1,053.00 +12.27%
    Alphabet C GOOG $1,169.94 +0.53% $1,045.65 +11.88%
    Apple AAPL $167.43 +0.27% $169.23 -1.07%
    Amazon AMZN $1,450.89 +0.90% $1,169.54 +24.05%
    Ebay EBAY $40.58 +0.44% $37.76 +7.46%
    Facebook FB $186.89 -0.13% $176.46 +5.91%
    PayPal PYPL $85.32 +1.83% $73.61 +15.90%
    Twitter TWTR $25.81 +0.74% $24.01 +7.49%
    Visa V $124.23 +0.55% $114.02 +8.95%
    VMware VMW $123.79 +4.25% $125.32 -1.23%

    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) fell 0.2%.
    The EUR rose 0.1% to USD 1.2413.
    Britain’s GBP rose 0.3% to USD 1.4188.
    Japan’s JPY fell 0.4% to 109.21 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 15:49 ET

    • NYMEX West Texas Intermediate (WTI): $64.89/barrel +0.60% Chart
    • ICE (London) Brent North Sea Crude: $69.05/barrel +0.04% Chart
    • NYMEX Natural gas futures: $2.97/MMBTU -7.04% Chart

    EBay: Earnings Report. Q4/2017

    Earnings Report Extract

    eBay Inc, a global commerce leader, delivered revenue for the quarter ended December 31, 2017 of $2.6 billion, increasing 9% on an as-reported basis and 7% on a foreign exchange (FX) neutral basis, primarily driven by gross merchandise volume (GMV) of $24.4 billion, up 10% on an as- reported basis and 7% on an FX-Neutral basis.

    During the quarter, eBay delivered GAAP net loss from continuing operations of $2.6 billion, or $(2.51) per diluted share primarily driven by a $3.1 billion tax charge attributable to the enactment of the Tax Cuts and Jobs Act. Non-GAAP net income from continuing operations was $618 million, or $0.59 per diluted share. The company generated $988 million of operating cash flow and $796 million of free cash flow from continuing operations while also repurchasing $922 million of its common stock in the quarter.

    “Q4 was a record quarter for eBay, representing the fifth quarter in a row of volume acceleration in our US Marketplace,” said Devin Wenig, President and CEO of eBay Inc. “We have made great progress transforming eBay while delivering meaningful growth and we expect further acceleration in 2018 as we continue to execute our strategy.”

    In the fourth quarter, eBay grew active buyers by 5% across its platforms, for a total of 170 million global active buyers. Underlying total eBay Inc. performance, the Marketplace platforms delivered $23.0 billion of GMV and $2.1 billion of revenue. Marketplace GMV was up 9% on an as-reported basis and 6% on an FX-Neutral basis, driven by strong holiday performance in the US and continued expansion of new user experiences, which led to revenue growth of 8% on an as- reported basis and 6% on an FX-Neutral basis. StubHub drove GMV of $1.4 billion, up 16% on an as-reported basis and 15% on an FX-Neutral basis, and revenue of $307 million, up 10% on both an as-reported basis and FX-Neutral basis driven by a strong concerts and sports landscape. Classifieds platforms delivered another quarter of double-digit growth with revenue of $244 million, up 21% on an as-reported basis and 13% on an FX-Neutral basis, driven primarily by strength in Germany.

    For the full year 2017, eBay Inc. delivered revenue of $9.6 billion, growing 7% on both an as-reported basis and FX-Neutral basis primarily driven by GMV of $88.4 billion, up 6% on both an as-reported basis and FX-Neutral basis. The company delivered strong operating and free cash flow on a continuing operations basis, generating $3.1 billion and $2.5 billion, respectively, during 2017. eBay also returned $2.7 billion of capital to shareholders through repurchases of its common stock.

    ebay_financials_20180131

    *2017 GAAP results from continuing operations primarily driven by a $3.1 billion tax charge attributable to the enactment of the Tax Cuts and Jobs Act. 2016 GAAP results from continuing operations driven by a $4.6 billion income tax benefit related to a legal structure realignment, primarily impacting its international entities, as well as a $0.8 billion gain from the sale of its equity holdings of MercadoLibre, Inc.

    Other Selected Financial and Operational Results

    • Operating margin — GAAP operating margin decreased to 25.4% for the fourth quarter of 2017, compared to 26.6% for the same period last year. Non-GAAP operating margin decreased to 30.9% in the fourth quarter of 2017, compared to 31.9% for the same period last year.
    • Taxes — The GAAP effective tax rate for continuing operations for the fourth quarter of 2017 was 563%, compared to (197)% for the fourth quarter of 2016. The non-GAAP effective tax rate for continuing operations for the fourth quarter of 2017 was 19%, compared to 24% for the fourth quarter of 2016.
    • Cash flow — The company generated $988 million of operating cash flow from continuing operations and $796 million of free cash flow from continuing operations during the fourth quarter of 2017.
    • Stock repurchase program — The company repurchased approximately $922 million of its common stock, or 25 million shares, in the fourth quarter of 2017. The company’s total repurchase authorization remaining as of
      December 31, 2017 was $1.7 billion.

    • Cash and cash equivalents and non-equity investments — The company’s cash and cash equivalents and non-equity
      investments portfolio totaled $11.3 billion as of December 31, 2017.

      Business Outlook

      Please note that eBay’s 2018 Business Outlook includes the impact of adopting the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Exhibit A, (see PDF), presents a reconciliation of the impact of adoption on eBay’s 2017 and 2016 Income Statement to enable investors to better understand normalized growth comparisons for the company’s 2018 Business Outlook.

      • First quarter 2018 — The company expects net revenue between $2.57 billion and $2.61 billion, representing FX- Neutral growth of 7% – 9%, with GAAP earnings per diluted share from continuing operations in the range of $0.37 – $0.41 and non-GAAP earnings per diluted share from continuing operations in the range of $0.52 – $0.54.
      • Full year 2018 — The company expects net revenue between $10.9 billion and $11.1 billion, representing FX-Neutral growth of 7% – 9%, with GAAP earnings per diluted share from continuing operations in the range of $1.65 – $1.75 and non-GAAP earnings per diluted share from continuing operations in the range of $2.25 – $2.30.

      In January 2018, eBay’s board of directors authorized an additional $6.0 billion stock repurchase program, with no expiration from the date of authorization. The company’s stock repurchase program is intended to programmatically offset the impact of dilution from its equity compensation programs and, subject to market conditions and other factors, to make opportunistic and programmatic repurchases of its common stock to reduce its outstanding share count. Any share repurchases under the company’s stock repurchase programs may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means at times and in such amounts as management deems appropriate and will be funded from the company’s working capital or other financing alternatives.

    Ebay, “eBay Inc. Reports Fourth Quarter and Full Year 2017 Results: eBay Delivers Record Fourth Quarter Driven by Strong Holiday Performance“, 31 Oct 2018 Full Report

    ebay_20180131

    Facebook: Earnings Report. Q4/2017

    Facebook Inc reported slightly slower-than-expected growth in daily active users in the latest quarter and said changes made to the News Feed reduced the time spent by users by about 50 million hours every day.Reuters

    Earnings Report Extract

    “2017 was a strong year for Facebook, but it was also a hard one,” said Mark Zuckerberg, Facebook founder and CEO. “In 2018, we’re focused on making sure Facebook isn’t just fun to use, but also good for people’s well-being and for society. We’re doing this by encouraging meaningful connections between people rather than passive consumption of content. Already last quarter, we made changes to show fewer viral videos to make sure people’s time is well spent. In total, we made changes that reduced time spent on Facebook by roughly 50 million hours every day. By focusing on meaningful connections, our community and business will be stronger over the long term.”

    fb_financials_20180131

    Fourth Quarter and Full Year 2017 Operational and Other Financial Highlights

    • Daily active users (DAUs) – DAUs were 1.40 billion on average for December 2017, an increase of 14% year-over-year.
    • Monthly active users (MAUs) – MAUs were 2.13 billion as of December 31, 2017, an increase of 14% year-over-year.
    • Mobile advertising revenue – Mobile advertising revenue represented approximately 89% of advertising revenue for the fourth quarter of 2017, up from approximately 84% of advertising revenue in the fourth quarter of 2016.
    • Capital expenditures – Capital expenditures were $2.26 billion and $6.73 billion for the fourth quarter and full year 2017, respectively.
    • Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $41.71 billion at the end of the fourth quarter of 2017.
    • Headcount – Headcount was 25,105 as of December 31, 2017, an increase of 47% year-over-year.

    2017 Tax Cuts and Jobs Act

    On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted into law and the new legislation contains several key tax provisions that affected us, including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring our U.S. deferred tax assets and liabilities, and reassessing the net realizability of our deferred tax assets and liabilities. In December 2017, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As a result, our provision for income taxes increased by $2.27 billion and our diluted EPS decreased by $0.77 for both the fourth quarter and full year 2017. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the transition tax, deferred tax re-measurements, and other items to be provisional due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118.

    Facebook, “Facebook Reports Fourth Quarter and Full Year 2017 Results“, 31 Jan 2018 Full Report

    fb_20180131

    PayPal: Earnings Report. Q4/2017

    Payments processor PayPal Holdings Inc’s fourth-quarter profit topped analysts’ forecasts on strength in its merchant services business, but the company gave a disappointing forecast for first-quarter earnings, sending its shares lower.Reuters

    Press Release Extract

    Global technology platform and digital payments leader PayPal Holdings, Inc. (NASDAQ: PYPL) today announced fourth quarter and full year results for the period ended December 31, 2017.

    “PayPal had a transformative year in 2017. We brought record numbers of new customer accounts to our platform by democratizing financial services for consumers and commerce capabilities for merchants. We also substantially expanded our opportunities for future growth and redefined our competitive position through our successful partnership strategy driven by our open platform architecture,” said Dan Schulman, President and CEO of PayPal.

    Schulman continued, “I am very pleased to announce that PayPal and eBay have signed a term sheet to make PayPal available, as a way to pay on eBay, through July 2023. We enter 2018 with strong momentum supporting an increasingly differentiated and expansive value proposition, and a focused commitment to deliver increasing value to our customers and shareholders.”

    Significant events in fourth quarter 2017

    • PayPal and Synchrony Financial announced an agreement expanding their consumer credit relationship. Under the terms of the transaction, Synchrony Financial will acquire PayPal’s U.S. consumer credit receivables portfolio, which totaled approximately $6.4 billion in receivables as of December 31, 2017. Subject to regulatory approval and other customary conditions, this transaction is expected to close in the third quarter of 2018.
      • The application of held for sale accounting relating to the U.S. consumer credit receivables resulted in the reversal of the related allowance for losses on interest and principal receivables.
      • The impact from the one-time adjustments related to held for sale accounting on GAAP net revenues was $39 million and on GAAP transaction and loan losses was $283 million, a benefit to GAAP earnings per diluted share (EPS) of $0.25.
    • PayPal’s GAAP results also include the impact of the recently enacted Tax Cut and Jobs Act of 2017 (the “Tax Act”), which resulted in a preliminary net tax expense of $180 million.

    Financial highlights for fourth quarter 2017 include:

    • GAAP revenue growth of 26% to $3.74 billion, or 26% on a foreign currency neutral (FX-neutral) basis with non-GAAP revenue growth of 24% to $3.71 billion, or 24% on a FX-neutral basis
    • GAAP operating margin of 22.5% with non-GAAP operating margin of 21.8%
    • GAAP EPS growth of 57% to $0.50, which includes the impact of held for sale accounting of $0.25, partially offset by the impact from the Tax Act of ($0.15), with non-GAAP EPS growth of 30% to $0.55
    • Entered into a $3.0 billion unsecured, term loan credit facility

    Financial highlights for full year 2017 include:

    • GAAP revenue growth of 21% to $13.09 billion, or 22% on an FX-neutral basis with non-GAAP revenue growth of 20% to $13.06 billion, or 21% on an FX-neutral basis
    • GAAP operating margin of 16.2% with non-GAAP operating margin of 21.1%
    • GAAP EPS growth of 28% to $1.47, which includes the impact of held for sale accounting of $0.26, partially offset by the impact from the Tax Act of ($0.15), with non-GAAP EPS growth of 27% to $1.90
    • Returned $1.01 billion to stockholders by repurchasing 19.7 million shares of common stock at an average price of $51

    Fourth quarter and full year 2017 impact of held for sale accounting on cash flow

    The application of held for sale accounting resulted in a change to the characterization of cash flows related to the U.S. consumer credit portfolio. Cash flows related to repayments of loans originated prior to the application of held for sale accounting continue to be reflected in cash flow from investing activities. Cash flows related to the net changes in loans originated following our application of held for sale accounting are now reflected in cash flow from operating activities. In the fourth quarter, $1.3 billion of net cash outflows recognized in cash flow from operating activities would previously have been recognized in cash flow from investing activities. This change resulted in operating cash flow of ($147) million with free cash flow of ($327) million in the fourth quarter. For full year 2017, inclusive of the impact from held for sale accounting, PayPal is reporting operating cash flow of $2.5 billion with free cash flow of $1.9 billion.

    Operating highlights for fourth quarter 2017 include:

    • 8.7 million active customer accounts added, with net new actives up 61%
    • 2.2 billion payment transactions, up 25%
    • $131 billion in total payment volume (TPV), up 32%, or 29% on an FX-neutral basis
    • 33.6 payment transactions per active account on a trailing twelve months basis, up 8%

    Operating highlights for full year 2017 include:

    • Active customer accounts of 227 million, up 15% with growth of 29 million net new actives
    • 7.6 billion payment transactions, up 24%
    • $451 billion in TPV, up 27% both on a spot and FX-neutral basis
    • 33.6 payment transactions per active account on a trailing twelve months basis, up 8%

    PayPal’s expanding value proposition

    PayPal processed $131 billion in TPV in the fourth quarter, representing growth of 32%, or 29% on an FX-neutral basis. Merchant Services TPV grew 36%, or 33% on an FX-neutral basis, and represented 87% of overall TPV for the quarter. eBay volume grew 10%, or 7% on an FX-neutral basis, and represented approximately 13% of overall TPV for the fourth quarter versus approximately 16% a year ago.

    Person-to-Person (P2P) volume grew 50% to approximately $27 billion, and represented approximately 20% of TPV in the fourth quarter. Venmo, the company’s social payments platform, processed $10.4 billion in payment volume in the fourth quarter, an increase of 86% year over year, and for the first time surpassed $10 billion in payment volume processed in a quarter. For the full year, Venmo’s volume increased 97% with approximately $35 billion in payment volume processed.

    Driven by strong mobile engagement on our platform over the holiday shopping season, PayPal processed approximately $48 billion in mobile payment volume in the fourth quarter, representing approximately 53% growth year over year.

    Extending PayPal’s global reach and merchant offering

    During the fourth quarter, PayPal announced the launch of domestic operations in India. Merchants offering PayPal will be able to process both local and global payments through the platform, gaining access to PayPal’s more than 200 million customers around the world and in India through a single integration.

    PayPal also made progress introducing Pay with Venmo to consumers. More than two million U.S. merchants now offer Venmo as a mobile payment option through the PayPal and Braintree platforms.

    One Touch, PayPal’s innovative checkout experience, continues its global roll out, ending the fourth quarter with 80 million consumers opted in, up from 40 million a year ago. At the end of 2017, eight million merchants offered One Touch compared with five million a year ago.

    Subsequent to the end of the fourth quarter, PayPal and eBay signed a term sheet to continue to feature PayPal at checkout on the eBay Marketplace through July 2023.

    2018 Financial Guidance

    Full year 2018 revenue and earnings guidance

    • PayPal expects revenue to grow 15 – 17% at current spot rates and 14 – 16% on an FX-neutral basis, to a range of $15.00 – $15.25 billion. Full year 2018 revenue guidance includes an expected impact related to the sale of U.S. consumer credit receivables to Synchrony Financial of ~3.5 percentage points for full year 2018, assuming the transaction closes on July 1, 2018.
    • PayPal expects GAAP earnings per diluted share in the range of $1.79 – $1.86 and non-GAAP earnings per diluted share in the range of $2.24 – $2.30.
    • Estimated non-GAAP amounts above for the twelve months ending December 31, 2018, reflect adjustments of approximately $910 – $950 million, primarily representing estimated stock-based compensation expense and related payroll taxes in the range of $820 – $850 million.

    First quarter 2018 revenue and earnings guidance

    • PayPal expects revenue to grow 20% – 22% at current spot rates and 20% – 21% on an FX-neutral basis, to a range of $3.58 – $3.63 billion.
    • PayPal expects GAAP earnings per diluted share in the range of $0.41 – $0.43 and non-GAAP earnings per diluted share in the range of $0.52 – $0.54.
    • Estimated non-GAAP amounts above for the three months ending March 31, 2018, reflect adjustments of approximately $215 – $230 million, primarily representing estimated stock-based compensation expense and related payroll taxes in the range of $190 – $200 million.

    PayPal, “PayPal Reports Fourth Quarter and Full Year 2017 Results“, 31 Jan 2018 Full Report

    pypl_20180131

    Deloitte Report: Global Perspectives for Private Companies: Plans, Priorities and Expectations

    deloitte_20180131

    Deloitte, “Global Perspectives for Private Companies: Plans, Priorities and Expectations“, Jan 2018 Report

    flag_usa US: President’s State of the Union Address

    CNY movements

    U.S. President Donald Trump urged lawmakers on Tuesday to work toward bipartisan compromises, but pushed a hard line on immigration, insisting on a border wall and other concessions from Democrats as part of any deal to protect the children of illegal immigrants.

    Trump, in his first State of the Union speech, gave no ground on the contentious issue of whether to shield young immigrants known as “Dreamers” from deportation.

    Aiming to keep conservative supporters happy as he looks to November congressional elections, Trump stood by a set of principles opposed by Democrats, including the border wall with Mexico and new restrictions on how many family members that legal immigrants can bring into the United States.

    “Tonight, I call upon all of us to set aside our differences, to seek out common ground, and to summon the unity we need to deliver for the people we were elected to serve,” Trump said in his address.

    Trump used the hour-and-20-minute speech, given annually by presidents to Congress, to try to overcome doubts about his presidency at a time when he is battling a probe into his campaign’s alleged ties with Russia and suffering low job approval ratings.

    Trump made no mention of the federal probe into whether his campaign colluded with Russia in the 2016 presidential election, a controversy that is dogging his presidency. Trump has denied collusion and has called the probe a “witch hunt.”

    The speech was short on details about Trump’s policy proposals.Reuters

    flag_australia AU: Consumer Price Index. Dec 2017

    Press Release Extract [au_cpi]

    The Consumer Price Index (CPI) rose 0.6 per cent in the December quarter 2017, the latest Australian Bureau of Statistics (ABS) figures reveal. This follows a rise of 0.6 per cent in the September quarter 2017.

    The most significant price rises this quarter are automotive fuel (+10.4%), tobacco (+8.5%), domestic holiday travel and accommodation (+6.3%) and fruit (+9.3%). These price rises were partially offset by falls in international holiday travel and accommodation (-1.7%), audio visual and computing equipment (-3.5%) and telecommunication equipment and services (-1.4%).

    The CPI rose 1.9 per cent through the year to December quarter 2017 having increased 1.8 per cent through the year to September quarter 2017.

    Chief Economist for the ABS, Bruce Hockman, said ‘While the annual CPI rose 1.9 per cent, annual inflation in most East Coast cities rose above 2.0 per cent, due in part to the strength in prices related to Housing. Softer economic conditions in Darwin and Perth have resulted in annual inflation remaining subdued at 1.0 and 0.8 per cent respectively.’

    Alcohol and Tobacco Group (+3.2%)

    The main contributor to the rise in the alcohol and tobacco group this quarter is tobacco (+8.5%).The rise in tobacco is due to the flow on effects of the federal excise tax increase of 12.5% and the further increase based on Average Weekly Ordinary Time Earnings (AWOTE) effective 1 September 2017.

    Over the last twelve months, the alcohol and tobacco group rose 7.3%.

    In seasonally adjusted terms, the alcohol and tobacco group rose 1.8% this quarter. The main contributor to the rise is tobacco (+4.1%).

    Transport Group (+2.4%)

    The main contributor to the rise in the transport group this quarter is automotive fuel (+10.4%). Automotive fuel rose in October (+3.9%), November (+4.7%) and December (+2.1%). All fuel types recorded rises this quarter. The rise is partially offset by falls in motor vehicles (-1.1%).

    Over the twelve months, the transport group rose 3.3%.

    In seasonally adjusted terms, the transport group rose 2.7% this quarter. The main contributor to the rise is automotive fuel (+10.4%).

    Food and Non-Alcoholic Beverages Group (+1.0%)

    The main contributor to the rise in the food and non-alcoholic beverages group this quarter is fruit (+9.3%) due to rises for berries, particularly strawberries, and grapes.

    Over the last twelve months, the food and non-alcoholic beverages group fell 0.2%.

    In seasonally adjusted terms, the food and non-alcoholic beverages group rose 0.8% this quarter. The main contributor to the rise is fruit (+6.4%).

    Recreation and Culture Group (+0.6%)

    The main contributor to the rise in the recreation and culture group this quarter is domestic holiday travel and accommodation (+6.3%). The rise in domestic holiday travel and accommodation is due to the October school holidays and the lead up to the peak summer holiday period.

    Over the last twelve months, the recreation and culture group rose 0.6%.

    In the CPI, airfares and accommodation are collected in advance (at the time of payment), but are only used in the CPI in the quarter in which the trip is undertaken. International airfares are collected two months in advance (October for travel in December) and domestic airfares are collected one month in advance (November for travel in December).

    In seasonally adjusted terms, the recreation and culture group fell 0.4% this quarter. The main contributor to the fall is international holiday travel and accommodation (-1.7%).

    Housing Group (+0.3)

    The main contributors to the rise in the housing group this quarter are new dwelling purchase by owner-occupiers (+0.6%), electricity (+0.9%), maintenance and repair of the dwellings (+0.7%) and rents (+0.3%). The rise in new dwelling purchase by owner-occupiers is due to continued demand in the eastern states and increases in input costs. The rise is partially offset by a fall in gas and other household fuels (-1.7%) due to the seasonal switch to off-peak pricing in Melbourne.

    Over the last twelve months, the housing group rose 3.4%.

    In seasonally adjusted terms, the housing group rose 0.8% this quarter. The main contributors to the rise are electricity (+2.4%) and new dwelling purchase by owner-occupiers (+0.6%).

    Insurance and Financial Services Group (+0.2%)

    The main contributor to the rise in the insurance and financial services group this quarter is insurance (+1.8%). The rise was partially offset by a fall in deposit and loan facilities (direct charges) (-3.0%) due to the removal of non-customer ATM withdrawal fees.

    Over the past twelve months, the insurance and financial services group rose 1.3%.

    In seasonally adjusted terms, the insurance and financial services group recorded no change this quarter.

    Education Group (+0.1%)

    The main contributor to the rise in education this quarter is preschool and primary education (+0.3%).

    Over the last twelve months, the education group rose 3.2%.

    In seasonally adjusted terms, the education group rose 1.1% this quarter. The main contributor to the rise is secondary education (+1.1%).

    Clothing and Footwear Group (-0.3%)

    The main contributor to the fall in the clothing and footwear group this quarter are garments for women (-1.5%) and footwear for women (-1.8%) due to ongoing competition and continued discounting activity in the retail industry.

    Over the last twelve months, the clothing and footwear group fell 3.0%.

    In seasonally adjusted terms, the clothing and footwear group fell 0.3% this quarter. The main contributor to the fall is garments for women (-1.3%).

    Health Group (-0.5%)

    The main contributor to the fall in the health group this quarter is pharmaceutical products (-2.0%) due to the cyclical increase in the proportion of consumers exceeding the Pharmaceutical Benefits Scheme (PBS) safety net wich reduces the out-of-pocket expense.

    Over the last twelve months the health group rose 4.0%.

    In seasonally adjusted terms, the health group rose 1.1% this quarter. The main contributor to the rise is medical and hospital services (+1.4%).

    Furnishings, Household Equipment and Services Group (-0.8%)

    The main contributor to the fall in the furnishings, household equipment and services group this quarter is household textiles (-5.7%) due to ongoing competition and continued discounting activity in the retail industry. The fall was partially offset by a rise in child care (+1.1%).

    Over the last twelve months, the furnishings, household equipment and services group fell 0.8%.

    In seasonally adjusted terms, the furnishings, household equipment and services group fell 0.4% this quarter.

    Communication Group (-1.3%)

    The main contributor to the fall in the communication group this quarter is telecommunication equipment and services (-1.4%). The fall was partially offset by a rise in postal services (+1.7%).

    Over the last twelve months, the communication group fell 3.4%.

    The communication group is not seasonally adjusted.

    International Trade Exposure – Tradables and NonTradables

    The tradables component of the All groups CPI rose 0.5% in the December quarter 2017. The tradable goods component rose 0.7% mainly due to automotive fuel (+10.4%) and fruit (+9.3%). The tradable services component fell 1.7% due to international holiday travel and accommodation (-1.7%).

    The non-tradables component of the All groups CPI rose 0.8% in the December quarter 2017. The non-tradable goods component rose 1.4%, mainly due to tobacco (+8.5%) and new dwelling purchase by owner-occupiers (+0.6%). The non-tradable services component rose 0.4%, mainly due to domestic holiday travel and accommodation (+6.3%) and insurance (+1.8%).

    Over the last twelve months the tradables component fell 0.3% and the non-tradables component rose 3.1%.

    In seasonally adjusted terms, the tradables component of the All groups CPI rose 0.6% while the non-tradables component rose 0.7%.

    Seasonally Adjusted Analytical Series

    The All groups CPI seasonally adjusted rose 0.6% this quarter, compared to the original All groups CPI which recorded a rise of 0.6%.

    The trimmed mean rose 0.4% this quarter, compared to a rise of 0.4% in the September quarter 2017. Over the last twelve months, the trimmed mean rose 1.8%, compared to a rise of 1.8% over the twelve months to the September quarter 2017.

    The weighted median rose 0.4% this quarter, compared to a revised rise of 0.4% in the September quarter 2017. Over the last twelve months, the weighted median rose 2.0%, compared to a rise of 1.9% over the twelve months to the September quarter 2017.

    Capital Cities Comparison

    At the All groups level, the CPI rose in all of the eight capital cities, with Hobart recording the largest movement.

    The transport group (+2.4%) is the most significant positive contributor to the All groups quarterly movement, with rises across all eight capital cities. This is driven by automotive fuel (+10.4%), due to increases in world oil prices.

    The alcohol and tobacco group (+3.2%) is the second most significant positive contributor to the All groups quarterly movement, with rises across all eight capital cities. This is driven by a rise in tobacco (+8.5%), due to the flow on effects of the federal excise tax increase of 12.5% and the further increase based on Average Weekly Ordinary Time Earnings (AWOTE) effective 1 September 2017.

    The food and non-alcoholic beverages group (+1.0%) is the third most significant positive contributor to the All groups quarterly movement, with rises in all eight capital cities. The rise is driven by fruits (+9.3%), due to rises for berries, particularly strawberries, and grapes.

    The most significant offsetting negative contributor to the All groups quarterly movement is the furnishings, household equipment and services group (-0.8%), with falls across all eight capital cities. The fall is driven by household textiles (-5.7%) due to ongoing competition and continued discounting activity in the retail industry.

    Over the last twelve months to December quarter 2017, the All groups CPI (+1.9%) has risen across all eight capital cities, with Adelaide (+2.3%), Sydney (+2.2%) , Melbourne (+2.2%) and Canberra (+2.2%) recording the largest movements.

    Australian Bureau of Statistics, “6401.0 – Consumer Price Index, Australia, Dec 2017“, 31 Jan 2018 More

    flag_europe EU: Euro Area Unemployment. Dec 2017

    Press Release Extract [eu_ue]

    The euro area (EA19) seasonally-adjusted unemployment rate was 8.7% in December 2017, stable compared to November 2017 and down from 9.7% in December 2016. This remains the lowest rate recorded in the euro area since January 2009. The EU28 unemployment rate was 7.3% in December 2017, stable compared to November 2017 and down from 8.2% in December 2016. This remains the lowest rate recorded in the EU28 since October 2008. These figures are published by Eurostat, the statistical office of the European Union.

    eu_ue_20180131

    Eurostat estimates that 17.961 million men and women in the EU28, of whom 14.137 million in the euro area, were unemployed in December 2017. Compared with November 2017, the number of persons unemployed decreased by 165 000 in the EU28 and by 134 000 in the euro area. Compared with December 2016, unemployment fell by 2.066 million in the EU28 and by 1.536 million in the euro area.

    Member States

    Among the Member States, the lowest unemployment rates in December 2017 were recorded in the Czech Republic (2.3%), Malta and Germany (both 3.6%). The highest unemployment rates were observed in Greece (20.7% in October 2017) and Spain (16.4%).

    eu_ue_states_20180131

    Compared with a year ago, the unemployment rate fell in all Member States for which data is comparable over time except in Finland where it remained stable. The largest decreases were registered in Greece (from 23.3% to 20.7% between October 2016 and October 2017), Croatia (from 12.5% to 10.0%), Portugal (from 10.2% to 7.8%) and Spain (from 18.5% to 16.4%).

    In December 2017, the unemployment rate in the United States was 4.1%, stable compared to November 2017 and down from 4.7% in December 2016.

    Youth unemployment

    In December 2017, 3.654 million young persons (under 25) were unemployed in the EU28, of whom 2.574 million were in the euro area. Compared with December 2016, youth unemployment decreased by 411 000 in the EU28 and by 301 000 in the euro area. In December 2017, the youth unemployment rate was 16.1% in the EU28 and 17.9% in the euro area, compared with 18.0% and 20.3% respectively in December 2016. In December 2017, the lowest rates were observed in the Czech Republic (4.9%), Germany (6.6%) and Estonia (6.8% in November 2017), while the highest were recorded in Greece (40.8% in October 2017), Spain (36.8%) and Italy (32.2%).

    Eurostat, “December 2017: Euro area unemployment at 8.7%, EU28 at 7.3%“, 31 Jan 2018 More

    flag_europe EU: Euro Area Annual Inflation. Dec 2017

    Press Release Extract [eu_cpi]

    Euro area annual inflation is expected to be 1.3% in January 2018, down from 1.4% in December 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 January (2.1%, compared with 2.9% in December), followed by food, alcohol & tobacco (1.9%, compared with 2.1% in December), services (1.2%, stable compared with December) and non-energy industrial goods (0.6%, compared with 0.5% in December).

    Eurostat, “Flash estimate – January 2018, Euro area annual inflation down to 1.3% “, 31 Jan 2018 More

    flag_usa US: ADP NonFarm Employment. Jan 2018

    Press Release Extract [us_adp]

    Private sector employment increased by 234,000 jobs from December to January according to the January ADP National Employment Report®

    us_adp_20180131

    ADP Research Institute, “ADP National Employment Report: Private Sector Employment Increased by 234,000 Jobs in January“, 29 Jan 2018 (08:30) More

    flag_usa US: Employment Cost Index. Q4/2017

    Press Release Extract [us_eci]

    Compensation costs for civilian workers increased 0.6 percent, seasonally adjusted, for the 3-month period ending in December 2017, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.5 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.5 percent.

    Civilian Workers

    Compensation costs for civilian workers increased 2.6 percent for the 12-month period ending in December 2017. In December 2016, compensation costs increased 2.2 percent. Wages and salaries increased 2.5 percent for the 12-month period ending in December 2017 and increased 2.3 percent for the 12-month period ending in December 2016. Benefit costs increased 2.5 percent for the 12-month period ending in December 2017. In December 2016, the increase was 2.1 percent.

    Private Industry Workers

    Compensation costs for private industry workers increased 2.6 percent over the year. In December 2016, the increase was 2.2 percent. Wages and salaries increased 2.8 percent for the current 12- month period, a larger increase than the December 2016 increase of 2.3 percent. The cost of benefits rose 2.3 percent for the 12-month period ending in December 2017, higher than the 1.8 percent increase in December 2016.

    Employer costs for health benefits increased 1.1 percent for the 12-month period ending in December 2017.

    Among occupational groups, compensation cost increases for private industry workers for the 12- month period ending in December 2017 ranged from 2.4 percent for management, professional, and related occupations to 3.1 percent for production, transportation, and material moving occupations.

    Among industry supersectors, compensation cost increases for private industry workers for the 12- month period ending in December 2017 ranged from 2.0 percent for education and health services and financial activities to 3.6 percent for leisure and hospitality.

    State and Local Government

    Compensation costs for state and local government workers increased 2.5 percent for the 12-month period ending in December 2017. In December 2016, the increase was 2.4 percent. Wages and salaries increased 2.1 percent for the 12- month period ending in December 2017, the same as the December 2016 increase. Benefit costs increased 3.2 percent for the 12-month period ending in December 2017. The prior year’s increase was 3.1 percent.

    Bureau of Labor Statistics, “Employment Cost Index. Dec 2017“, 29 Jan 2018 (08:30) More

    flag_usa US: Pending Home Sales. Dec 2018

    Press Release Extract [us_housing]

    Pending home sales were up slightly in December for the third consecutive month, according to the National Association of Realtors®. In 2018, existing-home sales and price growth are forecast to moderate, primarily because of the new tax law’s expected impact in high-cost housing markets.

    The Pending Home Sales Index, a forward-looking indicator based on contract signings, moved higher 0.5 percent to 110.1 in December from an upwardly revised 109.6 in November. With last month’s modest increase, the index is now 0.5 percent above a year ago.

    Lawrence Yun, NAR chief economist, says pending sales edged up in December and reached their highest level since last March. “Another month of modest increases in contract activity is evidence that the housing market has a small trace of momentum at the start of 2018,” he said. “Jobs are plentiful, wages are finally climbing and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search now.”

    Added Yun, “Sadly, these positive indicators may not lead to a stronger sales pace. Buyers throughout the country continue to be hamstrung by record low supply levels that are pushing up prices — especially at the lower end of the market.”

    The uninterrupted supply and demand imbalances throughout the country fueled price appreciation to 5.8 percent in 2017, which was the sixth straight year of gains at or above 5 percent1. While tight inventories are still expected to put upward pressure on prices in most areas this year, Yun expects overall price growth to shrink, with some states even experiencing a decline, because of the negative effect the changes to the mortgage interest deduction and state and local deductions under the new tax law.

    “In the short term, the larger paychecks most households will see from the tax cuts may give prospective buyers the ability to save for a larger down payment this year, and the healthy labor economy and job market will continue to boost demand,” said Yun. “However, there’s no doubt the nation’s most expensive markets with high property taxes are going to be adversely impacted by the tax law.”

    Added Yun, “Just how severe is still uncertain, but with homeownership now less incentivized in the tax code, sellers in the upper end of the market may have to adjust their price expectations if they want to trade down or move to less expensive areas. This could in turn lead to both a decrease in sales and home values.”

    After expanding 1.1 percent in 2017 to 5.51 million, Yun does anticipate a slight increase (0.5 percent) in existing sales this year (5.54 million). Single-family housing starts are forecast to jump 13.3 percent to 961,000, which will push new home sales up 15.3 percent to 701,000 (608,000 in 2016).

    The PHSI in the Northeast dipped 5.1 percent to 93.9 in December, and is now 2.7 percent below a year ago. In the Midwest the index decreased 0.3 percent to 105.0 in December, but is still 0.3 percent higher than December 2016.

    Pending home sales in the South grew 2.6 percent to an index of 126.9 in December and are now 4.0 percent higher than last December. The index in the West rose 1.5 percent in December to 101.7, but is still 3.1 percent below a year ago.

    National Association of Realtors, “Pending Home Sales for December 2017“, 29 Jan 2018 (10:00) More

    flag_usa US: Federal Reserve FOMC Monetary Policy

    Press Release Extract [us_fed]

    Federal Funds Rate

    Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate has stayed low. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2 percent. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12-month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

    In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1¼ to 1½ percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

    In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

    Decisions Regarding Monetary Policy Implementation

    The Federal Reserve has made the following decisions to implement the monetary policy stance announced by the Federal Open Market Committee in its statement on January 31, 2018:

    • The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on required and excess reserve balances at 1.50 percent, effective February 1, 2018.
    • As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive:


      “Effective February 1, 2018, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 1¼ to 1½ percent, including overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 1.25 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.

      The Committee directs the Desk to continue rolling over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing during each calendar month that exceeds $12 billion, and to reinvest in agency mortgage-backed securities the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities received during each calendar month that exceeds $8 billion. Small deviations from these amounts for operational reasons are acceptable.

      The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s agency mortgage-backed securities transactions.”

    US Federal Reserve, “FOMC Monetary Policy Statements“, 31 Jan 2018 (14:00) More

    flag_japan Japan update

    Consumer Confidence Index

    1. Consumer Confidence Index, Consumer Perception Indices

    The Consumer Confidence Index (seasonally adjusted series) in January 2018 was 44.7, the same as the previous month.

    The categories of the Consumer Perception Indices (seasonally adjusted series), which are comprised of the Consumer Confidence Index in January are as follows;

    • Overall livelihood: 42.6 (down 0.3 from the previous month)
    • Income growth: 42.9 (down 0.1 from the previous month)
    • Employment:49.7 (up 0.7 from the previous month)
    • Willingness to buy durable goods:43.7 (down 0.1 from the previous month)

    jp_cci_20180131

    2. Price expectations a year ahead

    • The percentage of a group who expect “Go up” in January was 82.4%, an increase of 2.4% points from the previous month.
    • The percentage of a group who expect “stay the same about 0%” in January was 11.5%, a decrease of 1.0% points from the previous month.
    • The percentage of a group who expect “Go down” in January was 3.2%, a decrease of 0.8% points from the previous month.

    jp_ccip_20180131

    Economic and Social Research Institute, Japan Cabinet Office, “Consumer Confidence Survey“, 31 Jan 2018 More

    Currency: USD/JPY

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    flag_china China update

    Manufacturing PMI. Jan 2018

    … Waiting for Press Release …

    National Bureau of Statistics, “Manufacturing PMI. Jan 2018“, 31 Jan 2018 More

    Non-Manufacturing PMI. Jan 2018

    … Waiting for Press Release …

    National Bureau of Statistics, “Non-Manufacturing PMI. Jan 2018“, 31 Jan 2018 More

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    Stockmarket: CSI300

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