Tue 2 Jan 2018


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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 rose on Tuesday in the first session of the new year, pushing the S&P 500 and Nasdaq to record closing highs, as investors were optimistic that 2018 will bring more gains for the market.

    • The S&P 500 index rose 22.18 points, or 0.83%, to 2,695.79 [record high]
    • The Dow Jones Industrial Average rose 104.79 points, or 0.42%, to 24,824.01
    • The Nasdaq Composite index rose 103.51 points, or 1.5%, to 7,006.90 [record high]
    • Advancing issues outnumbered declining ones on the NYSE by a 1.64-to-1 ratio; on Nasdaq, a 2.01-to-1 ratio favored advancers.

    Gains were driven the most by technology, but consumer discretionary, healthcare, energy and materials sectors were also up more than 1% each.

    Apple, Facebook, Alphabet and Microsoft pulled the technology index up 1.4%, following a 37% surge in 2017 that made it the best-performing S&P sector.

    Major stock indexes had closed out 2017 with their best performances since 2013. Many investors say the rally could continue this year with help from the recently approved U.S. tax overhaul that is anticipated to boost profits as well as the economy.

    “We’re off to the races once again. I don’t expect the kind of moves we saw last year. But as long as monetary policy stays the way it is … my view is stocks are going to have a decent year. And fiscal policy has become stimulative, as well, given the tax bill,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

    “Our best guess is the first quarter or half of the year can be OK as a continuation of last year,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. But, he said, there are risks ahead. “Valuations are still stretched, interest rates are still rising, and those will provide headwinds to the market at some point.”

    The S&P consumer discretionary index was up 1.5%, helped by a gain in Amazon.com of 1.7%.

    J.C. Penney, Nordstrom and Kohl’s climbed after a bullish Citigroup note on the retail sector detailed benefits from the corporate tax cuts.

    Energy shares were up even though oil prices dipped. Oil hovered near mid-2015 highs amid large anti-government rallies in major exporter Iran and ongoing supply cuts led by OPEC and Russia. The S&P energy index rose 1.8%.

    Shares of casino operators Wynn Resorts and Melco Resorts & Entertainment were down after a report showed lower-than-expected rise in Macau gambling revenue in Dec 2017.

    Abbott Labs jumped 3% and hit an intraday record of $59.20 after two brokerages upgraded the company’s stock to “overweight.”

    Shares of Allstate were down 2.7% on a brokerage downgrade.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) 2,695.79 +0.82% 2,238.83 +0.82%
    DJIA INDU 24,824.01 +0.42% 19,762.60 +0.42%
    NASDAQ IXIC 7,006.90 +1.49% 5,383.12 +1.49%

    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 3.122 +1.77% 2.105 +1.77%
    Valuation Rate USD/AUD 0.78827 +0.38% 0.72663 +0.38%
    AUD-denominated Index AUD 3.963 +1.38% 2.895 +1.38%

    Portfolio stock prices

    Stock Ticker Today Change 31 Dec 17 YTD
    Alphabet A GOOGL $1,073.21 +1.91% $1,053.00 +1.91%
    Alphabet C GOOG $1,065.00 +1.85% $1,045.65 +1.85%
    Apple AAPL $172.26 +1.79% $169.23 +1.79%
    Amazon AMZN $1,189.01 +1.66% $1,169.54 +1.66%
    Ebay EBAY $38.06 +0.79% $37.76 +0.79%
    Facebook FB $181.42 +2.81% $176.46 +2.81%
    PayPal PYPL $73.84 +0.31% $73.61 +0.31%
    Twitter TWTR $24.51 +2.08% $24.01 +2.08%
    Visa V $114.51 +0.42% $114.02 +0.42%
    VMware VMW $127.29 +1.57% $125.32 +1.57%

    FX: USD/AUD

    USD

    The EUR rose 0.5% to USD 1.2069 in early trading on Tuesday, its strongest level since Dec 2014, as the brightening economic outlook in the Euro Area continues after latest data showed the bloc’s manufacturing sector grew the most in 20 years. Historically, the Euro Dollar Exchange Rate – EUR/USD reached an all time high of 1.87 in Jul 1973 and a record low of 0.70 in Feb 1985. The EUR was only introduced as a currency on 1 Jan 1999. However, synthetic historical prices going back much further can be modelled if we consider a weighted average of the previous currencies.TradingEconomics

    The Bloomberg Dollar Spot Index (DXY) fell 0.23%. It was hampered by market expectations of a slower pace of interest rate increases by the Federal Reserve amid a tepid U.S. inflation picture. The USD had already hit a 3-month low on Friday, bringing its losses for 2017 to 9.8%, its worst performance since 2003.

    Other currencies gained:

    • The EUR rose 0.3% to USD 1.2044 and hit a 4-month high on Tuesday after data showed that euro zone manufacturers ramped up activity last month at the fastest pace in more than two decades.
    • The JPY strengthened 0.28% to 112.35 per USD
    • The GBP was last trading at USD 1.3594, up 0.69% on the day.Reuters 14:30

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

    The Bloomberg Dollar Spot Index (DXY) fell 0.5% to 1,153.42, after touching the lowest in 14 weeks.
    The EUR rose 0.4% to the strongest in about 3 years.
    Britain’s GBP rose 0.7% to USD 1.3597, the strongest in almost 15 weeks.
    Japan’s JPY advanced 0.3% to 112.26 per USD, the strongest in almost 5 weeks.

    The backdrop for the USD is just not very good. The global reflation trade is progressing along and the backdrop is that we’re rotating into a regime shift and that comes with a changing backdrop for capital flows,” said Mark McCormick, head of FX strategy for North America for Toronto Dominion Bank.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 15:50 ET

    • NYMEX West Texas Intermediate (WTI): $60.39/barrel -0.05% Chart
    • ICE (London) Brent North Sea Crude: $66.59/barrel -0.42% Chart
    • NYMEX Natural gas futures: $3.04/MMBTU +2.95% Chart

    flag_australia AU: CBA Manufacturing PMI. Dec 2017

    Press Release Extract [au_pmi]

    Accelerated growth of output and a sharper increase in new orders underpinned the latest marked expansion in the Australian manufacturing sector. Capacity pressures were tested, with backlogs of work rising at the steepest rate seen in the survey history. Firms responded to this by raising employment at a relatively strong pace. In turn, business confidence strengthened to a five-month high.

    au_pmi_20180102

    The headline index from the survey, the seasonally adjusted Commonwealth Bank Manufacturing Purchasing Managers’ Index™ (PMI®) – a composite indicator designed to measure the performance of the manufacturing economy – rose to 57.1 in December, from 56.3 in November, the highest reading in one year. Moreover, the PMI averaged 56.3 in the final quarter of 2017, the greatest figure since Q4 2016.

    New orders placed with Australian manufacturers increased sharply and at the quickest pace in 13 months during December. Panellists indicated strong demand from both new and existing clients. Furthermore, there were reports of new business inflows from Asia as well as New Zealand and Papua New Guinea. New export orders rose markedly and at the fastest pace since April. Consequently, greater business opportunities supported the sharpest upturn in production since June.

    Faster new business growth contributed to a further rise in outstanding work. In fact, the rate of backlog accumulation was the sharpest seen in the 20-month survey history. This prompted firms to hire more staff to enhance operating capacity. Although job creation eased slightly, it remained relatively strong.

    Purchasing activity was raised during December in line with forecasts of further order book expansions. This also underpinned strong optimism regarding future output, with the level of confidence climbing to a five-month high. Meanwhile, input stocks were accumulated at a solid pace, despite a further lengthening of average lead times. Panellists reported material shortages at some distributors, and slower deliveries from overseas suppliers.

    Input price inflation was driven by vendors raising their list prices and recent Australian dollar weakness. Cost inflation, despite weakening, remained sharp overall. In turn, firms raised their own charges to protect profit margins.

    Commenting on the Commonwealth Bank Manufacturing PMI data, Michael Blythe, Chief Economist at the Commonwealth Bank, said:

    ‘The Australian manufacturing sector ended 2017 on a solid note. Manufacturing activity picked up during the December quarter and prospects for 2018 look bright. Key leading indicators from the survey like employment, new orders and future business expectations are running well above average levels. Capacity constraints are starting to bite. The Backlogs of Work Index is at a record high and the Suppliers’ Delivery Times Index is showing an increasing deterioration.

    These constraints are keeping the demand for labour strong and seeing an increasing resort to overtime. Against this backdrop, the recent turn up in non mining capex is a welcome development’.

    IHS Markit, “Commonwealth Bank Manufacturing PMI®. Dec 2017 “, 2 Jan 2018 More

    flag_europe EU: Manufacturing PMI. Dec 2017

    Press Release Extract [eu_pmi]

    Key findings:

    • Final Eurozone Manufacturing PMI at 60.6 in December (Flash: 60.6, November Final: 60.1)
    • PMI readings at or close to record levels in Germany, Netherlands, Austria and Ireland
    • Business optimism hits series-record high

    eu_pmi_20180102

    eu_pmi2_20180102

    The eurozone manufacturing sector ended 2017 on a high note. Strong rates of expansion in output, new orders and employment pushed the final IHS Markit Eurozone Manufacturing PMI® to 60.6 in December, its best level since the survey began in mid-1997. The PMI was up from 60.1 in November and identical to the earlier flash estimate.

    The expansion was led by the investment goods sector, where the pace of growth signalled by the PMI was also a record high. The rate of improvement in the intermediate goods sector remained close to November’s survey-record. Growth was slower in the consumer goods sector by comparison, but remained solid and well above its long-run trend.

    National data signalled further broad-based growth, with business conditions improving across all of the countries covered. PMI readings were at survey- record highs in Austria, Germany and Ireland, and remained close to November’s series peak in the Netherlands. Rates of expansion in France and Greece were the fastest for over 17 and nine years respectively. Growth also remained robust, albeit slower, in Italy and Spain.

    Underpinning the strong headline PMI were near- record increases in euro area manufacturing output and new orders, both of which rose to the greatest extents since April 2000. Domestic market conditions remained robust, while growth of new export business was only a tick below November’s survey high. New export orders rose at, or close to, record rates in Austria, Germany and the Netherlands and remained solid in of the all other nations covered.

    The outlook for the eurozone manufacturing sector remained positive at the end of 2017. Business optimism rose to its highest level since the series began in July 2012. Confidence improved in almost all of the nations covered (the exceptions being Italy and the Netherlands) and was at (in the cases of France, Austria and Greece) or near to (Germany) record highs in several countries.

    Robust intakes of new business tested capacity, leading to a further marked increase in backlogs of work. Outstanding business increased at the sharpest pace in the series history, led by marked gains in Germany, France and Austria. This in turn supported a joint-survey record increase in euro area manufacturing employment.

    Jobs growth accelerated in four of the nations covered by the survey – France, the Netherlands, Austria and Ireland. The latter three all saw series- record increases, while job creation in France was at a 206-month high. Germany, meanwhile, saw staffing levels rise at one of the quickest rates on record.

    December saw rates of inflation in output prices and input costs remain elevated, despite slowing slightly since November. Part of the increase in purchase prices reflected ongoing supply chain pressures, with average vendor lead times lengthening to one of the greatest extents on record.

    All of the nations covered reported increases in input costs, among which Austria, Ireland and Greece saw stronger rates of inflation. Only Greece reported a decrease in selling prices during December, while Ireland was the only nation to register a faster rate of increase compared to the prior month.

    Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

    ‘The eurozone manufacturing boom gained further momentum in December, rounding off the best year on record and setting the scene for a strong start to 2018. The final PMI was in line with the earlier flash number, confirming a record monthly improvement in business conditions at the end of 2017. Forward- looking indicators bode well for the New Year: new orders rose at a near-record pace, while purchasing growth hit a new peak as firms readied themselves for higher production. Meanwhile, job creation was maintained at November’s record pace.

    ‘Perhaps most encouraging of all is the extent to which the strongest upturn is being recorded for producers of investment goods such as plant and machinery, which highlights the upswing in business investment. Higher investment should help boost productivity and profits, and therefore enhance the sustainability of the upturn.

    ‘The average PMI reading for 2017 is the highest annual trend in the survey’s two-decade history, with eurozone countries dominating the worldwide PMI growth rankings for much of 2017. Record years were seen in Germany, Austria, the Netherlands and Ireland, while Italy and France had their best annual performances since 2000. Spanish manufacturing had its best year since 2006, while Greece saw the strongest performance since 2008.

    ‘The growth spurt means many forecasters, notably the ECB, have revised their euro area growth projections for 2018 higher. The missing element has been sustained higher inflation, but the near- record incidences of supply chain delays seen towards the end of 2017 indicate that pricing power is shifting from the buyer to the seller, suggesting upward price pressures are gradually returning.’

    IHS Markit, “IHS Markit Eurozone Manufacturing PMI® – final data: Eurozone Manufacturing PMI ends 2017 at series-record high“, 2 Jan 2018 More

    flag_usa US: Manufacturing PMI. Dec 2017

    Press Release Extract [us_pmi]

    Key findings:

    • Output expands at quickest pace in 11 months…
    • …supported by steep increase in total new work
    • Rate of job creation fastest since September 2014

    us_pmi_20180102

    December data indicated a marked improvement in US manufacturing operating conditions. The latest upturn was supported by faster increases in output and new orders, amid reports of greater client demand. In line with stronger production growth, employment rose further and at the fastest pace since September 2014. Backlogs meanwhile increased at the quickest rate since October 2015 to indicate ongoing capacity pressures. Supply chain delays and increased global demand for inputs pushed costs up further, with the rate of cost inflation remaining sharp overall. Charge inflation, however, softened. Business confidence remained robust, driven by more favourable demand conditions.

    The seasonally adjusted IHS Markit final US Manufacturing Purchasing Managers’ IndexTM (PMITM) registered 55.1 in December, up from 53.9 in November. The latest index reading was the highest since March 2015 and signalled a solid improvement in the health of the sector. December data also rounded off the strongest quarterly performance since the start of 2015.

    Output at manufacturers expanded at a steep pace in December, with growth reaching an eleven-month high. Panellists attributed greater production to more favourable demand conditions and increased new order volumes.

    New business received by manufacturers continued to rise in December, with the rate of expansion accelerating to a ten-month high. Anecdotal evidence linked increases to greater demand from new and existing clients. Exports sales, however, grew at a marginal pace.

    In line with greater production requirements, firms added to their payrolls and at the fastest rate since September 2014. Increased capacity pressures were also reflected in backlog accumulation. The upturn in outstanding business accelerated and was the quickest since October 2015.

    Meanwhile, input price pressures intensified with the rate of cost inflation accelerating for the second consecutive month. Furthermore, the marked rate of increase was the second-fastest since December 2013. Panellists linked rises to higher raw material prices, which partly stemmed from supplier delays. Meanwhile, factory gate charges rose solidly, despite the rate of inflation softening since November.

    Greater production requirements also impacted purchasing activity which increased at the fastest pace since February. As a result, pre-production stocks also expanded at the end of the year.

    Business confidence remained robust in December, with manufacturers reporting the second-highest level of optimism since January 2016. Positive output expectations were linked to forecasts of greater client demand.

    Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

    ‘US manufacturers ended 2017 on a high. Output growth accelerated to its fastest since the start of the year on the back of a marked upswing in demand as the year came to a close.

    ‘Prospects for the upturn also look good. With business optimism about the year ahead running at its highest for two years in the closing months of 2017, companies are clearly expecting to be busier in 2018.

    ‘The upbeat mood is underscored by an increased appetite to hire new staff, with the survey indicating that factory payroll numbers are rising at a rate not seen for over three years.

    ‘Indicators of backlogs of work and input buying likewise suggest production will continue to grow at a solid pace as we move into 2018. However, the strengthening of demand for raw materials has led to supply chain delays, which have in turn been increasingly linked to higher prices as a sellers’ market develops. Input price inflation accelerated to one of the highest rates seen over the past five years in December, as suppliers hiked prices for a wide range of inputs.

    ‘The combination of strengthening growth, a solid labour market and rising prices will add to expectations that the Fed will remain on track for another rate hike in the near future, with March looking a likely possibility.’

    IHS Markit, “IHS Markit U.S. Manufacturing PMI™ – final data: December PMI signals strongest manufacturing growth since March 2015“, 2 Jan 2018 (09:45) More

    Global: Manufacturing PMI. Dec 2017

    Press Release Extract [global_pmi]

    The upturn in the global manufacturing economy gathered further pace at the end of 2017. Rates of expansion in output and new orders accelerated to the best seen since February 2011, leading to improved jobs growth and rising business optimism. Price inflation also eased slightly after strengthening in recent months.

    global_pmi2_20180102

    global_pmi2_20180102

    The J.P.Morgan Global Manufacturing PMI™ rose to a near seven-year high of 54.5 in December, up from 54.1 in November. The PMI has signalled expansion in each of the past 22 months.

    Growth was registered across the consumer, intermediate and investment goods sectors in December, with rates of expansion accelerating in all three. The strongest pace of improvement was in the intermediate goods category, followed closely by investment goods, with PMI readings at eighty-two month highs in both cases. Growth was mild in comparison in the consumer goods sector, despite its PMI ticking up to a four-month high.

    National PMI data signalled that growth was again faster (on average) in developed nations compared to emerging markets. The euro area remained the strongest performing region, with its PMI hitting a series-record high. Rates of expansion improved in the US (33-month high) and Japan, but eased in the UK. PMI readings hit a three-month high in China, surged to a five-year high in India, five-month high in Russia and remained in expansion territory in Brazil.

    December saw global manufacturing production scaled up in response to rising new order inflows, including the steepest gains in new export business since February 2011. These in turn tested capacity – as highlighted by a solid increase in backlogs of work – and encouraged faster job creation (the quickest since March 2011). Among the largest nations covered, employment rose in the US, the euro area, Japan, the UK, India and Brazil, but fell in China and South Korea.

    Upward price pressures moderated in December, with rates of inflation in input costs and output charges easing. Increases in both price measures remained slightly higher (on average) in developed nations than emerging markets.

    Commenting on the survey, David Hensley, Director of Global Economic Coordination at J.P.Morgan, said:

    ‘The performance of the global manufacturing sector continued to strengthen at the end of the year, with growth of output, new orders and employment reaching levels last achieved in early-2011. Improved inflows of new business, rising backlogs of work and improved business optimism all point to this robust upswing in output growth being carried over into 2018.’

    J.P.Morgan and IHS Markit in association with ISM and IFPSM, “J.P.Morgan Global Manufacturing PMI™: Global PMI ends 2017 at near seven-year high“, 2 Jan 2018 (11:00) More

    flag_japan Japan update

    Currency: USD/JPY

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

    Stockmarket: Nikkei 225

    Japan’s stock market is closed today.

    flag_china China update

    Caixin China General Manufacturing PMI™

    Press Release Extract [cn_pmi]

    Key Points

    • Stronger increases in output and new orders
    • Employment declines only slightly
    • Confidence towards the year-ahead remains historically weak

    cn_pmi_20180102

    The headline PMI pointed to a stronger improvement in Chinese manufacturing operating conditions at the end of 2017. Latest data highlighted faster growth of output, total new work and export sales. Greater production led to a further rise in buying activity, with the rate of growth quickening to a four-month high. At the same time, capacity pressures continued to build, with backlogs rising amid a further decline in workforce numbers (albeit marginal). Inflationary pressures remained elevated, with input costs rising sharply and prices charged increasing at a solid pace.

    Optimism towards the business outlook picked up slightly from November’s joint-record low, but remained weak in the context of historical data.
    The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted 51.5 in December, up from 50.8 in November, to signal a further improvement in the health of the sector. Though modest, the rate of strengthening was the highest seen for four months.

    Manufacturing production continued to increase across China at the end of 2017. Notably, the rate of expansion quickened to a three-month record. Improved sales and stronger underlying market demand were cited as key sources of growth in December. Furthermore, total new orders expanded at the steepest pace since August, with export sales also rising at a faster pace at the end of the year.

    Despite stronger increases in output and new work, manufacturers continued to shed staff in December. That said, the rate of job losses was the weakest seen for nine months and marginal. Nonetheless, lower staff numbers contributed to another rise in outstanding business, with the rate of accumulation quickening slightly since November.

    Higher production prompted firms to raise their buying activity for the seventh month running. Moreover, the rate of growth was the fastest seen since August. However, stock shortages at suppliers and delays linked to environmental inspections led to a further lengthening of average delivery times.

    Firms commented on using existing inventories of finished items to satisfy new orders, which led to a slight reduction in inventories of finished goods. Stocks of purchases also fell in December, albeit marginally.

    Average input costs continued to rise sharply, despite the rate of inflation softening to a four-month low. Anecdotal evidence indicated that higher costs for a variety of raw materials drove up cost burdens. Consequently, firms increased their selling prices solidly.

    Sentiment towards the 12-month business outlook picked up slightly from November’s joint-record low, but remained well below the historical series average. According to panellists, forecasts of relatively subdued client demand and changes to national policies had dampened confidence at the end of 2017.

    Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

    ‘The Caixin China General Manufacturing Purchasing Managers’ Index rose to 51.5 in December, the highest since August. Stronger increases in both output and new orders were seen in December compared to the previous month. Growth in input prices eased to a four-month low, while growth in output prices slowed marginally. Stocks of finished goods shrank again in December, and stocks of purchases declined slightly. Manufacturing operating conditions improved in December, reinforcing the notion that economic growth has stabilized in 2017 and has even performed better than expected. However, we should not underestimate downward pressure on growth next year due to tightening monetary policy and strengthening oversight on local government financing.’“

    IHS Markit, “Caixin China General Manufacturing PMI™“, 2 Jan 2018 More

    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

    The Shanghai Composite index closed up 42 points, or 1.2%, at 3,348 on Tuesday after latest data showed growth in China’s manufacturing sector unexpectedly hit a four-month high in Dec 2017 due to a surge in new orders. The largest percentage gainers in the index were Fujian Cement (10%), Shandong Lubei Chemical (10%) and China Jushi (10%). Historically, the China Shanghai Composite Stock Market Index reached an all time high of 6092.06 in Oct 2007 and a record low of 99.98 in Dec 1990.TradingEconomics