Tue 16 Jan 2018

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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 paused its rally on Tuesday, weighed down by weakness in General Electric shares and as lower oil prices dragged down the energy sector.

    • The S&P 500 index fell 9.82 points, or 0.35%, to 2,776.42
    • The Dow Jones Industrial Average fell 10.33 points, or 0.04%, to 25,792.86
    • The Nasdaq Composite index dropped 37.38 points, or 0.51%, to 7,223.69
    • Declining issues outnumbered advancing ones on the NYSE by a 2.04-to-1 ratio; on Nasdaq, a 2.18-to-1 ratio favored decliners.
    • The S&P 500 posted 170 new 52-week highs and six new lows; the Nasdaq Composite recorded 243 new highs and 29 new lows.
    • Volume on U.S. exchanges was 8.30 billion shares, compared to the 6.48 billion average over the last 20 trading days.
    • The CBOE Volatility index, a widely followed measure of market anxiety, rose to a more than 1-month high of 11.66.

    Earlier on Tuesday, the Dow Jones Industrial Average had broken above the 26,000 mark for the first time as Q4/2017 earnings season got off to a strong start following upbeat results from UnitedHealth and Citigroup. Industrials and materials were the other major laggards on the S&P, down 0.9% and 1.2%, respectively.

    “Lower energy prices are taking us down a little bit,” said Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute in Winston-Salem, North Carolina. But, she added, “investors are continuing to move into equities as they see returns. It’s feeding on itself, becoming a virtuous cycle, enticing more people in.”

    UnitedHealth rose 1.9% after the largest U.S. health insurer reported results that beat estimates and raised its 2018 earnings outlook.

    General Electric fell 2.9% after raising the prospect of breaking itself up and announcing more than $11 billion in charges from its long-term care insurance portfolio and new U.S. tax laws.

    The energy sector fell 1.2% as Brent crude oil shed some of its recent gains, falling nearly $1 per barrel.

    Merck surged 5.8% after early results from a key study showed its blockbuster drug Keytruda and two chemotherapy medicines helped lung cancer patients live longer and stopped the disease from advancing.

    Viacom fell 7.0% after sources told Reuters CBS Corp and the company were not in active merger discussions.

    You’d typically see and expect the markets to interpret that in a positive manner, but a lot of indices have moved back. What’s held them back seems to be company-specific,” said Shawn Cruz, senior trading specialist at TD Ameritrade in Chicago, making reference to General Electric. Cruz added that the Federal Reserve Bank of New York’s business conditions index, which came in slightly below expectations on Tuesday, may have also contributed to Wall Street’s dip.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) 2,776.42 -0.36% 2,673.61 +3.84%
    DJIA INDU 25,792.86 -0.05% 24,719.22 +4.34%
    NASDAQ IXIC 7,223.69 -0.52% 6,903.39 +4.63%

    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 3.226 -0.38% 3.068 +5.17%
    Valuation Rate USD/AUD 0.80109 +0.61% 0.78528 +2.01%
    AUD-denominated Index AUD 4.030 -0.98% 3.909 +3.11%

    Portfolio stock prices

    :-) Alphabet closed on a record high of $1,130.70, up a smidgin on Friday’s record $1,130.65
    :-) Visa closed on a record high of $120.39, up 0.25% on Friday’s record $120.09

    Stock Ticker Today Change 31 Dec 17 YTD
    Alphabet A GOOGL $1,130.70 +0.004% $1,053 +7.37%
    Alphabet C GOOG $1,121.76 -0.05% $1,045.65 +7.27%
    Apple AAPL $176.19 -0.51% $169.23 +4.11%
    Amazon AMZN $1304.86 -0.03% $1169.54 +11.57%
    Ebay EBAY $37.66 -0.95% $37.76 -0.27%
    Facebook FB $178.39 -0.55% $176.46 +1.09%
    PayPal PYPL $80.42 -0.15% $73.61 +9.25%
    Twitter TWTR $24.66 -2.96% $24.01 +2.70%
    Visa V $120.39 +0.24% $114.02 +5.58%
    VMware VMW $132.14 -0.30% $125.32 +5.44%



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

    The Bloomberg Dollar Spot Index (DXY) was essentially unchanged, erasing an earlier advance.
    The euro was flat at USD 1.2264.
    Britain’s GBP was little changed at USD 1.3794.
    Japan’s JPY added 0.1% to 110.39 per USD.


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

    Oil and Gas Futures

    Surging shale production is poised to push U.S. oil output to more than 10 million barrels per day – toppling a record set in 1970 and crossing a threshold few could have imagined even a decade ago.

    And this new record, expected within days, likely won’t last long. The U.S. government forecasts that the nation’s production will climb to 11 million barrels per day by late 2019, a level that would rival Russia, the world’s top producer.

    The economic and political impacts of soaring U.S. output are breathtaking, cutting the nation’s oil imports by a fifth over a decade, providing high-paying jobs in rural communities and lowering consumer prices for domestic gasoline by 37% from a 2008 peak.

    Fears of dire energy shortages that gripped the country in the 1970s have been replaced by a presidential policy of global “energy dominance.”

    “It has had incredibly positive impacts for the U.S. economy, for the workforce and even our reduced carbon footprint” as shale natural gas has displaced coal at power plants, said John England, head of consultancy Deloitte’s U.S. energy and resources practice.

    U.S. energy exports now compete with Middle East oil for buyers in Asia. Daily trading volumes of U.S. oil futures contracts have more doubled in the past decade, averaging more than 1.2 billion barrels per day in 2017, according to exchange operator CME Group.

    The U.S. oil price benchmark, West Texas Intermediate crude, is now watched closely worldwide by foreign customers of U.S. gasoline, diesel and crude.

    The question of whether the shale sector can continue at this pace remains an open debate. The rapid growth has stirred concerns that the industry is already peaking and that production forecasts are too optimistic.

    The costs of labor and contracted services have recently risen sharply in the most active oilfields; drillable land prices have soared; and some shale financiers are calling on producers to focus on improving short-term returns rather than expanding drilling.

    But U.S. producers have already far outpaced expectations and overcome serious challenges, including the recent effort by the Organization of the Petroleum Exporting Countries (OPEC) to sink shale firms by flooding global markets with oil.

    The cartel of oil-producing nations backed down in November 2016 and enacted production cuts amid pressure from their own members over low prices – which had plunged to below $27 earlier that year from more than $100/barrel in 2014.

    Shale producers won the price war through aggressive cost-cutting and rapid advances in drilling technology. Oil now trades above $64/barrel, enough for many U.S. producers to finance both expanded drilling and dividends for shareholders.

    Efficiencies spurred by the battle with OPEC – including faster drilling, better well designs and more fracking – helped U.S. firms produce enough oil to successfully lobby for the repeal of a ban on oil exports. In late 2015, Congress overturned the prohibition it had imposed following OPEC’s 1973 embargo.

    The United States now exports up to 1.7 million barrels per day of crude, and this year will have the capacity to export 3.8 billion cubic feet per day of natural gas. Terminals conceived for importing liquefied natural gas have now been overhauled to allow exports.

    That export demand, along with surging production in remote locations such as West Texas and North Dakota, has led to a boom in U.S. pipeline construction. Firms including Kinder Morgan and Enterprise Products Partners added 26,000 miles of liquids pipelines in the five years between 2012 and 2016, according to the Pipeline and Hazardous Materials Safety Administration. Several more multi-billion-dollar pipeline projects are on the drawing board.

    U.S. drillers say they can supply plenty more.

    “We continue to see and drive improvements” in drilling speed and efficiency, said Mathias Schlecht, a technology vice president at Baker Hughes, General Electric Co’s oilfield services business.

    New wells can be drilled in as little as a week, he said. A few years ago, it could take up to a month.

    The next phase of shale output growth depends on techniques to squeeze more oil from each well. Companies are now putting sensors on drill bits to more precisely access oil deposits, using artificial intelligence and remote operators to get the most out of equipment and trained engineers.

    As expanded investments push more producers to add wells in less productive regions, technology will help make those plays more profitable, said Kate Richard, chief executive of Warwick Energy Group, which owns interests in more than 5,000 U.S. wells.

    In an interview, she estimated about a third of the money from private equity investments in shale will be used to wring more oil from overlooked regions.

    Higher prices – up about $10/barrel in the last 2 months – also may encourage the industry to work through a backlog of some 7,300 drilled-but-uncompleted shale wells that have built up because of crew and equipment shortages.

    The higher prices have suppliers that provide hydraulic fracturing services, such as Keane Group and Liberty Oilfield Services, buying expensive new equipment in anticipation of more work.

    U.S. fracking service revenues are expected to grow by 20% this year, approaching a record of $29 billion set in 2014, according to oilfield research firm Spears & Associates.

    The shale revolution initially upended the traditional industry hierarchy, making billionaires out of wildcatters such as Harold Hamm, who founded Continental Resources, and the late Aubrey McClendon of Chesapeake Energy.

    Top U.S. oil firms such as Exxon Mobil and Chevron a decade ago turned much of their focus to foreign fields, leaving smaller firms to develop U.S. shale. Now they’re back, buying shale companies, land and shifting more investments back home from overseas.

    Exxon last year agreed to pay up to $6.6 billion for land in the Permian basin, the epicenter of U.S. shale. Chevron this year plans to spend $4.3 billion on shale development.

    The majors’ shift is driving up costs for labor and drillable land in the region, another boost to wages and wealth in rural areas.

    In the shale industry hub of Midland, Texas, unemployment has fallen to a mere 2.6%, said Willie Taylor, executive director of the Permian Basin Workforce Development Board, a group that helps firms find staff. ‘It was an employer’s market,” he said. “Now it’s more of a job seeker’s market.’

    Companies are now offering signing bonuses to attract workers to West Texas. One oil company flies workers to Midland from Houston weekly to fill a local labor void, he said.Reuters

    Futures prices

    Prices are as at 15:47 ET

    • NYMEX West Texas Intermediate (WTI): $63.71/barrel -0.92% Chart
    • ICE (London) Brent North Sea Crude: $69.20/barrel -1.51% Chart
    • NYMEX Natural gas futures: $3.12/MMBTU -2.53% Chart

    flag_japan Japan update

    Producer Price Index. Dec 2017

    Producer Prices in Japan increased 3.1% in Dec 2017 over Dec 2016, after climbing an upwardly revised 3.6% in Nov 2017. The print was below expectations of 3.2% and was the lowest annual pace in 3 months. The largest increase was observed in petroleum & coal products (14.8% vs 19.3% in Nov 2017), followed by nonferrous metal prices (11.2% vs 17.3%). In contrast, prices fell for production machinery (-0.6%, the same as in Nov 2017), electrical machinery & equipment (-0.5% vs -0.9%), and business oriented machinery (-0.2% compared to 0.2%). On a monthly basis, prices increased 0.2% after rising 0.5% in Nov 2017.

    Producer Prices Change in Japan averaged 1.40% from 1961 until 2017, reaching an all time high of 33.90% in Feb 1974 and a record low of -8.60% in Aug of 2009.TradingEconomics

    Currency: USD/JPY

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

    Stockmarket: Nikkei 225

    n225 movements
    ^ Nikkei 225 movements over the past week Chart: Google Finance

    The Nikkei 225 jumped 237 points or 1% to 23952 on Tuesday, the highest close since 15 Nov 1991 as the JPY retreated slightly against the USD. Exporters, financials and tech shares were among the biggest gainers.

    Historically, the Japan Nikkei 225 Stock Market Index reached an all time high of 38915.87 in Dec 1989 and a record low of 85.25 in Jul 1950.TradingEconomics

    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