Tue 30 Jan 2018


watch Nightly Business Report. watch PBS NewsHour. watch Bloomberg Technology.

In Portfolioticker today

read_this Hey Jarvis, how did we go today?

  • 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 fell for a second straight day on Tuesday, with the Dow registering its biggest 2-day drop since Sep 2016, pressured by healthcare stocks and rising bond yields.

    The Dow also had its biggest daily percentage decline since May 2017 and the day’s 1.37% fall was the second-biggest single-day drop since the election of Donald Trump, slated to give his first State of the Union speech later Tuesday.

    The selloff set traders in the options market fretting about a near-term shock to equities and the Cboe Volatility Index (VIX), the most widely followed barometer of expected near-term stock market gyrations, closed up 0.95 points at 14.79, its highest close since 17 Aug 2017.

    • The S&P 500 index fell 31.1 points, or 1.09%, to 2,822.43
    • The Dow Jones Industrial Average fell 362.59 points, or 1.37%, to 26,076.89
    • The Nasdaq Composite index fell 64.02 points, or 0.86%, to 7,402.48
    • Declining issues outnumbered advancing ones on the NYSE by a 4.17-to-1 ratio; on Nasdaq, a 2.98-to-1 ratio favored decliners.
    • The S&P 500 posted 17 new 52-week highs and four new lows; the Nasdaq Composite recorded 41 new highs and 43 new lows.
    • Volume so far on U.S. exchanges was 8.1 billion shares, compared with the 7.1 billion average for the full session over the last 20 trading days.

    Treasury Yields

    U.S. Treasury yields climbed to multi-year highs after the start of the Federal Reserve’s two-day meeting, which could shed light on the central bank’s economic and rate hike outlook.

    “Investors are catching up to the fact that rates have risen,” said Jonathan Mackay, investment strategist at Schroders in New York. “The market’s finally catching up.”

    Healthcare

    Healthcare stocks pulled the major indexes lower on news that Amazon.com Inc, Berkshire Hathaway Inc and JPMorgan Chase & Co will jointly form a healthcare company to help control costs for their U.S. employees.

    UnitedHealth Group Inc was the biggest drag on the Dow, falling 4.3%.
    Pfizer Inc was down 3.1% despite its better-than-expected earnings and upbeat 2018 guidance.

    The S&P 500 Healthcare index was the day’s biggest loser among the 11 major sectors, dropping by 2.13%.

    Investigations Impacting on Prices

    Apple Inc declined for a second day, falling 0.6% on news that the U.S. Department of Justice and the Securities and Exchange Commission are investigating the company’s disclosure that it slowed older iPhones with flagging batteries.

    MetLife Inc fell 8.6% and was the day’s biggest daily percentage decliner in the S&P 500 after news the U.S. Securities and Exchange Commission was investigating the insurer’s failure to pay some workers’ pensions.

    Earnings Reports

    Earnings so far have been stronger than expected. S&P 500 earnings growth is now forecast at 13.2%, up from 12% a month ago. Among companies that have reported so far, 80% are exceeding analysts’ expectations, according to Thomson Reuters data. Investors will likely scrutinize Trump’s first State of the Union address for clues on trade policy and infrastructure spending.

    Harley-Davidson Inc closed down 8.0% after announcing it would close a Kansas City plant in the face of declining shipments.Reuters

    The Dow Jones Industrial Average tumbled 362 points, helping to send U.S. stocks to the biggest two-day decline since May, while yields on benchmark government bonds touched April 2014 highs as caution crept into markets after one of the best starts to a year in recent history.

    Screens flashed red across most asset classes, with investors on edge ahead of a slew of earnings, a U.S. rate decision, the president’s address to Congress and major economic data. All major U.S. equity indexes sank a second day, with investors pocketing profits from a 4-week rally that greeted 2018. The 10-year Treasury yield pushed above 2.73%, the highest since Aprl 2014. Commodities retreated, led by crude and industrial metals. Gold turned lower, while the USD fluctuated.

    “We’ve just had such a huge move in one month, it’s scared people. We had huge flows into equities at the beginning of this year,” said Carmel Wellso, director of research at Janus Henderson. “Some people might be saying ’Wow, I just made 10%, that’s what I wanted to make for this whole year. Maybe I’ll take some money off the table.’”

    Investors are weighing whether stronger corporate earnings, a pick-up in economic growth and optimism over U.S. tax cuts can continue driving up prices in markets that recently touched their highest on record; Goldman Sachs Group Inc. predicts a correction is on the horizon, but says any such pullback would be a buying opportunity.

    The anxiety spread to Asia and Europe, with euro-zone stocks falling the most since Nov 2017 and Japan’s Topix wiping out gains for the year. Emerging-market stocks tumbled 1.7%, the most in two months. Gold futures lost 0.3% and even Bitcoin joined the selloff, sinking as much as 12% to fall below $10,000 before recovering from the lows of the day.Bloomberg

    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) 2,822.43 -1.09% 2,673.61 +5.56%
    DJIA INDU 26,076.89 -1.38% 24,719.22 +5.49%
    NASDAQ IXIC 7,402.48 -0.86% 6,903.39 +7.22%

    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 3.179 -0.37% 3.068 +3.64%
    Valuation Rate USD/AUD 0.81283 +0.02% 0.78528 +3.50%
    AUD-denominated Index AUD 3.915 -0.39% 3.909 +0.16%

    Portfolio stock prices

    :-) Amazon closed on a record high of $1,437.82, up 1.42% on yesterday’s record $1,417.68.
    :-) Amazon is up 22.94% in the first 4 weeks of the year.

    Stock Ticker Today Change 31 Dec 17 YTD
    Alphabet A GOOGL $1,177.37 -0.77% $1,053.00 +11.81%
    Alphabet C GOOG $1,163.69 -1.02% $1,045.65 +11.28%
    Apple AAPL $166.97 -0.59% $169.23 -1.34%
    Amazon AMZN $1,437.82 +1.42% $1,169.54 +22.93%
    Ebay EBAY $40.40 -0.99% $37.76 +6.99%
    Facebook FB $187.12 +0.61% $176.46 +6.04%
    PayPal PYPL $83.78 -0.63% $73.61 +13.81%
    Twitter TWTR $25.62 +1.74% $24.01 +6.70%
    Visa V $123.55 -1.04% $114.02 +8.35%
    VMware VMW $118.74 -5.05% $125.32 -5.26%

    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) was little changed.
    The EUR rose 0.1% to USD 1.2396, but fell back after reaching the highest level in more than 3 years.
    Britain’s GBP rose 0.5% to USD 1.4141.
    Japan’s JPY rose 0.1% to 108.84 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 15:48 ET

    • NYMEX West Texas Intermediate (WTI): $64.34/barrel -1.86% Chart
    • ICE (London) Brent North Sea Crude: $68.80/barrel -0.95% Chart
    • NYMEX Natural gas futures: $3.18/MMBTU +0.25% Chart

    Amazon, Berkshire, JPM Forming A Healthcare Company

    Press Release Extract [amzn]

    Amazon.com Inc, Berkshire Hathaway and JPMorgan Chase & Co will form a healthcare company aimed at cutting costs for their U.S. employees, they said on Tuesday, sending shares in the broad healthcare sector sharply lower.

    The company will not aim to make a profit and initially focus on technology to provide what they called “simplified, high-quality and transparent healthcare” for their more than 500,000 U.S. employees.

    “The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said Berkshire Hathaway Chairman and Chief Executive Officer Warren Buffett. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”

    The announcement comes as investors in the healthcare sector worry that technology and retailing behemoth Amazon could become a healthcare competitor and eat away at sector profits, just as it has done in retailing.

    Amazon has been looking at the pharmacy business and pharmacy distribution, according to numerous media reports and Wall Street analysts. It is unclear if the company has plans beyond this initiative.

    U.S. healthcare spending increases each year faster than inflation, and in 2017 accounted for 18 percent of the U.S. economy. Corporations, which sponsor healthcare plans for more than 160 million Americans, and the U.S. government are trying to cut those costs.

    Prices have risen under former Democratic President Barack Obama’s 2010 Affordable Care Act, which overhauled health insurance and expanded the Medicaid government program for the poor. Republican President Donald Trump has rolled back the mandate that required all Americans to have health insurance or pay a fine, cut subsidies for low-income people and promised new, cheaper insurance.

    By teaming up with JPMorgan, the biggest U.S. bank, and Berkshire, the third largest public company in the world, Amazon appears to be taking a big step in shaking up the health industry.More

    flag_europe NZ: Overseas Merchandise Trade. Dec 2017

    Press Release Extract [nz_trade]

    December 2017 month

    December 2017 monthly values are actual and compared with December 2016:

    • Goods exports rose $1.1 billion (26 percent) to $5.6 billion, a new high for monthly total exports. The previous high was $5.0 billion in March 2014.
    • Goods imports rose $494 million (11 percent) to $4.9 billion.
    • The monthly trade balance was a surplus of $640 million (12 percent of exports).
    • In the last five December months, there were two surpluses (in 2012 and 2013), and three deficits (2014, 2015, and 2016).
    • The December 2017 surplus was the largest in a December month, and the largest in any month since March 2015 ($661 million).

    Exports to top destinations

    The monthly movements for December 2017 for our top export partners (ranked by total annual goods exports) were:

    • China – up $343 million (28 percent) to $1.6 billion, led by a rise in milk powder, butter, and cheese, up $230 million (39 percent).
    • Australia – up $119 million (17 percent) to $799 million, with increases over a range of commodities.
    • USA – up $76 million (18 percent), led by a rise in beef, up $47 million (55 percent) in value, and 37 percent in quantity.
    • EU – up $63 million (18 percent), led by a rise in lamb, up $35 million (45 percent) in value, and 13 percent in quantity.
    • Japan – up $92 million (43 percent), led by a rise in aluminium and aluminium articles, up $57 million (131 percent).

    Imports from top sources

    The monthly movements for December 2017 for our top import partners (ranked by total annual goods imports) were:

    • China – up $80 million (9.4 percent), led by a rise in electrical machinery and equipment, up $24 million (13 percent).
    • EU – up $155 million (19 percent), led by a rise in mechanical machinery and equipment, up $75 million (41 percent).
    • Australia – up $9.1 million (1.7 percent).
    • USA – up $37 million (8.5 percent), led by a rise in mechanical machinery and equipment, up $21 million (20 percent).
    • Japan – down $20 million (5.5 percent).

    December 2017 quarter

    December 2017 quarterly values are seasonally adjusted and compared with the September 2017 quarter.

    • Goods exports rose 8.6 percent, to $14.5 billion, following a 1.4 percent fall in the September 2017 quarter.
    • The trend for export values rose 6.2 percent in the December 2017 quarter, to a new series high. The rise follows rises in each of the previous three quarters.
    • Goods imports rose 12 percent, to $15.3 billion, following a 1.9 percent fall in the September 2017 quarter.
    • Excluding the large import items (greater than $100 million), the seasonally adjusted value of imported goods rose 8.3 percent in the December 2017 quarter.
    • The trend for import values rose 3.6 percent in the December 2017 quarter, to a new series high. The rise follows rises in each of the previous four quarters. The trend calculation excludes large import items.
    • The quarterly trade balance was a deficit of $798 million (5.5 percent of exports).
    • The quarterly deficit was the 15th consecutive quarterly deficit since the last surplus (in March 2014).

    December 2017 year

    December 2017 annual values are actual and compared with the December 2016 year.

    • New Zealand’s two-way goods trade for 2017 was $110 billion, up $10 billion (10 percent) from the December 2016 year.
    • The value of goods exported for the year ended December 2017 was $53.7 billion, up $5.2 billion (11 percent).
    • The value of goods imported for the year ended December 2017 was $56.5 billion, up $4.9 billion (9.4 percent).
    • The annual trade deficit was $2.8 billion (5.3 percent of exports).

    The annual movements for our top five export destinations (ranked by total annual goods exports) were:

    • China – up $2.5 billion (27 percent) to $12.0 billion, led by a rise in milk powder, butter, and cheese, up $1.4 billion (52 percent).
    • Australia – up $542 million (6.5 percent) to $8.8 billion, with increases over a range of commodities, including milk powder, butter, and cheese, up $205 million (41 percent).
    • USA – showed little change, up $28 million (0.5 percent).
    • EU – up $51 million (1.0 percent), led by wine, up $35 million (6.5 percent) in value, and 19 percent in quantity.
    • Japan – up $245 million (8.2 percent), led by aluminium and aluminium articles, up $134 million (30 percent).

    The annual movements for New Zealand’s top import partners (ranked by total annual goods imports) were:

    • China – up $593 million (5.7 percent), led by mechanical machinery and equipment, up $271 million (16 percent).
    • EU – up $1.1 billion (12 percent), led by rises in mechanical machinery and equipment (up $523 million or 28 percent), and vehicles, parts, and accessories (up $480 million or 23 percent). Aircraft and parts fell $264 million (61 percent).
    • Australia – up $422 million (6.5 percent), with increases across a range of commodities.
    • USA – up $197 million (3.4 percent), led by mechanical machinery and equipment, up $208 million (17 percent).
    • Japan – up $507 million (14 percent), led by vehicles, parts, and accessories, up $387 million (17 percent).

    Stats NZ, “Overseas merchandise trade: December 2017“, 30 Jan 2018 More

    flag_europe EU: GDP. Q4/2017

    Press Release Extract [eu_gdp]

    Seasonally adjusted GDP rose by 0.6% in both the euro area (EA19) and in the EU28 during the fourth quarter of 2017, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. In the third quarter of 2017, GDP had grown by 0.7% in both zones.

    eu_gdp_20180139

    Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 2.7% in the euro area and by 2.6% in the EU28 in the fourth quarter of 2017, after +2.8% in both zones in the previous quarter.

    Over the whole year 2017, GDP grew by 2.5% in both zones.

    Eurostat, “Preliminary flash estimate for the fourth quarter of 2017: GDP up by 0.6% in both the euro area and the EU28, +2.7% and +2.6% respectively compared with the fourth quarter of 2016“, 30 Jan 2018 More

    flag_europe EU: Economic Sentiment Indicator. Jan 2018

    Press Release Extract [eu_esi]

    January 2018: Economic Sentiment edges down slightly from 17-year high

    In January, the Economic Sentiment Indicator (ESI) decreased slightly from its 17-year high in both the euro area (by 0.6 points to 114.7) and the EU (by 0.4 points to 114.7).

    eu_esi_20180130

    Euro area developments

    The softening of euro-area sentiment resulted from markedly lower confidence in services and retail trade, while confidence in industry remained stable. By contrast, confidence increased among consumers and, in particular, construction managers. Amongst the largest euro-area economies, the ESI rose in Spain (+0.9), the Netherlands (+0.9) and Germany (+0.6) but decreased markedly in France (-2.4) and Italy (-1.7).

    The flat development of industry confidence (+0.0) resulted from managers’ more optimistic views on the current level of overall order books, being counterbalanced by their worsening assessment of stocks of finished products and broadly unchanged production expectations. Regarding the questions not included in the confidence indicator, managers’ appraisals of the past production worsened markedly, while their views on export order books improved slightly. The marked decline in services confidence (-1.3) was driven by managers’ more pessimistic demand expectations, with broadly stable assessments of past demand and the past business situation. Increasing consumer confidence (+0.8) was fuelled by a strong improvement in households’ unemployment expectations, while their expectations regarding their financial situation became slightly more negative.

    Households’ assessment of the general economic situation and their savings expectations remained unchanged. Lower retail trade confidence (-1.0) was the result of retailers’ more positive views on the expected business situation being more than offset by their markedly worsened assessment of the present business situation and the adequacy of the
    volume of stocks. Construction confidence (+1.5) surged thanks to managers’ more positive assessment of the level of order books and, to a somewhat lesser extent, their increasing employment expectations. The steep improvement in financial services confidence (+3.4), which is not included in the ESI, reflected managers’ more optimistic appraisals of the past business situation and past demand, while their assessment of demand expectations remained broadly flat.

    Employment plans were revised up strongly in services (17-year high) and, to a lesser extent, in retail trade (alltime high) and construction (10-year high), while employment plans in industry edged lower from their 30-year high of December. Selling price expectations increased slightly in retail trade and more markedly in services and construction while softening somewhat in industry. Consumer price expectations surged in January, reaching a 5-year high.

    EU developments

    The slightly softer decline of the EU ESI (-0.4) resulted from a steep improvement of sentiment in Poland (+5.0), while the ESI decreased in the largest non-euro area EU economy, the UK (-0.7). As opposed to the euro area, construction confidence in the EU decreased slightly due to plummeting confidence in the UK. In line with the euro area, confidence among consumers and in financial services improved in the EU, while it worsened in retail trade and services. Further in line with the euro area, EU confidence in industry remained broadly unchanged.

    As in the euro area, EU managers in services and retail trade reported upward revisions in their employment expectations, while industrial managers corrected their expectations markedly downwards. In contrast to the euro area, employment plans in construction saw a downward revision. Price expectations were in line with those for the euro area for the services sector, while they increased in industry, decreased strongly in retail trade and remained broadly unchanged in construction.

    Quarterly survey results (conducted in January)

    In the euro-area manufacturing sector, the estimated rate of capacity utilisation increased further to 84.4% (0.6 points higher than in October). Accordingly, the share of managers assessing their current production capacity as ‘more than sufficient’ (in view of current order books and demand expectations) declined markedly (-1.1 points).

    While the estimated number of months’ production assured by orders on hand edged down by 0.3 months from Octobers’ all-time high, developments in new orders were assessed markedly more favourably than in October (+1.1 points). On the external side, managers’ export volume expectations were revised downwards (by -0.8 points), while managers’ assessment of their competitive position on foreign markets outside the EU over the past three months remained virtually flat compared to October. EU-wide developments were qualitatively in line; the rate of capacity utilisation increased to 83.9% (+0.3 points).

    In January 2017, capacity utilisation in services increased in the euro area (by 0.6 points to 90.2%) and remained broadly unchanged in the EU (+0.1 points to 89.7%).

    Directorate-General Economic and Financial Affairs (DG ECFIN) of the European Commission, , “Business and Consumer Survey Results: Economic Sentiment Indicator. Jan 2018“, 30 Jan 2018 More

    flag_europe EU: Business Climate Indicator. Jan 2018

    Press Release Extract [eu_bci]

    Business Climate Indicator slightly lower in January

    eu_bci_20180130

    In January 2018, the Business Climate Indicator (BCI) for the euro area edged slightly lower (-0.06 points to +1.54) from its highest level recorded since 1985 in December. Managers’ appraisals of overall order books and export order books improved, while their assessment of stocks of finished products and, in particular, past production worsened. Meanwhile, managers’ views on future production remained broadly unchanged.

    Directorate-General Economic and Financial Affairs (DG ECFIN) of the European Commission, “Business and Consumer Survey Results: Business Climate Indicator for the Euro Area. Jan 2018“, 30 Jan 2018 More

    flag_usa US: Residential Vacancies and Home Ownership. Q4/2017

    Press Release Extract [us_housing]

    National vacancy rates in the fourth quarter 2017 were 6.9 percent for rental housing and 1.6 percent for homeowner housing. The rental vacancy rate of 6.9 percent was virtually unchanged from the rate in the fourth quarter 2016 (6.9 percent) and 0.6 percentage points lower than the rate in the third quarter 2017 (7.5 percent). The homeowner vacancy rate of 1.6 percent was 0.2 percentage points lower than the rate in the fourth quarter 2016 (1.8 percent) and virtually unchanged from the rate in the third quarter 2017 (1.6 percent).

    us_housing_20180130

    The homeownership rate of 64.2 percent was not statistically different from the rates in the fourth quarter 2016 (63.7 percent) or the third quarter 2017 (63.9 percent).

    U.S. Census Bureau, “Quarterly Residential Vacancies and Home Ownership, Fourth Quarter 2017“, 30 Jan 2018 (10:00) More

    flag_usa US: CB Consumer Confidence Index. Jan 2018

    Press Release Extract [us_cci]

    The Conference Board Consumer Confidence Index® increased in January, following a decline in December. The Index now stands at 125.4 (1985=100), up from 123.1 in December. The Present Situation Index decreased slightly, from 156.5 to 155.3, while the Expectations Index increased from 100.8 last month to 105.5 this month.

    The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was January 18.

    “Consumer confidence improved in January after declining in December,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions decreased slightly, but remains at historically strong levels. Expectations improved, though consumers were somewhat ambivalent about their income prospects over the coming months, perhaps the result of some uncertainty regarding the impact of the tax plan. Overall, however, consumers remain quite confident that the solid pace of growth seen in late 2017 will continue into 2018.”

    Consumers’ assessment of current conditions was slightly less positive in December. Consumers’ assessment of business conditions was mixed. The percentage saying business conditions are “good” decreased slightly from 35.8 percent to 34.9 percent, while those saying business conditions are “bad” increased slightly, from 11.7 percent to 12.7 percent. Consumers’ assessment of the labor market was also mixed. The percentage of consumers claiming jobs are “plentiful” increased from 36.3 percent to 37.6 percent, while those claiming jobs are “hard to get” increased marginally, from 16.0 percent to 16.4 percent.

    Consumers’ optimism about the short-term outlook improved in January, following a sharp decline in December. The percentage of consumers anticipating business conditions to improve over the next six months increased marginally, from 21.6 percent to 22.0 percent, while those expecting business conditions to worsen increased from 9.0 percent to 9.8 percent.

    Consumers’ outlook for the job market was also less negative. The proportion expecting more jobs in the months ahead was virtually unchanged at 19.0 percent, while those anticipating fewer jobs declined from 15.9 percent to 11.8 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement decreased from 22.7 percent to 20.4 percent, while the proportion expecting a decrease also declined, from 9.0 percent to 7.7 percent.

    The Conference Board, “Consumer Confidence Survey®. Jan 2018“, 30 Jan 2018 (10:00) More

    flag_japan Japan update

    Currency: USD/JPY

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

    Stockmarket: Nikkei 225

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

    flag_china China update

    Currency: USD/CNY

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

    Stockmarket: CSI300

    CSI300 movements
    ^ Shanghai CSI300 movements over the past week Chart: Google Finance