Fri 9 Feb 2018


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  • Today at the stock market Opinion
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  • Today at the stock market

    bull/bearWall Street’s main stock indexes climbed more than 1% on Friday, giving investors some solace after a week of huge swings that shook the market out of months of calm.

    Even with Friday’s gains, the benchmark S&P 500 fell 5.2% for the week, its biggest weekly percentage drop since Jan 2016, as volatility spiked back up.

    During Friday’s session alone, the S&P 500 swung from as high as up 2.2% to down 1.9%, echoing the big swings of the past week. The Dow moved in a range of more than 1,000 points. The fresh volatility came a day after the benchmark S&P 500 and the Dow industrials confirmed they were in correction territory, both falling more than 10% from record highs of 26 Jan 2018. Friday’s session marked the latest day of sharp swings in the past week that have pulled stocks lower after a steady climb for months to record highs:

    • The S&P 500 index rose 38.55 points, or 1.49%, to 2,619.55
    • The Dow Jones Industrial Average rose 330.44 points, or 1.38%, to 24,190.9
    • The Nasdaq Composite index added 97.33 points, or 1.44%, to 6,874.49.

    “I don’t think the market is focused on fundamentals at all. It’s very volatile,” Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments in Boston.Reuters

    The S&P 500 tumbled 5.2% in the week, its steepest slide since Jan 2016, jolting equity markets from an unprecedented stretch of calm. At one point, stocks fell 12% from the latest highs, before a furious rally Friday left the equity benchmark 1.5% higher on the day. Still, the selloff has wiped out gains for the year.

    Signs mounted that jitters spread to other assets, with measures of market unrest pushing higher in junk bonds, emerging-market equities and Treasuries. The Cboe Volatility Index ended at 29, almost three times higher than its level 26 Jan 2018. The VIX’s bond-market cousin reached its highest since Apr 2017 during the week, and a measure of currency volatility spiked to levels last seen almost a year ago.

    Pressure on equities came from the Treasury market, where yields spiked to a 4-year high, raising concern the Federal Reserve would accelerate its rate-hike schedule. Yields ended the week at 2.85%, near where they started, as Treasuries moved higher when equity selling reached its most frantic levels. Commodities including oil, gold and industrial metals moved lower Friday. The USD, EUR and GBP all declined.

    Traders are now focusing on next week’s U.S. consumer-price data after a week in which the 10-year yield pushed as high as 2.88%. Equity investors took the signal to mean interest rates will rise as inflation gathers pace, denting earnings and consumers’ spending power.

    “Sometimes making a bottom can take time. Investors should be at least aware, cognizant, and expect a little more volatility after we go through this period of more cathartic volatility,” Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co., said by phone.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) 2,619.55 +1.49% 2,238.83 -2.03%
    DJIA INDU 24,190.90 +1.38% 19,762.60 -2.14%
    NASDAQ IXIC 6,874.49 +1.43% 5,383.12 -0.42%

    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 2.966 +1.13% 2.105 -3.31%
    Valuation Rate USD/AUD 0.78509 +0.30% 0.72663 -0.03%
    AUD-denominated Index AUD 3.780 +0.82% 2.895 -3.29%

    Portfolio stock prices

    Stock Ticker Today Change 31 Dec 17 YTD
    Alphabet A GOOGL $1,046.27 +3.82% $1,053.00 -0.64%
    Alphabet C GOOG $1,037.78 +3.60% $1,045.65 -0.76%
    Apple AAPL $156.41 +0.81% $169.23 -7.58%
    Amazon AMZN $1,339.60 -0.81% $1,169.54 +14.54%
    Ebay EBAY $41.66 +1.56% $37.76 +10.32%
    Facebook FB $176.11 +2.64% $176.46 -0.20%
    PayPal PYPL $74.75 +3.36% $73.61 +1.54%
    Twitter TWTR $31.51 +4.40% $24.01 +31.23%
    Visa V $116.32 +2.16% $114.02 +2.01%
    VMware VMW $113.13 +4.30% $125.32 -9.73%

    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 0.1%.
    The EUR fell 0.1% to USD 1.2236.
    Britain’s GBP fell 0.7% to USD 1.3819, the weakest in more than 3 weeks.
    Japan’s JPY fell less than 0.05% to 108.77 per USD.

    The yield on 10-year Treasuries rose two basis points to 2.85%.
    Germany’s 10-year yield dipped two basis points to 0.75%.
    Britain’s 10-year yield declined five basis points to 1.57%.
    Bloomberg

    AUD

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

    Oil and Gas Futures

    American crude output is soaring so fast that the U.S. is on the verge of elbowing Saudi Arabia and Russia aside as the top supplier, gushing more than 10 million barrels a day. Drillers this week added the most oil rigs since January 2017.

    “The supply backlash that we have been expecting in the U.S. because of higher prices became very real in the market psyche,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone.

    Crude had been on a steady rally since June as the Organization of Petroleum Exporting Countries (OPEC) and Russia curtailed output to prop up prices, while American stockpiles shrank. But with some prime shale areas delivering profits with oil at $50 or even less, the U.S. is producing the most crude since the 1970s.

    Traders who try to divine market momentum from technical signals were closely watching New York crude’s 50-day moving average during the session, with West Texas Intermediate closing below the key level. A settlement below that mark for several days in a row would be regarded as a bearish indicator.

    WTI for March delivery slid $1.95 to settle at $59.20/barrel on the New York Mercantile Exchange, the lowest since 22 Dec 2017. For the week, futures declined 9.6%, the most since Jan 2016.

    Brent for April settlement declined $2.02 to end the session at $62.79 on the London-based ICE Futures Europe exchange. The global benchmark settled at a $3.80 premium to April WTI.

    The last time oil had such a bad week two years ago, the commodity was trading near a $26 bottom.

    On Friday alone futures in New York lost almost $2, settling below $60/barrel for the first time this year as the unraveling of global equity markets added to concerns that a new shale boom is in the making.

    U.S. production surged to 10.25 million barrels/day last week, according to government data released Wednesday and is forecast to top 11 million a day by Nov 2018, a year earlier than previously expected.

    The broader market selloff could also weaken consumer sentiment and eventually affect demand for oil, Mark Watkins, a Park City, Utah-based regional investment manager at U.S. Bank Wealth Management, which oversees $142 billion in assets, said by telephone.Bloomberg

    Futures prices

    Prices are as at 15:49 ET

    • NYMEX West Texas Intermediate (WTI): $59.10/barrel -3.35% Chart
    • ICE (London) Brent North Sea Crude: $62.73/barrel -3.21% Chart
    • NYMEX Natural gas futures: $2.60/MMBTU -3.71% Chart

    Amazon to Launch A Delivery Service

    Amazon.com Inc. is preparing to launch a delivery service for businesses, positioning it to directly compete with United Parcel Service Inc. and FedEx Corp.

    Dubbed “Shipping with Amazon,” or SWA, the new service will entail the tech giant picking up packages from businesses and shipping them to consumers, according to people familiar with the matter.

    Amazon expects to roll out the new delivery service in Los Angeles in coming weeks with third-party merchants that sell goods via its website, according to the people. Amazon then aims to expand the service to more cities as soon as this year, some of the people say.

    While the program is being piloted with the company’s third-party sellers, it is envisioned to eventually be opened to other businesses too, according to some of the people. Amazon is planning to undercut UPS and FedEx on pricing, although the exact rate structure is still unclear, these people said.

    The new service, which stems from a Los Angeles pilot project first reported by The Wall Street Journal more than a year ago, moves Amazon into direct competition for parcel business currently handled by delivery partners UPS and FedEx. “Shipping With Amazon” was previously tested and rolled out in London.

    It is the latest move by Amazon to create its own freight and parcel delivery network. In the last couple of years, Amazon has expanded into ocean freight, built a network of its own drivers who can now deliver inside homes and leased up to 40 aircraft while establishing an air cargo hub.

    Amazon already delivers some of its own orders in at least 37 U.S. cities. With the new “Shipping with Amazon” option, Amazon plans to send drivers to pick up shipments from warehouses and businesses itself and deliver the packages when it is able, the people said. For shipments outside Amazon’s delivery reach, the U.S. Postal Service and other carriers will take care of the so-called last mile to customers’ doorsteps.

    “We’re always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices,” a spokeswoman said in a statement.

    It remains to be seen whether Amazon can successfully deliver packages for other businesses on a broad scale. UPS and FedEx have built out massive networks over the course of decades to allow them to deliver across the U.S. And it is expensive. UPS this year alone is planning to spend up to $7 billion on upgrading its delivery network.

    A spokesman said that UPS continues to support Amazon and other customers and doesn’t comment on customers’ business strategies or decisions regarding using UPS services.

    FedEx in a statement Friday pointed to a video on its website that outlines the size, scope and expertise of its global delivery network, including its over 40 years of experience, roughly 650 aircraft, 150,000 trucks, 400,000 employees and 4,800 operating facilities globally to handle about 12 million shipments a day.

    On FedEx’s December earnings call, executives were asked about what would happen if Amazon started competing for its shipping business, to which they said they don’t comment on hypothetical situations. They added that Amazon was a longstanding customer, but that no one customer represented more than 3% of its revenue or volume.

    Wall Street Journal, “Amazon to Launch Delivery Service That Would Vie With FedEx, UPS“, 9 Feb 2018 Article

    flag_australia AU: Housing Finance. Dec 2017

    The value of outstanding housing loans financed by Authorised Deposit-taking Institutions (ADIs) was AUD 1.637b trillion which is about one year’s GDP.

    Press Release Extract [au_housing]

    DWELLINGS FINANCED

    Value of Dwellings Financed

    The total value of dwelling commitments excluding alterations and additions (trend) fell 0.1% in December 2017 compared with November 2017 and the seasonally adjusted series fell 1.6% in December 2017.

    The total value of owner occupied housing commitments (trend) rose (up $29m, 0.1%) in December 2017. A rise was recorded in commitments for the purchase of established dwellings (up $49m, 0.3%) while falls were recorded in commitments for the construction of dwellings (down $16m, 0.8%) and commitments for the purchase of new dwellings (down $4m, 0.3%). The seasonally adjusted series for the total value of owner occupied housing commitments fell 1.0% in December 2017.

    The total value of investment housing commitments (trend) fell (down $63m, 0.5%) in December 2017 compared with November 2017. A fall was recorded in commitments for the purchase of dwellings by individuals for rent or resale (down $102m, 1.0%), while rises were recorded in commitments for the construction of dwellings for rent or resale (up $32m, 2.6%) and commitments for the purchase of dwellings by others for rent or resale (up $7m, 0.7%). The seasonally adjusted series for the total value of investment housing commitments fell 2.6% in December 2017.

    Number of Owner Occupied Dwellings Financed

    The number of owner occupied housing commitments (trend) fell 0.3% in December 2017, following a fall of 0.2% in November 2017. Falls were recorded in commitments for the purchase of established dwellings excluding refinancing (down 213, 0.7%), commitments for the construction of dwellings (down 48, 0.8%), and commitments for the purchase of new dwellings (down 4, 0.1%). The seasonally adjusted series for the total number of owner occupied housing commitments fell 2.3% in December 2017.

    Number of Owner Occupied Dwellings Financed – State

    Between November 2017 and December 2017, the number of owner occupied housing commitments (trend) fell in New South Wales (down 106, 0.6%), Western Australia (down 80, 1.5%), Victoria (down 13, 0.1%), the Northern Territory (down 6, 2.0%) and Tasmania (down 1, 0.1%), while rises were recorded in Queensland (up 10, 0.1%), the Australian Capital Territory (up 7, 0.6%) and South Australia was flat.

    The seasonally adjusted estimates fell in New South Wales (down 438, 2.5%), Victoria (down 423, 2.6%), the Australian Capital Territory (down 90, 7.1%), Queensland (down 74, 0.7%), South Australia (down 41, 1.1%) and Tasmania (down 23, 2.3%), while rises were recorded in Western Australia (up 51, 1.0%) and the Northern Territory (up 1, 0.5%).

    First Home Buyer Commitments

    In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 17.9% in December 2017 from 18.0% in November 2017. Between November 2017 and December 2017, the average loan size for first home buyers rose $7,600 to $334,700. The average loan size for all owner occupied housing commitments rose $4,300 to $393,200 for the same period.

    Number of Owner Occupied Dwellings Financed Excluding Refinancing

    The number of owner occupied housing commitments excluding refinancing (trend) fell 0.7% in December 2017, following a fall of 0.5% in November 2017. The seasonally adjusted series fell 3.4% in December 2017, after a rise of 1.5% in November 2017.

    PURPOSE OF FINANCE (OWNER OCCUPATION)

    Construction of dwellings

    The number of finance commitments for the construction of dwellings for owner occupation (trend) fell 0.8% in December 2017, following a fall of 0.8% in November 2017. The seasonally adjusted series fell 1.1% in December 2017, after a rise of 1.8% in November 2017.

    Purchase of new dwellings

    The number of finance commitments for the purchase of new dwellings for owner occupation (trend) fell 0.1% in December 2017, after a rise of 0.1% in November 2017. The seasonally adjusted series fell 3.8% in December 2017, after a rise of 3.2% in November 2017.

    Purchase of established dwellings (including refinancing across lending institutions)

    The number of finance commitments for the purchase of established dwellings for owner occupation (trend) fell 0.3% in December 2017, following a fall of 0.2% in November 2017. The seasonally adjusted series fell 2.3% in December 2017, after a rise of 1.4% in November 2017.

    Refinancing

    The number of refinancing commitments for owner occupied housing (trend) rose 0.5% in December 2017, following a rise of 0.5% in November 2017. The seasonally adjusted series rose 0.4% in December 2017, following a rise of 1.8% in November 2017.

    TYPE OF LENDER (OWNER OCCUPATION)

    Banks

    The number of commitments for owner occupied dwellings financed by banks (trend) fell 0.3% in December 2017, following a fall of 0.3% in November 2017. The seasonally adjusted series fell 1.9% in December 2017, after a rise of 1.6% in November 2017.

    Non-banks

    The number of commitments for owner occupied dwellings financed by non-banks (trend) rose 0.1% in December 2017, following a rise of 0.5% in November 2017. The seasonally adjusted series fell 5.9% in December 2017, after a rise of 1.2% in November 2017. The number of commitments for owner occupied dwellings financed by permanent building societies (trend) fell 7.7% in December 2017, following a fall of 5.9% in November 2017.

    HOUSING LOAN OUTSTANDINGS

    At the end of December 2017, the value of outstanding housing loans financed by Authorised Deposit-taking Institutions (ADIs) was $1,637b, up $8b (0.5%) from the November 2017 closing balance. Owner occupied housing loan outstandings financed by ADIs rose $7b (0.6%) to $1,076b and investment housing loan outstandings financed by ADIs rose $1.7b (0.3%) to $562b.

    Bank housing loan outstandings rose $8b (0.5%) during December 2017 to reach a closing balance of $1,600b. Owner occupied housing loan outstandings of banks rose $6b (0.6%) to $1,047b and investment housing loan outstandings of banks rose $1.7b (0.3%) to $553b.

    Australian Bureau of Statistics, “5609.0 – Housing Finance, Australia, December 2017“, 9 Feb 2018 More

    flag_usa US: Wholesale Trade: Sales and Inventories. Dec 2017

    Press Release Extract [us_wholesale]

    Sales

    December 2017 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $500.2 billion, up 1.2 percent (±0.7 percent) from the revised November level and were up 9.1 percent (±1.1 percent) from the December 2016 level. The October 2017 to November 2017 percent change was revised from the preliminary estimate of up 1.5 percent (±0.5 percent) to up 1.9 percent (±0.7 percent).

    Inventories

    Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $612.1 billion at the end of December, up 0.4 percent (±0.4 percent) from the revised November level. Total inventories were up 3.4 percent (±0.7 percent) from the revised December 2016 level. The November 2017 to December 2017 percent change was revised from the advance estimate of up 0.2 percent (±0.4 percent) to up 0.4 percent (±0.4 percent).

    Inventories/Sales Ratio

    us_wholesale_20180209

    The December inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.22. The December 2016 ratio was 1.29.

    US Census Bureau, “Wholesale Trade: Sales and Inventories. Dec 2017“, 9 Feb 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