Tue 27 Feb 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/bearU.S. stocks suffered on Tuesday their biggest daily drops since the selloff three weeks ago after comments from Federal Reserve Chairman Jerome Powell revived fears about more interest-rate increases than expected this year. Indexes posted their biggest daily percentage losses since 8 Feb 2018.

    • The S&P 500 index fell 35.32 points, or 1.27%, to 2,744.28
    • The Dow Jones Industrial Average fell 299.24 points, or 1.16%, to 25,410.03
    • The Nasdaq Composite fell 91.11 points, or 1.23%, to 7,330.35
    • Declining issues outnumbered advancing ones on the NYSE by a 3.38-to-1 ratio; on Nasdaq, a 3.07-to-1 ratio favored decliners
    • The S&P 500 posted 44 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 93 new highs and 50 new lows
    • About 7.4 billion shares changed hands on U.S. exchanges. That compares with the 8.3 billion daily average for the past 20 trading days, according to Thomson Reuters data.

    Powell gave an upbeat view on the U.S. economy and said data has strengthened his confidence on inflation. Traders boosted bets the central bank will squeeze in a fourth rate hike this year following the remarks.

    Bond yields also rose, while the Cboe Volatility Index (VIX), the most widely followed barometer of expected near-term volatility of the S&P 500 index, rose 2.79 points to 18.59, its largest one-day gain also in nearly three weeks.

    Powell’s first semi-annual economic testimony as Fed chief before the U.S. Congress comes at a sensitive time for the market, which had been trying to recover from the recent selloff, which confirmed the market was in a correction, or down 10% from a 26 Jan 2018 record high. Fears over rising rates in part had sparked the selloff. In his prepared remarks, Powell hinted that the central bank would stick to its current path of gradual rate hikes, but his comments during congressional testimony seemed to spook the market.

    “He said it’s his impression the economy was getting stronger, which subtly gave the indication that he was going to raise his personal forecast for four rate hikes this year,” said Michael O‘Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

    The Fed is widely expected to raise rates next month and in Dec 2017 signaled a total of 3 rate hikes this year. Fed officials will release new forecasts, including their views on the appropriate future path of rate hikes, when they meet next month.

    “Sure enough, rates here have moved up a little bit as well, probably a little bit more so here based on his testimony, but I don’t think we are in a danger zone or anything of a spike in rate hikes by the Fed,” said Mark Kepner, managing director, sales and trading in Chatham, New Jersey.

    Comcast fell 7.4% after the U.S. cable giant offered to buy Sky for $31 billion in an unsolicited approach, taking on Rupert Murdoch’s Fox and Bob Iger’s Walt Disney in the battle for Europe’s biggest pay-TV group. The stock was the biggest drag on the S&P 500. Disney dropped 4.5% and Twenty-First Century Fox fell 3% following the news.

    Macy’s rose 3.5% after reporting higher-than-expected same-store sales growth for Q4/2017. The biggest U.S. department store chain said sales at established stores could mark their first annual gain in 4 years.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) 2,744.28 -1.28% 2,673.61 +2.64%
    DJIA INDU 25,410.03 -1.17% 24,719.22 +2.79%
    NASDAQ IXIC 7,330.35 -1.23% 6,903.39 +6.18%

    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 3.319 -0.68% 3.068 +8.21%
    Valuation Rate USD/AUD 0.78372 -0.81% 0.78528 -0.02%
    AUD-denominated Index AUD 4.237 +0.11% 3.909 +8.41%

    Portfolio stock prices

    Stock Ticker Today Change 31 Dec 17 YTD
    Alphabet A GOOGL $1,117.51 -2.29% $1,053.00 +6.12%
    Alphabet C GOOG $1,118.29 -2.23% $1,045.65 +6.94%
    Apple AAPL $178.39 -0.33% $169.23 +5.41%
    Amazon AMZN $1,511.98 -0.66% $1,169.54 +29.27%
    Ebay EBAY $43.15 -1.56% $37.76 +14.27%
    Facebook FB $181.46 -1.88% $176.46 +2.83%
    PayPal PYPL $79.46 +0.13% $73.61 +7.94%
    Twitter TWTR $31.32 -2.62% $24.01 +30.44%
    Visa V $123.37 -0.98% $114.02 +8.20%
    VMware VMW $128.85 +0.14% $125.32 +2.81%

    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) rose 0.6%.
    The EUR fell 0.7% to USD 1.223.
    Japan’s JPY fell 0.4% to 107.37 per USD.
    South Africa’s ZAR fell 1.7% to 11.7488 per USD, the biggest drop in more than 3 weeks.
    Britain’s GBP fell 0.5% to USD1.3904.

    The yield on US 10-year Treasuries rose 3 basis points to 2.89%.
    Germany’s 10-year yield gained 3 basis points to 0.68%.
    Britain’s 10-year yield added 5 basis points to 1.56%.
    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): $62.86/barrel -1.64% Chart
    • ICE (London) Brent North Sea Crude: $66.50/barrel -1.48% Chart
    • NYMEX Natural gas futures: $2.69/MMBTU 0.00% Chart

    flag_europe EU: Economic Sentiment Indicator. Feb 2018

    Press Release Extract [eu_esi]

    February 2018: Economic Sentiment eases in both the euro area and the EU

    In February, the Economic Sentiment Indicator (ESI) decreased slightly in both the euro area (by 0.8 points to 114.1) and the EU (by 0.5 points to 114.3), while remaining at historically elevated levels.

    eu_esi_20180227

    Euro area developments

    The softening of the euro-area indicator resulted from decreases across all sectors except for services. The drop was marked among consumers, while smaller in the industry, retail trade and construction sectors. By contrast, confidence in services improved. Amongst the largest euro-area economies, the ESI rose markedly in Italy (+1.5) and marginally in the Netherlands (+0.4), while it decreased strongly in France (-2.7) and Germany (-1.6), and only slightly in Spain (-0.7).

    The decrease in industry confidence (-1.0) was mainly due to a strong reduction in managers’ production expectations, while their assessments of the current level of overall order books and the stocks of finished products remained broadly stable. Of the questions not included in the confidence indicator, both managers’ assessment of past production and their views on export order books worsened slightly. Increasing services confidence (+0.7) was driven by more positive views on all its components (managers’ demand expectations as well as their assessment of past demand and the past business situation). The decrease in consumer confidence (-1.3) reflected more negative assessments of all its components. The deterioration was particularly strong for consumers’ future unemployment and savings expectations, while the views on the future general economic situation and on households’ future financial situation deteriorated only slightly. The decline in retail trade confidence (-0.9) resulted from more negative views on both the present and the expected business situation, while managers’ assessment of the adequacy of the volume of stocks remained virtually unchanged. The small contraction in construction confidence (-0.5) was due to downward revisions in managers’ employment expectations, whereas their assessment of the level of order books stayed broadly stable. Finally, the minor fall (-0.4) in financial services confidence (not included in the ESI) resulted from an improved appraisal of the past business situation, which was more than offset by a deterioration in managers’ assessments of past and expected demand.

    Employment plans were revised downward somewhat from historically high levels across business sectors. The decrease was small in industry and construction, while employment plans declined more markedly in services and retail trade. Selling price expectations decreased in retail trade and construction, whereas they remained broadly stable in industry and services. Consumers’ price expectations dropped in February.

    EU developments

    In the EU, sentiment deteriorated in the largest non-euro area EU economy, the UK (-1.6), while remaining broadly unchanged in Poland (+0.3). In line with the euro area, confidence worsened in industry and among consumers but improved in services. However, EU confidence improved also in the retail trade and construction sectors. The fall in EU confidence in the financial services sector was more pronounced than in the euro area.
    In contrast with the euro area, EU managers were more upbeat about their employment expectations in retail trade and construction, and expected a broadly unchanged situation in industry and services. Concerning price expectations, managers in the EU expect to markedly decrease their selling prices in the industry and services sectors, while prices are expected to increase in retail trade and construction. In line with the euro area, consumers’ price expectations decreased.

    European Commission DG ECFIN, “Economic Sentiment Indicator. Feb 2018“, 27 Feb 2018 More

    flag_europe EU: Business Climate Indicator. Feb 2018

    Press Release Extract [eu_bci]

    Business Climate Indicator decreases slightly in February

    In February 2018, the Business Climate Indicator (BCI) for the euro area decreased slightly (-0.08 points to +1.48). Managers’ appraisals of past production and export order books decreased slightly, while their production expectations worsened markedly. Meanwhile, managers’ assessment of stocks of finished products and overall order books remained broadly unchanged.

    eu_bci_20180227

    European Commission DG ECFIN, “Business Climate Indicator. Feb 2018“, 27 Feb 2018 More

    flag_usa US: Advance Economic Indicators Report. Jan 2018

    Press Release Extract [us_eci]

    Advance International Trade in Goods

    The international trade deficit was $74.4 billion in January, up $2.1 billion from $72.3 billion in December. Exports of goods for January were $133.9 billion, $3.1 billion less than December exports. Imports of goods for January were $208.3 billion, $0.9 billion less than December imports.

    Advance Wholesale Inventories

    Wholesale inventories for January, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $617.7 billion, up 0.7 percent (±0.4 percent) from December 2017, and were up 4.5 percent (±0.7 percent) from January 2017. The November 2017 to December 2017 percentage change was revised from up 0.4 percent (±0.4 percent) to up 0.6 percent (±0.4 percent).

    Advance Retail Inventories

    Retail inventories for January, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $626.2 billion, up 0.8 percent (±0.2 percent) from December 2017, and were up 2.4 percent (±0.5 percent) from January 2017. The November 2017 to December 2017 percentage change was revised from up 0.2 percent (±0.2 percent) to up 0.3 percent (±0.2 percent).

    US Census Bureau, “Advance Economic Indicators Report (International Trade Retail & Wholesale). Jan 2018“, 27 Feb 2018 (08:30) More

    flag_usa US: Advance Report on Durable Goods. Jan 2018

    Press Release Extract [us_durg]

    New Orders

    New orders for manufactured durable goods in January decreased $9.2 billion or 3.7 percent to $239.7 billion, the U.S. Census Bureau announced today. This decrease, down following two consecutive monthly increases, followed a 2.6 percent December increase. Excluding transportation, new orders decreased 0.3 percent. Excluding defense, new orders decreased 2.7 percent. Transportation equipment, also down following two consecutive monthly increases, led the decrease, $8.6 billion or 10.0 percent to $77.7 billion.

    us_durg_20180227

    Shipments

    Shipments of manufactured durable goods in January, up eight of the last nine months, increased $0.6 billion or 0.2 percent to $247.0 billion. This followed a 0.5 percent December increase. Transportation equipment, up two of the last three months, led the increase, $0.4 billion or 0.5 percent to $81.3 billion.

    Unfilled Orders

    Unfilled orders for manufactured durable goods in January, down following four consecutive monthly increases, decreased $3.1 billion or 0.3 percent to $1,140.9 billion. This followed a 0.6 percent December increase. Transportation equipment, down three of the last four months, drove the decrease, $3.6 billion or 0.5 percent to $771.8 billion.

    US Census Bureau, “Advance Report on Durable Goods -Manufacturers Shipments Inventories and Orders. Jan 2018“, 27 Feb 2018 (08:30) More

    flag_usa US: Consumer Confidence Index. Feb 2018

    Press Release Extract [us_cci]

    The Conference Board Consumer Confidence Index® increased in February, following a modest increase in January. The Index now stands at 130.8 (1985=100), up from 124.3 in January. The Present Situation Index increased from 154.7 to 162.4, while the Expectations Index improved from 104.0 last month to 109.7 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 15 Feb 2018.

    “Consumer confidence improved to its highest level since 2000 (Nov. 2000, 132.6) after a modest increase in January,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions was more favorable this month, with the labor force the main driver. Despite the recent stock market volatility, consumers expressed greater optimism about short-term prospects for business and labor market conditions, as well as their financial prospects. Overall, consumers remain quite confident that the economy will continue expanding at a strong pace in the months ahead.”

    Consumers’ appraisal of present-day conditions improved in February. Consumers’ assessment of business conditions was moderately more positive than in January. The percentage saying business conditions are “good” increased slightly from 35.0 percent to 35.8 percent, while those saying business conditions are “bad” decreased from 13.0 percent to 10.8 percent. Consumers’ assessment of the labor market was considerably more favorable. Those claiming jobs are “plentiful” increased from 37.2 percent to 39.4 percent, while those claiming jobs are “hard to get” decreased from 16.3 percent to 14.7 percent.

    Consumers were also more optimistic about the short-term outlook in February. The percentage of consumers anticipating business conditions will improve over the next six months increased from 21.5 percent to 25.8 percent, while those expecting business conditions will worsen decreased from 9.8 percent to 9.4 percent.

    Consumers’ outlook for the job market was also more positive. The proportion expecting more jobs in the months ahead increased from 18.7 percent to 21.6 percent, while those anticipating fewer jobs declined from 12.5 percent to 11.9 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement increased from 20.6 percent to 23.8 percent, however, the proportion expecting a decrease also rose, from 7.9 percent to 8.6 percent.

    The Conference Board, “Consumer Confidence Index. Feb 2018“, 27 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