Fri 2 Mar 2018


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In Portfolioticker today

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  • Today at the stock market Opinion
  • The portfolio today Opinion
  • Energy: Oil and Gas Futures
  • flag_europe EU: Industrial Producer Prices – Domestic Market. Jan 2018
  • flag_usa US: Consumer Confidence Index (Final). Feb 2018
  • flag_usa US: Trump Invites Trade War
  • flag_japan Japan Update
  • flag_china China Update
  • Today at the stock market

    bull/bearThe S&P 500 ended another turbulent week on an upbeat note Friday, but major indexes posted their worst week of losses since early February as President Donald Trump’s threat to impose import tariffs on steel and aluminium rattled investors.

    The gains on Friday came as investors who had been spooked by the prospect of a global trade war backed off those concerns and noted a trade war was far from certain at this point.

    • The S&P 500 index gained 13.58 points, or 0.51%, to 2,691.25
    • The Dow Jones Industrial Average fell 70.92 points, or 0.29%, to 24,538.06
    • The Nasdaq Composite indices added 77.31 points, or 1.08%, to 7,257.87
    • Advancing issues outnumbered declining ones on the NYSE by a 1.69-to-1 ratio; on Nasdaq, a 2.99-to-1 ratio favored advancers.
    • The S&P 500 posted one new 52-week high and 25 new lows; the Nasdaq Composite recorded 59 new highs and 65 new lows.
    • About 7.7 billion shares changed hands on U.S. exchanges. That compares with the 8.4 billion daily average for the past 20 trading days, according to Thomson Reuters data.

    For the week, the S&P 500 dropped 2%, while the Dow was down 3% and the Nasdaq fell 1%. Wall Street had posted gains in the previous two weeks as it recovered from its steep early-Feb 2018 selloff. Those losses in early Feb 2018 pushed the S&P 500 down more than 10% from a 26 Jan 2018 record high, confirming the market was in a correction.

    Trump on Thursday threatened a 25% tariff on steel imports and 10% on aluminium without exemptions for any countries, igniting a selloff in a market already on edge over rising U.S. interest rates and bond yields. Trump struck a defiant tone on Friday, saying trade wars were“good, and easy to win”, and U.S. Commerce Secretary Wilbur Ross, appearing on CNBC, said tariffs would have a“trivial effect.”

    Phil Orlando, chief equity strategist at Federated Investors in New York, said Trump’s announcement was made to call everyone’s attention to the U.S. trade deficit but investors decided that a full-blown global trade was not going to happen.

    “For a real estate guy like that, you pound the podium, you rattle some sabers, you get everybody’s attention and then you negotiate back to some reasonable midpoint.”

    The tariffs could dampen profits for everything from car makers to beer companies and result in higher prices for consumers.

    Shares of big U.S. steel companies and manufacturers were under pressure on uncertainty over the effects of tariffs.

    Shares in Caterpillar, a buyer of raw materials and a big exporter of construction machinery products, were down 2.6% after falling 2.8% in the previous day’s session. General Motors was down 1%.

    The tariffs are unlikely to significantly hurt Corporate America’s overall earnings, according to stock market strategists, who were not immediately adjusting their profit estimates following Trump’s announcement.

    “The impact on total corporate earnings first would be driven by the impact on the economy,” said Keith Parker, U.S. equity strategist for UBS in New York.

    McDonald’s dropped 4.8% after RBC lowered its price target on the stock and cut its 2018 earnings estimate, citing a disappointing early sales impact from McDonald’s value menu. The stock was the biggest drag on the S&P and the Dow.

    J.C. Penney Co Inc shares fell 5.4% after the department store chain missed same-store sales estimates.Reuters

    The threat of a trade war sparked the early selling, only to ease as the president’s recent history of backing off seemingly iron-clad policy positions gave rise to speculation the actual levies may not disrupt global growth.

    “People always forget that Trump is a negotiator, and when you negotiate, you don’t negotiate from the point where you want it to end up — you put an anchor out, and you negotiate from that anchor,” said Brent Schutte, chief investment strategist of Northwestern Mutual Life Insurance Co.’s wealth-management unit “Yesterday was an anchor. I do believe there will be some give back if others are willing to give the U.S. something.”

    Earlier, Trump pushed back against a wave of criticism of the steel and aluminum tariffs he proposed Thursday, saying “trade wars are good.” The possibility of the levies raised the prospect of tit-for-tat curbs on American exports and higher prices for domestic users, further clouding the outlook for economic growth at a time when central banks around the world are embarking on policy-tightening or approaching it.

    “When people are nervous, they’re more likely to react and overreact more strongly,” said James Norman, head of equity strategy at QS Investors. “And that’s the kind of market environment we’re in right now.”

    Elsewhere, the Stoxx Europe 600 Index sank more than 2% for a 4th day of losses, while Germany’s DAX Index reached its lowest level since Aug 2017. Japan led the retreat in Asia earlier, with the Topix Index tumbling after Bank of Japan Governor Haruhiko Kuroda mentioned for the first time a possible time frame for discussing an exit from its extraordinary easing program. The yen surged to the strongest since 2016 and shares from Hong Kong to Australia declined.

    Kuroda’s comments were seen as further evidence the era of massive stimulus that boosted asset prices and slashed borrowing costs is coming to an end. Earlier this week, Federal Reserve Chair Jerome Powell sparked speculation the central bank may quicken the pace of monetary tightening, a move investors worry could derail economic expansion.

    “The market is looking ahead like, are four more rate hikes, and then hikes into next year, going to be an incremental negative that’s going to slow down the economy?” said Jeff James, a portfolio manager at Driehaus Capital Management.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) 2,691.25 +0.50% 2,673.61 +0.65%
    DJIA INDU 24,538.06 -0.29% 24,719.22 -0.74%
    NASDAQ IXIC 7,257.87 +1.07% 6,903.39 +5.13%

    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 3.267 +0.55% 3.068 +6.50%
    Valuation Rate USD/AUD 0.78109 +0.01% 0.78528 -0.54%
    AUD-denominated Index AUD 4.185 +0.54% 3.909 +7.06%

    Portfolio stock prices

    Stock Ticker Today Change 31 Dec 17 YTD
    Alphabet A GOOGL $1,084.14 +1.18% $1,053.00 +2.95%
    Alphabet C GOOG $1,078.92 +0.87% $1,045.65 +3.18%
    Apple AAPL $176.21 +0.69% $169.23 +4.12%
    Amazon AMZN $1,500.25 +0.45% $1,169.54 +28.27%
    Ebay EBAY $42.95 +1.60% $37.76 +13.74%
    Facebook FB $176.62 +0.38% $176.46 +0.09%
    PayPal PYPL $78.87 +0.29% $73.61 +7.14%
    Twitter TWTR $33.00 +2.35% $24.01 +37.44%
    Visa V $120.77 +0.30% $114.02 +5.92%
    VMware VMW $116.34 -5.92% $125.32 -7.17%

    FX: USD/AUD

    USD

    The USD could face headwinds if President Donald Trump’s proposals to impose stiff tariffs on steel and aluminium imports are enacted, with the biggest risk stemming from the possible flight of capital flows needed to finance ballooning U.S. deficits.

    Currency markets, in general, dislike any form of trade intervention and previous protectionist efforts by the U.S. government have resulted in dollar weakness.

    “The U.S. is now in a very precarious position because it’s putting a risk premium on U.S. assets by introducing tariffs and going down this protectionist route, which is negative for growth,” said Mark McCormick, head of North American FX strategy at TD Securities in Toronto.

    The introduction of import tariffs threatens to increase the price of foreign products in the United States, reducing demand and imports.

    Tariffs introduced by Presidents George W. Bush and Bill Clinton in 2002 and 1995 had resulted in a 15% decline in the USD overall, according to estimates from TD Securities, although there were other factors that also undermined the USD during those periods.

    The biggest risk for the USD stems from the possible exodus of capital flows, analysts said. If risk sentiment worsens significantly, this would outweigh any short-term advantage the dollar would have against emerging markets in its role as a safe-haven bet, they said.

    Trump said on Thursday duties of 25% on steel imports and 10% on aluminium would be formally announced next week, although White House officials later said some details still needed to be ironed out.

    The USD fell against most currencies after the announcement, falling to a more than two-year low versus the JPY.Reuters

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

    The Bloomberg Dollar Spot Index fell 0.3%.
    The EUR rose 0.5% to USD 1.2328.
    Britain’s GBP rose 0.1% to USD 1.379.
    Japan’s JPY rose 0.5% to 105.73 per USD, the strongest since Nov 2016.

    The yield on 10-year Treasuries increased 5 basis points to 2.86%.
    Germany’s 10-year yield rose 1 basis points to 0.65%.
    Britain’s 10-year yield rose 1 basis point to 1.47%.
    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 15:49= ET

    • NYMEX West Texas Intermediate (WTI): $61.41/barrel +0.69% Chart
    • ICE (London) Brent North Sea Crude: $64.51/barrel +1.07% Chart
    • NYMEX Natural gas futures: $2.71/MMBTU +0.52% Chart

    flag_europe EU: Industrial Producer Prices – Domestic Market. Jan 2018

    Press Release Extract [eu_ipp]

    In January 2018, compared with December 2017, industrial producer prices rose by 0.4% in both the euro area (EA19) and the EU28. In December 2017, prices increased by 0.1% in both the euro area and the EU28.

    eu_ipp_20180302

    In January 2018, compared with January 2017, industrial producer prices rose by 1.5% in the euro area and by 1.9% in the EU28.

    Monthly comparison by main industrial grouping and by Member State

    The 0.4% increase in industrial producer prices in total industry in the euro area in January 2018, compared with December 2017, is due to rises of 0.6% for intermediate goods, of 0.4% for both capital goods and durable consumer goods and of 0.3% in the energy sector, while prices fell by 0.1% for non-durable consumer goods. Prices in total industry excluding energy rose by 0.5%.

    In the EU28, the 0.4% increase is due to rises of 1.0% in the energy sector, of 0.7% for intermediate goods, of 0.4% for capital goods and of 0.3% for durable consumer goods, while prices fell by 0.1% for non-durable consumer goods. Prices in total industry excluding energy also rose by 0.4%.

    The highest increases in industrial producer prices were observed in Estonia (+2.9%), Portugal (+1.5%), Romania (+1.3%), Denmark, Latvia and Slovakia (all +1.1%), while the only decrease was recorded in Ireland (-0.4%).

    Annual comparison by main industrial grouping and by Member State

    The 1.5% increase in industrial producer prices in total industry in the euro area in January 2018, compared with January 2017, is due to rises of 2.8% for intermediate goods, of 1.1% for capital goods, durable and non-durable consumer goods and of 0.5% in the energy sector. Prices in total industry excluding energy rose by 1.9%.

    In the EU28, the 1.9% price increase is due to rises of 3.0% for intermediate goods, of 1.9% in the energy sector, of 1.6% for non-durable consumer goods, of 1.2% for durable consumer goods and of 1.1% for capital goods. Prices in total industry excluding energy rose by 2.0%.

    The largest increases in industrial producer prices were recorded in Bulgaria (+5.6%), the United Kingdom (+4.1%), Belgium (+3.8%), Latvia (+3.6%) and Hungary (+3.5%), while decreases were observed in Luxembourg (-3.7%) and Cyprus (-0.4%).

    Eurostat, “Industrial Producer Prices – Domestic Market. Jan 2018“, 2 Mar 2018 More

    flag_usa US: Consumer Confidence Index (Final). Feb 2018

    Press Release Extract [ser_uom]
    Index Feb 2018 Jan 2018 Feb 2017 M-M% Y-Y%
    Index of Consumer Sentiment 99.7 95.7 96.3 +4.2% +3.5%
    Current Economic Conditions 114.9 110.5 111.5 +4.0% +3.0%
    Index of Consumer Expectations 90.0 86.3 86.5 +4.3% +4.0%

    Surveys of Consumers chief economist, Richard Curtin

    Consumer sentiment remained quite favorable in February, at its second highest level since 2004. Consumers based their optimism on favorable assessments of jobs, wages, and higher after-tax pay.

    The highest proportion of households since 1998 reported that their finances had improved compared with a year ago and anticipated continued gains during the year ahead.

    Economic news heard by consumers continued to be dominated by the tax reform legislation and net job gains, which was untarnished by the consensus view that interest rates would increase and stock prices would remain volatile. Although rising interest rates was seen as a reason to temper their longer term outlook for the overall economy, only a modest moderation in the pace of economic growth was anticipated.

    Although consumers expected the unemployment rate to dip below 4% in 2018, only modest wage growth was anticipated, and inflation expectations have remained unchanged. Interest rates, even when pushed higher in the weeks and months ahead, will not cause postponement of discretionary purchases as long as income continues to rise near its present pace.

    Personal tax cuts are crucial to spur additional spending, but unlike prior cuts that had an immediate positive impact, this tax cut has not generated universal support across partisan lines.

    Overall, the data signal an expected gain of 2.9% in real personal consumption expenditures during 2018.

    University of Michigan, “Consumer Confidence Index (Final). Feb 2018“, 2 Mar 2018 (10:00) More

    flag_usa US: Trump Invites Trade War

    President Donald Trump invited a trade war after slapping tariffs on steel and aluminum imports, daring other countries to act on threats of retaliation.

    “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump said in an early morning tweet on Friday.

    Trump is facing anger from manufacturers and trade partners in China and Europe after announcing tariffs of 25 percent on imported steel and 10 percent on aluminum for “a long period of time.” The formal order is expected to be signed next week.

    Republican Senator Ben Sasse of Nebraska cautioned “Trade wars are never won. Trade wars are lost by both sides,” in a statement. “If the President goes through with this, it will kill American jobs — that’s what every trade war ultimately does. So much losing.”

    Trump in a follow-up tweet Monday morning warned of more trade actions ahead, casting them as reciprocal taxes, a term he has used for imposing levies on imports from countries that charge higher duties on U.S. goods than the U.S. currently charges.

    trump_trade_20180302

    The aggressive stance has stoked fears of trade retaliation and roiled global markets. The U.S. dollar weakened for a second day against a basket of currencies, while equity markets across the U.S., Asia and Europe have declined.

    Trump hasn’t given the details of his proposed action on steel and aluminum tariffs, including whether any products or countries would be exempted.

    The planned tariffs, justified on the basis that cut-price metals imports hurt both American producers and national security, now raise the prospect of retaliatory curbs on American exports and higher prices for domestic users. While the practical impact may yet turn out to be limited, the political environment for global trade has just taken a turn for the worse.Bloomberg

    Canada is expected to suffer most from Mr Trump’s move, just as the president seeks to renegotiate the North American Free Trade Agreement with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto.

    “Canada will take responsive measures to defend its trade interests and workers,” said the country’s Foreign Affairs Minister, Chrystia Freeland.

    Canada supplies 16% of US demand for steel while China supplies 2%, followed by Brazil and South Korea. Mr Ciobo said Australia only provided 0.8% of the US steel market and 1.5% of aluminium supply.

    China has previously threatened to limit imports of US soybeans in reaction to US tariffs, while the European Union may also respond with tariffs or other barriers.TheAge

    The International Monetary Fund warned on Friday that U.S. import tariffs on steel and aluminum would likely cause economic damage to the United States and its trading partners, and urged countries to resolve trade disputes without resorting to retaliatory measures.Reuters

    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