Wed 28 Mar 2018


Shows:  watch Nightly Business Report. watch PBS NewsHour. watch Bloomberg Technology.
Special: watch CNBC: Trump Wants To Target Amazon With AntiTrust or Tax Axios Report.
Special: watch Bloomberg: Australian Banks Face Rising Funding Costs.
Indices: chart Market Today. Market (52 weeks). Portfolio (52 weeks).
FX:        chart USD Today. USD Year. AUD Today. AUD Year.


In Portfolioticker today

read_this Hey Jarvis, how did we go today?

Today at the stock market

bull/bearWall Street closed lower after a rocky session on Wednesday as gains in consumer staples and healthcare were offset by a sharp drop in Amazon shares and a continuing slide in technology stocks.

  • The S&P 500 index fell 7.62 points, or 0.29%, to 2,605.
  • The Dow Jones Industrial Average fell 9.29 points, or 0.04%, to 23,848.42.
  • The Nasdaq Composite fell 59.58 points, or 0.85%, to 6,949.23.
  • Advancing issues outnumbered declining ones on the NYSE by a 1.12-to-1 ratio; on Nasdaq, a 1.22-to-1 ratio favored decliners.
  • Volume on U.S. exchanges was 6.96 billion shares, compared to the 7.36 billion average for the full session over the last 20 trading days.

All three major U.S. indexes ended the day in negative territory following Tuesday’s late-session tech-driven sell-off following Monday’s rally as traders moved to defensive stocks after recent weeks’ heightened volatility.

“People should expect what’s happening given the kind of volatility we’ve seen as well as the fact that we’re kind of in a news vacuum prior to quarterly earnings,” Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana, said. “It’s a market that’s really looking for the next leadership.”

Online retailer Amazon.com was down as much as 6.7%, losing more than $53 billion in market value after a report that President Donald Trump indicated he wanted to rein in the company. The stock later pared its loses to end the day down 4.4%.

Shares of automaker Tesla slumped 7.7%, extending recent losses, following a credit downgrade and news that officials are investigating a fatal crash and fire in California.

Countering those losses were gains for consumer staples, real estate, telecom, and healthcare.

The S&P Energy index posted the biggest loss of the 11 major S&P sectors, ending 1.99% lower as crude prices fell after data showed a surprise build in U.S. stocks.

The markets shrugged off a report from the U.S. Commerce Department that the U.S. economy slowed less than previously reported in the fourth quarter as consumer spending grew at its fastest quarterly pace in three years. GDP expanded at a 2.9% annual rate in the last 3 months of 2017, ahead of the previously reported 2.5%.

Strong economic data could invite a more hawkish approach by the U.S. Federal Reserve this year with respect to further interest rate hikes.

“I’m not surprised by the economic data,” said Carlson. “But the market right now is looking past that from a valuation standpoint.”

Stocks had jumped earlier in the week as trade war fears ebbed following comments from officials in the United States and China that implied the world’s two largest economies would renegotiate tariffs and trade imbalances.

China is expected to announce a list of tariffs on U.S. imports in retaliation against the expected tariff proposals from the U.S. on Chinese goods.Reuters

Market indices

Market indices
^ S&P500 Index today (mouseover for 12 month view) [Chart: Google Finance]

Index Ticker Today Change 31 Dec 17 YTD
S&P 500 SPX (INX) 2,605.00 -0.30% 2,673.61 -2.57%
DJIA INDU 23,848.42 -0.04% 24,719.22 -3.53%
NASDAQ IXIC 6,949.23 -0.86% 6,903.39 +0.66%

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 3.079 -1.39% 3.068 +0.36%
Valuation Rate USD/AUD 0.77108 -0.22% 0.78528 -1.81%
AUD-denominated Index AUD 3.994 -1.18% 3.909 +2.19%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 17 YTD
Alphabet A GOOGL $1,005.18 -0.18% $1,053.00 -4.55%
Alphabet C GOOG $1,004.56 -0.06% $1,045.65 -3.93%
Apple AAPL $166.48 -1.11% $169.23 -1.63%
Amazon AMZN $1,431.42 -4.39% $1,169.54 +22.39%
Ebay EBAY $40.11 -0.28% $37.76 +6.22%
Facebook FB $153.03 +0.53% $176.46 -13.28%
PayPal PYPL $75.06 -1.64% $73.61 +1.96%
Twitter TWTR $28.45 +1.35% $24.01 +18.49%
Visa V $116.99 -0.35% $114.02 +2.60%
VMware VMW $119.95 -2.78% $125.32 -4.29%

Selected Tech News Headlines

  • Amazon sheds $53 billion in market value after report on Trump threat: “Amazon.com Inc shares fell as much as 7.4% on Wednesday, wiping about $53.6 billion from its market value after U.S. President Donald Trump reportedly indicated he wanted to rein in the U.S. technology and retail group.” Reuters Axios: “Trump’s deep-seated antipathy toward Amazon surfaces when discussing tax policy and antitrust cases. The president would love to clip CEO Jeff Bezos’ wings. But he doesn’t have a plan to make that happen.” Axios Report
  • Oracle wins copyright against Google’s use of Java: “The U.S. Court of Appeals for the Federal Circuit said Google’s use of Oracle’s Java development platform to create the Android operating system was not protected under the fair-use provision of copyright law, reversing a 2016 jury verdict. The court sent the case back to a U.S. judge in San Francisco for a trial to determine how much compensation Google owes Oracle. Oracle had previously sought $9 billion in damages. The closely watched case, which dates to 2010, involves how much copyright protection should extend to the Java programming language, which Google used to design the Android operating system that runs most of the world’s smartphones. Annemarie Bridy, a professor of intellectual property at the University of Idaho College of Law, said in an interview the ruling could stifle software innovation by opening up developers to potential liability for copyright infringement. This is a ruling that could have a significant chilling effect on software developers,” she said, noting that they rely on computer code like Oracle’s to make apps communicate with each other. Reuters
  • Facebook’s Zuckerberg to testify before Congress …: “Facebook Inc Chief Executive Mark Zuckerberg plans to testify before U.S. Congress, a source briefed on the matter said on Tuesday, as he bows to pressure from lawmakers insisting he explain how 50 million users’ data ended up in the hands of a political consultancy.” Reuters
  • … However Zuckerberg decided not to personally appear before the UK Parliament: “Mark Zuckerberg has come under intense criticism from the UK parliamentary committee investigating fake news after the head of Facebook refused an invitation to testify in front of MPs for a third time. When the Commons committee travelled to Washington DC in February to obtain oral evidence from US companies, Facebook flew over its UK policy director rather than send a high-level executive to speak to the committee. In response to the latest request, Facebook has suggested one of two executives could speak to parliament: Chris Cox, the company’ chief product officer, who is in charge of the Facebook news feed, or Mike Schroepfer, the chief technology officer, who heads up the developer platform.” Guardian (UK)

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 0.8% to USD 1.2301.
Britain’s GBP 0.6% to USD 1.4077.
Japan’s JPY fell 1.5 percent to 106.97 per USD.

The yield on 10-year Treasuries was little changed at 2.78%.
Britain’s 10-year yield declined 5 basis points to 1.36%.
Germany’s 10-year yield was little changed at 0.50%.
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 EDT

  • NYMEX West Texas Intermediate (WTI): $64.61/barrel -0.98% Chart
  • ICE (London) Brent North Sea Crude: $69.78/barrel -0.47% Chart
  • NYMEX Natural gas futures: $2.70/MMBTU -0.44% Chart

flag_china China: North Korea to Meet with USA and Denuclearise

North Korean leader Kim Jong Un has pledged to denuclearize and meet U.S. officials, China said on Wednesday after an historic meeting with President Xi Jinping, who promised China would uphold its friendship with its isolated neighbor.

After two days of speculation, China and North Korea both confirmed that Kim had visited Beijing and met Xi during what China’s Foreign Ministry called an unofficial visit to China from Sunday to Wednesday.

The China visit was Kim’s first known trip outside North Korea since he assumed power in 2011 and is believed by analysts to serve as preparation for upcoming summits with South Korea and the United States.

North Korea’s KCNA news agency made no mention of Kim’s pledge to denuclearize, or his anticipated meeting with U.S. President Donald Trump that is planned for some time in May.

Beijing has traditionally been the closest ally of secretive North Korea, but ties have been frayed by North Korea’s pursuit of nuclear weapons and China’s backing of tough U.N. sanctions in response.

China’s Foreign Ministry cited Kim in a lengthy statement as telling Xi that the situation on the Korean peninsula is starting to improve because North Korea has taken the initiative to ease tensions and put forward proposals for peace talks.

“It is our consistent stand to be committed to denuclearization on the peninsula, in accordance with the will of late President Kim Il Sung and late General Secretary Kim Jong Il,” Kim Jong Un said, according to the statement.

North Korea is willing to talk with the United States and hold a summit between the two countries, he said.

“The issue of denuclearization of the Korean Peninsula can be resolved, if South Korea and the United States respond to our efforts with goodwill, create an atmosphere of peace and stability while taking progressive and synchronous measures for the realization of peace,” Kim said.

Kim Jong Un’s predecessors, grandfather Kim Il Sung and father Kim Jong Il, both publicly promised not to pursue nuclear weapons but secretly continued to develop the programs, culminating in the North’s first nuclear test in 2006 under Kim Jong Il.

The North had said in past failed talks aimed at dismantling its nuclear program that it could consider giving up its arsenal if the United States removed its troops from South Korea and withdrew its so-called nuclear umbrella of deterrence from South Korea and Japan.

Many analysts and former negotiators believe this still constitutes North Korea’s stance on denuclearization of the Korean peninsula and remain deeply skeptical Kim is willing to give up the nuclear weapons his family has been developing for decades.

Though billed as an unofficial trip, Kim’s appearance in Beijing contained almost all the trappings of a state visit, complete with an honor guard and banquet at Beijing’s Great Hall of the People.

China briefed Trump on Kim’s visit and the communication included a personal message from Xi to Trump, the White House said in a statement.

“The United States remains in close contact with our allies South Korea and Japan. We see this development as further evidence that our campaign of maximum pressure is creating the appropriate atmosphere for dialogue with North Korea,” the statement said.

A top Chinese diplomat, Politburo member Yang Jiechi, will brief officials in Seoul on Thursday, including President Moon Jae-in, on Xi’s meeting with Kim, according to the presidential office in Seoul.

China had largely sat on the sidelines as Pyongyang improved its relations with Seoul, prompting worry in Beijing that it was no longer a central player in the North Korean issue, reinforced by Trump’s subsequent announcement of his proposed meeting with Kim in May.Reuters

flag_australia AU: Engineering Construction Activity. Dec-17

Press Release Extract [au_const]

VALUE OF WORK DONE, CHAIN VOLUME MEASURES

Total:

  • The trend estimate for the value of total engineering construction work done rose 1.9% in the December 2017 quarter.
  • The seasonally adjusted estimate for the value of total engineering construction work done fell 35.1% in the December quarter to $22,272.5m.

Private Sector:

  • The trend estimate for the value of work done for the private sector rose 1.9% in the December quarter.
  • The seasonally adjusted estimate for the value of work done for the private sector fell 46.6% in the December quarter to $13,533.1m.

Public Sector:

  • The trend estimate for the value of work done for the public sector rose 1.7% in the December quarter.
  • The seasonally adjusted estimate for the value of work done for the public sector fell 2.6% in the December quarter to $8,739.4m.

Value of Work Commenced, Current Prices:

  • The value of work commenced in the December quarter was $15,273.3m in original terms, a decrease of 40.3% from the September quarter.

Australian Bureau of Statistics, “8762.0 – Engineering Construction Activity, Australia, Dec 2017“, 28 Mar 2018 (11:30 AEDT) More

flag_usa US: GDP and Corporate Profits Q4/2017 and 2017

Press Release Extract [us_gdp]

Real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the fourth quarter of 2017, according to the “third” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.2 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 2.5 percent. With this third estimate for the fourth quarter, the general picture of economic growth remains the same; personal consumption expenditures (PCE) and private inventory investment were revised up.

us_gdp_20180328

Real gross domestic income (GDI) increased 0.9 percent in the fourth quarter, compared with an increase of 2.4 percent in the third. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.9 percent in the fourth quarter, compared with an increase of 2.8 percent in the third quarter.

The increase in real GDP in the fourth quarter primarily reflected positive contributions from PCE, nonresidential fixed investment, exports, residential fixed investment, state and local government spending, and federal government spending that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the fourth quarter reflected a downturn in private inventory investment that was partly offset by accelerations in PCE, exports, state and local government spending, nonresidential fixed investment, and federal government spending, and an upturn in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, turned up.

Current-dollar GDP increased 5.3 percent, or $253.5 billion, in the fourth quarter to a level of $19,754.1 billion. In the third quarter, current-dollar GDP increased 5.3 percent, or $250.6 billion.

The price index for gross domestic purchases increased 2.5 percent in the fourth quarter, compared with an increase of 1.7 percent in the third quarter. The PCE price index increased 2.7 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.9 percent, compared with an increase of 1.3 percent.

2017 GDP

Real GDP increased 2.3 percent in 2017 (that is, from the 2016 annual level compared with an increase of 1.5 percent in 2016.

The increase in real GDP in 2017 primarily reflected positive contributions from PCE, nonresidential fixed investment, and exports. These contributions were partly offset by a decline in private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP from 2016 to 2017 reflected upturns in nonresidential fixed investment and in exports and a smaller decrease in private inventory investment. These movements were partly offset by decelerations in residential fixed investment and in state and local government spending. Imports, which are a subtraction in the calculation of GDP, accelerated.

Current-dollar GDP increased 4.1 percent, or $766.1 billion, in 2017 to a level of $19,390.6 billion, compared with an increase of 2.8 percent, or $503.8 billion, in 2016.

The price index for gross domestic purchases increased 1.8 percent in 2017, compared with an increase of 1.0 percent in 2016. The PCE price index increased 1.7 percent, compared with an increase of 1.2 percent. Excluding food and energy prices, the PCE price index increased 1.5 percent, compared with an increase of 1.8 percent.

During 2017 (measured from the fourth quarter of 2016 to the fourth quarter of 2017), real GDP increased 2.6 percent, compared with an increase of 1.8 percent during 2016. The price index for gross domestic purchases increased 1.9 percent during 2017, compared with an increase of 1.4 percent during 2016.

Corporate Profits

Profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) decreased $1.1 billion in the fourth quarter, in contrast to an increase of $90.2 billion in the third quarter.

Profits of domestic financial corporations decreased $14.6 billion in the fourth quarter, in contrast to an increase of $47.8 billion in the third. Profits of domestic nonfinancial corporations increased $19.4 billion, compared with an increase of $10.4 billion. Rest-of-the-world profits decreased $5.9 billion, in contrast to an increase of $32.0 billion. In the fourth quarter, receipts increased $14.9 billion, and payments increased $20.8 billion.

In 2017, profits from current production increased $91.2 billion, in contrast to a decrease of $44.0 billion in 2016. Profits of domestic financial corporations increased $15.7 billion, in contrast to a decrease of $2.0 billion. Profits of domestic nonfinancial corporations increased $37.4 billion, in contrast to a decrease of $51.7 billion. The rest-of-the-world component of profits increased $38.0 billion, compared with an increase of $9.8 billion.

The 2017 Tax Cuts and Jobs Act includes several provisions that impact the business income and personal income statistics in the national income and product accounts (NIPAs). The provisions do not impact corporate profits for current production or GDI but do impact net cash flow in the fourth quarter of 2017.

Bureau of Economic Analysis, “Gross Domestic Product 4th quarter and annual 2017 (third estimate) Corporate Profits 4th quarter and annual 2017“, 28 Mar 2018 (08:30) More

flag_usa US: International Trade Retail & Wholesale. Feb 2018

Press Release Extract [us_retail]

Advance International Trade in Goods

The international trade deficit was $75.4 billion in February, up $0.1 billion from $75.3 billion in January. Exports of goods for February were $136.5 billion, $2.9 billion more than January exports. Imports of goods for February were $211.9 billion, $3.0 billion more than January imports.

Advance Wholesale Inventories

Wholesale inventories for February, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $626.7 billion, up 1.1 percent (±0.2 percent) from January 2018, and were up 5.7 percent (±0.9 percent) from February 2017. The December 2017 to January 2018 percentage change was revised from up 0.8 percent (±0.4 percent) to up 1.0 percent (±0.4 percent).

Advance Retail Inventories

Retail inventories for February, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $628.1 billion, up 0.4 percent (±0.2 percent) from January 2018, and were up 2.5 percent (±0.5 percent) from February 2017. The December 2017 to January 2018 percentage change was unrevised at up 0.7 percent (±0.2 percent).

US Census Bureau, “International Trade Retail & Wholesale. Feb 2018“, 28 Mar 2018 (08:30) More

flag_usa US: Pending Home Sales Index. Feb 2018

Press Release Extract [us_homes]

Pending home sales rebounded sharply in February to their highest level in nearly a year and second-highest level in over a decade, according to the National Association of Realtors®. All major regions saw a notable hike in contract activity last month.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, jumped 5.5 percent to 112.3 in February from 106.4 in January. Last month’s index reading is 2.6 percent above a year ago, is the highest since last April (113.6) and the second highest since May 2006 (112.5).

Lawrence Yun, NAR chief economist, says February’s convincing bump in pending sales is proof that demand is rising with spring on the doorstep. “Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” he said. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.”

Added Yun, “Last month being the warmest February in decades also played a role in kick-starting prospective buyers’ house hunt.”

Looking ahead to the busy spring months, Yun expects to see continued ebbs and flows in activity as new supply struggles to replace listings that are going under contract at a very quick pace. This is especially the case at the lower- and mid-market price ranges, where choices are minimal and prices are being bid higher by multiple offers.

“The homes most buyers are in the market for are unfortunately the most difficult to find and ultimately buy,” said Yun. “The country’s healthy labor market is translating to greater job security, but affordability is not improving because home prices in some areas are still outpacing incomes by three times or more because of tight supply. How much new and existing inventory there is on the market this spring will determine if sales can reach their full potential and finally start reversing the nation’s low homeownership rate.”

Existing-home sales are forecast to be around 5.57 million this year, an increase of 2.3 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 4 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

The PHSI in the Northeast rose 3.4 percent to 102.1 in February, and is now 6.6 percent above a year ago. In the Midwest the index jumped 11.4 percent to 110.8 in February, but is still 0.6 percent lower than February 2016.

Pending home sales in the South climbed 4.3 percent to an index of 127.8 in February and are now 4.2 percent above last February. The index in the West increased 3.1 percent in February to 97.5, but is still 0.2 percent higher than a year ago.

National Association of Realtors, “Pending Home Sales Index. Feb 2018“, 28 Mar 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
^ CSI 300 movements over the past week [Chart: Google Finance]