Thu 29 Mar 2018 (Q1/2018)


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In Portfolioticker today

read_this Hey Jarvis, how did we go today?

Today at the stock market

bull/bearStocks steadied on Thursday, after a woeful week for major technology companies, even as global equities careened towards their first quarterly drop in two years. Shares tracked by the 47-country MSCI index glided 0.86% higher, with Alphabet, Apple and Facebook retaking the market’s leadership mantle.

  • The S&P 500 gained 35.87 points, or 1.38%, to 2,640.87
  • The Dow Jones Industrial Average rose 254.69 points, or 1.07%, to 24,103.11
  • The Nasdaq Composite added 114.22 points, or 1.64%, to 7,063.45.

Despite equities’ gains, safe-haven bonds also advanced in price.

The volatile give-and-take during the week and quarter would seem to set the table for tense months ahead as buy-the-dip bulls look for corporate earnings to validate the market’s current levels and short-selling bears work to expose investors’ complacency.

Yet David Kelly, chief global strategist at JPMorgan Chase & Co’s funds division, said he is optimistic that markets have clarified the effects of a large U.S. tax cut and the prospect for higher interest rates, factors he says challenged markets during the first quarter.

“It’s not that the uncertainties have gone away on higher rates or lower taxes, but I think we’ve grown accustomed to them, and that should lay a foundation for investors to put more money to work,” he said.

Economic data on Thursday showed U.S. consumer spending rising only marginally, but the number of Americans filing for unemployment benefits dropped to a more than 45-year low last week. Monthly inflation readings moderated.

Those statistics helped keep downward price swings at bay on Thursday after a turbulent start to 2018 in financial markets that is set to end one of the longest quarterly bull runs and included the biggest-ever rise in Wall Street’s “fear gauge,” the CBOE Volatility Index.

A “melt-up” that sent the MSCI’s “all-country” world share index up more than 7% in Jan 2018 suddenly melted away as tensions over global trade escalated, turmoil deepened in the White House and market-leading technology firms wobbled on fears of regulation and other issues. The index is down more than 1% in price terms this year.

Now, the Dow, S&P 500, FTSE, Nikkei and scores of other major indexes are all also down for the year. And there was little place to hide, with U.S. bond returns also in the red for the quarter.

In Asia, Japan’s Nikkei rose 0.6%, while Shanghai closed up 1.2% and Hong Kong’s Hang Seng recovered from an early wobble to add 0.2%. The pan-European FTSEurofirst 300 index rose 0.44%.

Oil continued its march higher. Benchmark Brent crude rose 1%, advancing its gains for the quarter and sidestepping data the day prior showing a surprise build in U.S. crude stockpiles.

Many markets across Europe and the Americas will be closed on the final weekday of the quarter in observance of Good Friday.

A monthly markets poll by Reuters showed trade war and tech sector worries have spooked global investors into cutting equity exposure to a 4-month low and holdings of U.S. stocks to the lowest in nearly two years.

Roger Jones, the head of equities at London & Capital, said he hopes the equity market’s selloff from its highs is not prolonged. “The longer this goes, the higher the chance it will start to affect the man in the street,” said Jones.

Benchmark 10-year U.S. Treasury notes rose in price to yield 2.741%, from 2.775% late on Wednesday. That market action pushed the gap between short- and long-dated Treasury yields to its tightest in a decade. Some investors see the narrowing as a sign the economy will sputter. In addition to that curve flattening, the quarter was marked by a rise in short-term borrowing costs, reflected in the soaring London interbank offered rate (Libor).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) 2,650.56 +1.74% 2,673.61 -0.87%
DJIA INDU 24,241.70 +1.64% 24,719.22 -1.94%
NASDAQ IXIC 7,082.73 +1.92% 6,903.39 +2.59%

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 3.118 +1.26% 3.068 +1.64%
Valuation Rate USD/AUD 0.77312 -0.39% 0.78528 -1.55%
AUD-denominated Index AUD 4.034 +1.64% 3.909 +3.21%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 17 YTD
Alphabet A GOOGL $1,037.14 +3.17% $1,053.00 -1.51%
Alphabet C GOOG $1,031.79 +2.71% $1,045.65 -1.33%
Apple AAPL $167.78 +0.78% $169.23 -0.86%
Amazon AMZN $1,447.34 +1.11% $1,169.54 +23.75%
Ebay EBAY $40.24 +0.32% $37.76 +6.56%
Facebook FB $159.79 +4.41% $176.46 -9.45%
PayPal PYPL $75.87 +1.07% $73.61 +3.07%
Twitter TWTR $29.01 +1.96% $24.01 +20.82%
Visa V $119.62 +2.24% $114.02 +4.91%
VMware VMW $121.27 +1.10% $125.32 -3.24%

Selected Tech News Headlines

  • Trump escalates attack on Amazon, focusing on tax, shipping: “U.S. President Donald Trump accused Amazon.com Inc on Thursday of not paying enough tax, taking advantage of the U.S. postal system and putting small retailers out of business, but did not present any evidence to back up his criticisms or suggest any specific actions he planned to take. Trump has attacked Amazon and its Chief Executive Jeff Bezos several times, and his latest comment on Twitter came a day after news website Axios reported that Trump was obsessed with the world’s largest online retailer and wanted to rein in its growing power with federal antitrust laws.

    trump_amazon_20180329
    Amazon shares fell as much as 4.5% in morning trade, but later pared losses, down 1.3% at midday. The stock dropped 5% on Wednesday following the Axios report. Amazon declined to comment on the tweet. It was not clear what Trump’s comments were based on.” Reuters

  • Apple unveils new privacy tools ahead of EU law: “Apple is introducing new tools that will allow consumers to control how their data are used and deactivate their Apple ID accounts, as tech companies strive to bring their services into line with a tough new EU data protection law. The European Union General Data Protection Regulation (GDPR) enters into force on 25 May 2018 and is the biggest shake-up of privacy rules since the birth of the internet. It introduces stiff fines of up to 4% of global turnover for companies found to be in breach. Facebook has also announced some privacy changes ahead of the entry into force of the EU law which is seen as raising standards worldwide as companies introduce changes globally. Apple has distanced itself from the likes of Google and Facebook who collect user data to serve them targeted advertising, saying its customers are not the product. Apple’s changes are designed to give users the right to data portability, a new right introduced by GDPR, by allowing them to get a copy of their data which can be transferred to another service.” Reuters
  • Australian Health Department breached privacy laws publishing data of 2.5m people: “The federal Department of Health “unintentionally” breached privacy laws when it published de-identified health records of 2.5 million people online, Australia’s Privacy Commissioner has ruled Ruling. About 1½ years ago, the department published de-identified health data of 10 per cent of the population from the Medicare Benefits Scheme (MBS) and the Pharmaceutical Benefits Scheme (PBS) on the government’s open data website for “research purposes”. A month later, Dr Chris Culnane, Dr Benjamin Rubinstein and Dr Vanessa Teague from the Melbourne University’s School of Computing and Information Systems – easily re-identified records by cross-referencing the dataset with other sources such as Wikipedia, Facebook and news websites. They reported they had pinpointed unique patient records matching 7 well-known Australians, including 3 former or current Members of Parliament and a footballer. After a lengthy investigation, commissioner Timothy Pilgrim has concluded the department had failed to meet the high standard required by the Australian Privacy Principles (APPs), breaching the Privacy Act three times. “The department breached APP 6 (only in relation to health providers) by disclosing such personal information for a purpose other than that for which it was collected,” his report reads. “It breached APP 1 and APP 11 [because] the steps taken … to confirm personal information was removed from the dataset prior to its publication were inadequate relative to the sensitivity of the information and the context of its release.” SMH

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 0.2%.
The EUR was little changed at USD1.2303.
Britain’s GBP fell 0.4% to USD 1.4027.
Japan’s JPY rose 0.4% to 106.41 per USD.

The yield on 10-year Treasuries fell 4 basis points to 2.74%, the lowest in more than 7 weeks.
Germany’s 10-year yield fell 1 basis point to 0.49%.
Britain’s 10-year yield fell 1 basis point to 1.35%, the lowest in more than 2 months.
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 13:48 EDT

  • NYMEX West Texas Intermediate (WTI): $64.88/barrel +0.78% Chart
  • ICE (London) Brent North Sea Crude: $70.27/barrel +1.06% Chart
  • NYMEX Natural gas futures: $2.73/MMBTU +1.26% Chart

flag_australia AU: Australian National Accounts: Finance and Wealth. Dec 2017

Press Release Extract [au_wealth]

In the December quarter 2017, non-financial corporations invested $53.7b which was funded by both gross saving and net borrowing. Households invested $44.5b and primarily funded this through gross saving. The general government sector invested $16.0b and funded investment through gross saving and net borrowing.

au_capform_20180329

National investment increased $7.7b in the December quarter 2017 to its highest level of $117.3b. While national investment fell steadily from a peak of $116.0b in December quarter 2012 following a decline in mining investment, growth in recent quarters was driven by both the private and public sector.

au_invest_20180329

Private non-financial corporations investment was $47.6b in December quarter 2017. It has recovered from a low of $36.6b in March quarter 2017 following a steady decline since its peak of $63.5b in June quarter 2013. Household investment was $44.5b in December quarter 2017 and has grown steadily since the $25.4b recorded in March quarter 2013.

During December quarter 2017, national net borrowing was $14.0b with non-financial corporations borrowing $18.5b, financial corporations borrowing $4.9b and the general government borrowing $4.1b. In contrast, households lent $13.4b to other sectors.

Net borrowing of $18.5b by non-financial corporations was a result of acquiring $10.7b of financial assets and incurring $29.2b in liabilities. Financial assets acquired were equities, deposits and loans and placements. Non-financial corporations incurred liabilities through the issuance of equity.

Net borrowing of $4.9b by financial corporations was a result of acquiring $51.2b of financial assets and incurring $56.0b in liabilities. The acquisition of financial assets by financial corporations was driven by issuance of loans and the acquisition of equities, these were partly offset by derivative settlements. Financial corporations net incurrence of liabilities was driven by the acceptance of deposits, positive net transaction in equity in reserves and bond issuance. These were partly offset by settlement in derivative liabilities.

Net borrowing of $4.1b by general government was a result of acquiring $8.9b of financial assets and incurring $13.0b in liabilities. The financial assets primarily acquired by national general government were deposit assets, equities and loans and placements. These were partly offset by divestment in one name paper.

Households were net lenders in December quarter 2017. Households acquired $32.2b in net equity in reserves, of which unfunded super contributed $3.1b. Households acquired $10.4b in deposits assets and incurred liabilities through $30.8b in loan borrowings.

Australian Bureau of Statistics, “5232.0 – Australian National Accounts: Finance and Wealth, Dec 2017“, 29 Mar 2018 (11:30 AEDT) More

flag_australia AU: Engineering Construction Activity. Dec 2017

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“, 29 Mar 2018 (11:30 AEDT) More

flag_australia AU: Job Vacancies. Feb 2018

Press Release Extract [au_vacancies]

Trend Estimates

  • Total job vacancies in February 2018 were 220,800, an increase of 4.0% from November 2017.
  • The number of job vacancies in the private sector was 201,600 in February 2018, an increase of 4.4% from November 2017.
  • The number of job vacancies in the public sector was 19,100 in February 2018, a decrease of 0.1% from November 2017.

au_vacancies_20180329

Australian Bureau of Statistics, “6354.0 – Job Vacancies, Australia, Feb 2018“, 29 Mar 2018 (11:30 AEDT) More

flag_usa US: Unemployment Insurance Weekly Claims Report

Press Release Extract [us_ui]

In the week ending March 24, the advance figure for seasonally adjusted initial claims was 215,000, a decrease of 12,000 from the previous week’s revised level. This is the lowest level for initial claims since January 27, 1973 when it was 214,000. The previous week’s level was revised down by 2,000 from 229,000 to 227,000. The 4-week moving average was 224,500, a decrease of 500 from the previous week’s revised average. The previous week’s average was revised up by 1,250 from 223,750 to 225,000.

Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal.

us_ui

The advance seasonally adjusted insured unemployment rate was 1.3 percent for the week ending March 17, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending March 17 was 1,871,000, an increase of 35,000 from the previous week’s revised level. The previous week’s level was revised up 8,000 from 1,828,000 to 1,836,000. The 4-week moving average was 1,861,500, a decrease of 12,750 from the previous week’s revised average. This is the lowest level for this average since January 5, 1974 when it was 1,838,500. The previous week’s average was revised down by 6,250 from 1,880,500 to 1,874,250.

us_ue

Unadjusted Data

The advance number of actual initial claims under state programs, unadjusted, totaled 192,440 in the week ending March 24, a decrease of 5,611 (or -2.8 percent) from the previous week. The seasonal factors had expected an increase of 5,218 (or 2.6 percent) from the previous week. There were 228,269 initial claims in the comparable week in 2017.
The advance unadjusted insured unemployment rate was 1.5 percent during the week ending March 17, unchanged from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 2,106,576, a decrease of 1,498 (or -0.1 percent) from the preceding week. The seasonal factors had expected a decrease of 40,399 (or – 1.9 percent) from the previous week. A year earlier the rate was 1.6 percent and the volume was 2,283,882.

The total number of people claiming benefits in all programs for the week ending March 10 was 2,140,845, a decrease of 87,182 from the previous week. There were 2,322,025 persons claiming benefits in all programs in the comparable week in 2017.

Extended benefits were payable in Alaska and the Virgin Islands during week ending March 10.

Initial claims for UI benefits filed by former Federal civilian employees totaled 568 in the week ending March 17, a decrease of 91 from the prior week. There were 644 initial claims filed by newly discharged veterans, a decrease of 17 from the preceding week.

There were 10,462 former Federal civilian employees claiming UI benefits for the week ending March 10, a decrease of 1,574 from the previous week. Newly discharged veterans claiming benefits totaled 8,248, an increase of 376 from the prior week.

The highest insured unemployment rates in the week ending March 10 were in the Virgin Islands (6.4), Alaska (3.4), New Jersey (2.9), Connecticut (2.8), Puerto Rico (2.7), Montana (2.5), Rhode Island (2.5), Massachusetts (2.4), California (2.3), and Illinois (2.3).

The largest increases in initial claims for the week ending March 17 were in New York (+1,218), New Jersey (+647), Connecticut (+540), Pennsylvania (+439), and Vermont (+296), while the largest decreases were in California (-2,425), Texas (-1,011), Georgia (-866), Michigan (-756), and Illinois (-480).

Employment and Training Administration, “Unemployment Insurance Weekly Claims Report“, 29 Mar 2018 (08:30) More

flag_usa US: Personal Income and Outlays. Feb 2018

Press Release Extract [us_pce]

Personal income increased $67.3 billion (0.4 percent) in February according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $53.9 billion (0.4 percent) and personal consumption expenditures (PCE) increased $27.7 billion (0.2 percent).

Real DPI increased 0.2 percent in February and Real PCE increased less than 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

The increase in personal income in February primarily reflected increases in wages and salaries and nonfarm proprietors’ income.

The $1.4 billion increase in real PCE in February reflected an increase of $1.0 billion in spending for goods and a $0.5 billion increase in spending for services. Within goods, recreational goods and vehicles was the leading contributor to the increase. Within services, financial services and insurance was the leading contributor to the increase.

Personal outlays increased $27.8 billion in February. Personal saving was $497.4 billion in February and the personal saving rate, personal saving as a percentage of disposable personal income, was 3.4 percent.

2017 Personal Income and Outlays

Personal income increased 3.1 percent in 2017 (that is, from the 2016 annual level to the 2017 annual level), compared with an increase of 2.4 percent in 2016. DPI increased 2.9 percent in 2017 compared with an increase of 2.6 percent in 2016. In 2017, PCE increased 4.5 percent, compared with an increase of 4.0 percent in 2016.
Real DPI increased 1.2 percent in 2017, compared with an increase of 1.4 percent in 2016. Real PCE increased 2.8 percent, compared with an increase of 2.7 percent in 2016.

Bureau of Economic Analysis, “BEA 18-15: Personal Income and Outlays. Feb 2018“, 29 Mar 2018 (08:30) More

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

Press Release Extract [ser_uom]
Index Mar 2018 Feb 2018 Mar 2017 M-M% Y-Y%
Index of Consumer Sentiment 101.4 99.7 96.9 +1.7% +4.6%
Current Economic Conditions 121.2 114.9 113.2 +5.5% +7.1%
Index of Consumer Expectations 88.8 90.0 86.5 -1.3% +2.7%

Surveys of Consumers chief economist, Richard Curtin

Consumer sentiment at month’s end was marginally below the mid-month reading due to uncertainty about the impact of the proposed trade tariffs. The Sentiment Index, however, still reached the highest level since 2004, and the Current Conditions Index set a new all-time peak. Importantly, all of the March gain in the Sentiment Index was among households with incomes in the bottom third (+14.1); those in the middle third were unchanged, while the Index fell among households in the top third (-5.6).

Households with incomes in the top third cited significantly greater concerns with government economic policies than last month, especially trade policies, with net references falling from +31 to just +1, offsetting their positive reactions to tax policies.

The consensus expectation among consumers is that interest rates will increase in the foreseeable future. While consumers view the current level of interest rates as still relatively low, they understand that interest rate hikes are intended to dampen the future pace of economic growth. Their reaction will both emphasize borrowing-in-advance of those expected increases as well as heighten their precautionary savings motives. The trade-off between spending and saving will crucially depend on the pace of future interest rate hikes compared with the pace of income growth.

It is likely that income growth will initially dominate, tilting consumers’ motives more toward spending than saving. Overall, the data are consistent with a growth rate of 2.6% in consumption from mid-2018 to mid-2019.

University of Michigan, “Consumer Confidence Index (Final). Mar 2018“, 29 Mar 2018 (10:00 EDT) 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 today [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 today [Chart: Google Finance]