Mon 23 Apr 2018

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read_this Hey Jarvis, how did we go today?

Today at the stock market

bull/bearWall Street ended mixed on Monday as concerns about soft smartphone demand weighed on tech stocks and pulled the Nasdaq lower while earnings optimism protected against deeper losses. Tech stocks dragged on both the S&P 500 and the Nasdaq ahead of a big week of earnings for the sector.

  • The S&P 500 index rose 0.15 points, or 0.01%, to 2,670.29
  • Of the 11 major S&P sectors, 6 ended the session in positive territory, with the biggest percentage gain coming from the Telecom index.
  • The Dow Jones Industrial Average fell 14.25 points, or 0.06%, to 24,448.69
  • The Nasdaq Composite index fell 17.53 points, or 0.25%, to 7,128.60
  • Declining issues outnumbered advancing ones on the NYSE by a 1.22-to-1 ratio; on Nasdaq, a 1.39-to-1 ratio favored decliners.
  • Volume on U.S. exchanges was 5.76 billion shares, compared to the 6.80 billion average for the full session over the last 20 trading days.

Merck & Co Inc helped lift the healthcare sector, up 2.4% following a Goldman Sachs upgrade to “buy.”

Aluminium company stocks dropped as the United States opened the door to sanctions relief for Russian aluminum giant United Company Rusal Plc. Alcoa fell 13.5% and Arconic fell 5.2%, making it the biggest percentage loser on the S&P.


Yields on 10-year U.S. Treasuries rose to their highest level since Jan 2014 amid concerns over the growing supply of government debt and accelerating inflation.

“The markets are clearly spooked by this move in the bond market … Ultimately if these long-term interest rates continue to move higher, that’s going to continue to be a stumbling block for markets and I think we’ll continue to see markets trading down,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

Earnings Reports

Earnings provided a bright spot, with 18 percent of the companies in the S&P 500 having reported, 78.2 percent of which have beat consensus estimates. Analysts expect earnings growth at S&P 500 companies of nearly 20 percent in the first quarter, the strongest showing in seven years, according to Thomson Reuters data.

“By and large earnings have been very good, they continue to be supportive of the market,” said Stephen Massocca.


Chipmaker shares dropped after the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd, cut its full-year revenue target due to softer demand for smartphones. The Philadelphia Semiconductor index closed down 1.3%, posting its fourth straight session of declines on concerns of slowing smartphone demand.

Google parent Alphabet Inc was up slightly in volatile after-hours trading following its earnings release; the company reported a 73% jump in profits in Q1/2018.

Quarterly results are expected this week from 181 S&P 500 companies, including technology heavy-hitters Facebook, Microsoft, Amazon and Intel Corp.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) 2,670.29 +0.01% 2,673.61 -0.13%
DJIA INDU 24,448.69 -0.06% 24,719.22 -1.10%
NASDAQ IXIC 7,128.60 -0.25% 6,903.39 +3.26%

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 3.138 -0.37% 3.068 +2.30%
Valuation Rate USD/AUD 0.76543 -0.83% 0.78528 -2.53%
AUD-denominated Index AUD 4.101 +0.45% 3.909 +4.91%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 17 YTD
Alphabet A GOOGL $1,073.81 -0.33% $1,053.00 +1.97%
Alphabet C GOOG $1,067.45 -0.52% $1,045.65 +2.08%
Apple AAPL $165.24 -0.29% $169.23 -2.36%
Amazon AMZN $1,517.86 -0.64% $1,169.54 +29.78%
Ebay EBAY $41.60 -1.43% $37.76 +10.16%
Facebook FB $165.84 -0.27% $176.46 -6.02%
PayPal PYPL $78.21 -0.67% $73.61 +6.24%
Twitter TWTR $31.22 -2.17% $24.01 +30.02%
Visa V $124.46 +0.20% $114.02 +9.15%
VMware VMW $135.02 -0.76% $125.32 +7.74%

Selected Tech News Headlines

  • Amazon Has a Top-Secret Plan to Build Home Robots: “Amazon has embarked on an ambitious, top-secret plan to build a domestic robot, according to people familiar with the plans. Codenamed “Vesta,” after the Roman goddess of the hearth, home and family, the project is overseen by Gregg Zehr, who runs Amazon’s Lab126 hardware research and development division based in Sunnyvale, California. Lab126 is responsible for Amazon devices such as the Echo speakers, Fire TV set-top-boxes, Fire tablets and the ill-fated Fire Phone. The Vesta project originated a few years ago, but this year Amazon began to aggressively ramp up hiring. There are dozens of listings on the Lab 126 Jobs page for openings like “Software Engineer, Robotics” and “Principal Sensors Engineer.” People briefed on the plan say the company hopes to begin seeding the robots in employees’ homes by the end of this year, and potentially with consumers as early as 2019, though the timeline could change, and Amazon hardware projects are sometimes killed during gestation.” Bloomberg

Currencies: USD/AUD


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

The USD rallied to a 4-month high on Monday as the 10-year Treasury yield’s climb toward the psychologically important 3% level spurred buying of the USD, leaving the EUR and JPY lower.

The 10-year yield hit its highest in over four years at 2.998%, driven by worries about the growing supply of government debt and accelerating inflation as oil and commodity prices climb. But although traders got close, the 3% barrier continued to hold late into Monday’s session.

The strong USD also reflected an improved outlook on trade. U.S. Treasury Secretary Steven Mnuchin said on Saturday he may travel to China, a move that could ease tensions between the world’s two largest economies.

“The de-escalation of trade tensions favors the dollar in the short run, particularly against the euro and yen,” said Mark McCormick, North American head of foreign exchange strategy at TD Securities in Toronto, Canada.

Rising U.S. bond yields have not always fed through to a higher USD in 2018 as U.S. political uncertainty and geopolitical tensions have sometimes caused a breakdown between interest rates and currency performance.

But with the 10-year Treasury yield closing in on 3% and the gap between U.S. and German government bond rates at a 29-year high, the USD was bought across the board.

The Bloomberg Dollar Spot Index (DXY) rose 0.7% to 90.960, its highest level since 18 Jan 2018.

The EUR fell by 0.7% to a 2-month low of USD 1.2200, not helped by a survey showing business activity in Apr 2018 stabilizing across the euro zone.

The euro had enjoyed a strong rally until February before finding itself stuck in a trading range with the dollar after the European Central Bank cautioned investors expecting it to raise rates sooner than expected. The ECB holds its monetary policy meeting on Thursday.

“I don’t think there’s going to be any change in policy this week. I think the tone might be a little more dovish, especially on the Euro. The last ECB minutes revealed a little bit more concern on the currency side,” said Sireen Harajli, currency strategist at Mizuho in New York.

The rise in bond yields also weakened Asian emerging market currencies versus the USD, with the Chinese CNY and Korean KRW down and the Indonesian IDR hitting a two-year low of 13,895/USD.

The AUD fell to its weakest since 13 Dec 2018, falling to as low as USD 0.760, while Britain’s GBP and New Zealand’s NZD also dropped.

The JPY fell 1% to a session low of JPY 108.73/USD, its weakest since 13 Feb 2018.Reuters

At the end of the session …

The Bloomberg Dollar Spot Index (DXY) rose 0.8%, reaching the highest in almost 14 weeks on its 5th straight advance.
The EUR fell 0.7% to USD 1.2208, dropping to the weakest in almost 8 weeks.
Britain’s GBP fell 0.4% to USD 1.3943.
Japan’s JPY fell 1% to 108.72/USD, touching the weakest level in 10 weeks.

The yield on 10-year Treasuries rose 1 basis point to 2.97%, after reaching the highest in more than 4 years.
Germany’s 10-year yield rose 5 basis points to 0.63%, the highest in 6 weeks.
Britain’s 10-year yield rose 6 basis points to 1.54%.


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

Oil and Gas Futures

Futures prices

Prices are as at 15:47 EDT

  • NYMEX West Texas Intermediate (WTI): $69.02/barrel +0.91%% Chart
  • ICE (London) Brent North Sea Crude: $75.07/barrel +1.36% Chart
  • NYMEX Natural gas futures: $2.74/MMBTU +0.00% Chart

Alphabet Earnings Report. Q1/2018

Press Release Extract [googl]

Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended March 31, 2018.
“Our ongoing strong revenue growth reflects our momentum globally, up 26% versus the first quarter of 2017 and 23% on a constant currency basis to $31.1 billion. We have a clear set of exciting opportunities ahead, and our strong growth enables us to invest in them with confidence,” said Ruth Porat, CFO of Alphabet and Google.

Q1 2018 financial highlights

The following summarizes our consolidated financial results for the quarters ended March 31, 2017 and 2018 (in millions, except for per share information, percentages, and number of employees; unaudited) with results for the quarter ended March 31, 2018 affected by gains on equity securities reflected in other income (expense), net (OI&E):

Operating income and Earnings


Q1 2018 supplemental information (in millions, except percentages; unaudited)

Segment revenues and operating results:

In Q1 2018, Nest joined forces with Google’s hardware team. Consequently, the financial results of Nest have been reported in the Google segment, with Nest revenues reflected in Google other revenues. Prior period segment information has been recast to conform to the current period segment presentation. Consolidated financial results are not affected.


[PT: What are Google properties? More]

Traffic acquisition costs (TAC) to Google Network Members and distribution partners


Monetization metrics information

In Q1 2018, we changed our monetization metrics for Google Network Members’ properties revenues from the percentage change in the number of paid clicks and cost-per-click to the percentage change in the number of impressions and cost-per-impression. The monetization metrics for Google properties revenues remain unchanged.


[Other items not included above are:

  • Q1 2018 impact from equity securities
  • Consolidated balance sheets
  • Consolidated statements of income
  • Consolidated statements of cash flows
  • Reconciliations (incl GAAP : Non-GAAP)
  • Segment results]

Alphabet, “Alphabet Announces First Quarter 2018 Results“, 23 Apr 2018 More

Investor Reaction


Comment: Bloomberg

Google’s digital advertising business generated robust growth in the first quarter, while spending surged.

Parent Alphabet Inc. reported first-quarter sales of $24.9 billion, excluding payments to partners that distribute Google services and ads. Analysts expected $24.3 billion, according to data compiled by Bloomberg. Alphabet shares rose less than 1 percent in after-hours trading.

The results suggest the company has so far shrugged off a privacy backlash against internet companies and their data-heavy ad targeting businesses. Google is the world’s largest digital ad provider, supported by online services that are so useful that consumers have so far continued to share their data and accept targeted ads from the company. Increased concern about privacy and the threat of new regulation may hurt this business, but it would also damage smaller rivals, perhaps more.

Alphabet gave investors several new metrics this quarter. It disclosed more details on its massive investments in private companies like Uber for the first time. The Mountain View, California-based company reported a $3 billion gain on equity securities in the first quarter. That boosted earnings by $3.40 a share. Excluding those gains, Alphabet would have made a profit of $9.93 per share.

Alphabet capital spending surged nearly threefold to $7.7 billion. That reflected a large real-estate investment and investments in Google’s cloud-computing and hardware businesses.

Another brake on earnings: Google payouts to distribution partners, known as Traffic Acquisition Costs, or TAC, which jumped 36 percent to $6.3 billion. Alphabet executives said last quarter that TAC growth would slow down after the first quarter.Bloomberg

flag_europe EU: General Government Deficit and Debt. 2017

Press Release Extract [eu_deficit]

In 2017, the government deficit and debt of both the euro area (EA19) and the EU28 decreased in relative terms compared with 2016. In the euro area the government deficit to GDP ratio fell from 1.5% in 2016 to 0.9% in 2017, and in the EU28 from 1.6% to 1.0%. In the euro area the government debt to GDP ratio declined from 89.0% at the end of 2016 to 86.7% at the end of 2017, and in the EU28 from 83.3% to 81.6%.

In 2017, Malta (+3.9%), Cyprus (+1.8%), the Czech Republic (+1.6%), Luxembourg (+1.5%), Sweden and Germany (both +1.3%), the Netherlands (+1.1%), Denmark (+1.0%), Bulgaria (+0.9%), Greece and Croatia (both +0.8%) and Lithuania (+0.5%) registered a government surplus, while Slovenia reported a government balance. The lowest government deficits as a percentage of GDP were recorded in Ireland and Estonia (both -0.3%), Latvia (-0.5%) and Finland (-0.6%). Two Member States had deficits equal to or higher than 3% of GDP: Spain (-3.1%) and Portugal (-3.0%).

At the end of 2017, the lowest ratios of government debt to GDP were recorded in Estonia (9.0%), Luxembourg (23.0%), Bulgaria (25.4%), the Czech Republic (34.6%), Romania (35.0%) and Denmark (36.4%). Fifteen Member States had government debt ratios higher than 60% of GDP, with the highest registered in Greece (178.6%), Italy (131.8%), Portugal (125.7%), Belgium (103.1%) and Spain (98.3%).

In 2017, government expenditure in the euro area was equivalent to 47.1% of GDP and government revenue to 46.2%. The figures for the EU28 were 45.8% and 44.9% respectively. In both zones the government expenditure ratio decreased between 2016 and 2017, while the government revenue ratio increased.

Eurostat, “Provision of deficit and debt data for 2017 – first notification: Euro area and EU28 government deficit at 0.9% and 1.0% of GDP respectively, Government debt at 86.7% and 81.6%“, 23 Apr 2018 More

flag_europe EU: Flash Eurozone Composite PMI. Apr 2018

Press Release Extract [eu_composite_pmi]

Key findings:

  • Flash Eurozone PMI Composite Output Index at 55.2 (55.2 in March). Growth unchanged.
  • Flash Eurozone Services PMI Activity Index at 55.0 (54.9 in March). 2-month high.
  • Flash Eurozone Manufacturing PMI Output Index at 55.8 (55.9 in March). 17-month low.
  • Flash Eurozone Manufacturing PMI at 56.0 (56.6 in March). 14-month low.


Eurozone business activity continued to rise at a solid pace in April, though the rate of expansion remained considerably weaker than seen earlier in the year amid signs of weaker growth of demand and supply constraints. Slower inflows of new orders, alongside weakened optimism about the business outlook, suggests that growth could slow further in May. Price pressures meanwhile eased during the month from recent elevated levels.

The IHS Markit Eurozone PMI held steady at 55.2 in April, according to flash survey data based on approximately 80% of final responses. The unchanged reading indicated the joint-weakest expansion of business output since the start of 2017, but remained well above the average of 53.8 seen over the past five years.

Manufacturing again led the upturn, albeit with the rate of factory output growth slowing to a 17-month low. Service sector activity meanwhile rose at a rate only marginally faster than March’s seven-month low.

Output growth across the two sectors has fallen sharply since an 11-and-a-half year peak at the start of the year, in line with a slowdown in order book growth. Inflows of new orders rose at the weakest rate for 15 months in April.

Factories reported the smallest gains in both total goods orders and export orders for a year-and-a- half during April, the latter in part dampened by the recent strength of the euro, notably against the US dollar. New business inflows in the service sector meanwhile slipped to an eight-month low, adding to signs of a broad-based waning of demand growth both at home and in export markets.

The survey also continued to suggest that supply constraints contributed to the slowdown in output and orders. In manufacturing, supply chain delays remained widespread, with average delivery times once again lengthening to one of the greatest extents seen in the survey’s two-decade history. Backlogs of work also continued to rise in both sectors as firms struggled to cope with the influx of new business, in some instances linked to shortages of materials and suitable staff.

Employment rose at an increased rate in April, the pace of job creation running at an elevated rate by historical standards of the survey, albeit below that seen at the turn of the year. In some cases, lower employment was linked to recruitment difficulties. While factory hiring slowed, service sector job creation hit the highest since October 2007.

Some easing of inflationary pressures from recent elevated levels was reported, as input costs rose at the slowest rate for seven months. Slower growth of costs helped push selling price inflation down to a four-month low. Costs increases remained widespread, however, linked to both higher raw material prices (often in turn associated with demand exceeding supply) and growing staff costs. The latter led to service sector costs rising at an increased rate during the month.

By country, growth picked up slightly in both France and Germany, but in both cases failed to recover to February’s levels. France’s expansion was consequently the second-weakest in the past eight months while Germany’s was the second-lowest in nine months. While manufacturing acted as the main drag in France, it was the service sector that lagged behind in Germany. Elsewhere, growth slowed to an 18-month low, with both manufacturing and services recording weaker expansions.


Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The Eurozone economy remained stuck in a lower gear in April, with business activity expanding at a rate unchanged on March, which had in turn been the slowest since the start of 2017. Growth has downshifted markedly since the peak at the start of the year, but importantly still remains robust.

“The April data are running at a level broadly consistent with Eurozone GDP growth of approximately 0.6% at the start of the second quarter.

“The decline in the PMI from January’s high is neither surprising nor alarming: such strong growth as that seen at the start of the year rarely persists for long, not least because supply fails to keep up with demand. With recent months seeing record delivery delays for inputs to factories and growing skill shortages, output is clearly being constrained. In France, strikes were also reported to have disrupted growth, and may continue to do so in coming months.

“However, it’s also clear that underlying demand has weakened, in part due to exports being hit by the stronger euro. With companies’ future optimism having slipped to the lowest since last year, it looks likely that growth may well slow further in coming months.”

IHS Markit, “Flash Eurozone Composite PMI. Apr 2018“, 23 Apr 2018 More

flag_usa US: Existing-Home Sales. Mar 2018

Press Release Extract [us_housing]

Existing-home sales grew for the second consecutive month in March, but lagging inventory levels and affordability constraints kept sales activity below year ago levels, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.1 percent to a seasonally adjusted annual rate of 5.60 million in March from 5.54 million in February. Despite last month’s increase, sales are still 1.2 percent below a year ago.

Lawrence Yun, NAR chief economist, says closings in March eked forward despite challenging market conditions in most of the country. “Robust gains last month in the Northeast and Midwest – a reversal from the weather-impacted declines seen in February – helped overall sales activity rise to its strongest pace since last November at 5.72 million,” said Yun. “The unwelcoming news is that while the healthy economy is generating sustained interest in buying a home this spring, sales are lagging year ago levels because supply is woefully low and home prices keep climbing above what some would-be buyers can afford.”

The median existing-home price for all housing types in March was $250,400, up 5.8 percent from March 2017 ($236,600). March’s price increase marks the 73rd straight month of year-over-year gains.

“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets – especially those out West,” said Yun.

Total housing inventory at the end of March climbed 5.7 percent to 1.67 million existing homes available for sale, but is still 7.2 percent lower than a year ago (1.80 million) and has fallen year-over-year for 34 consecutive months. Unsold inventory is at a 3.6-month supply at the current sales pace (3.8 months a year ago).

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage increased for the sixth straight month to 4.44 percent in March (highest since 4.46 percent in December 2013) from 4.33 percent in February. The average commitment rate for all of 2017 was 3.99 percent.

Properties typically stayed on the market for 30 days in March, which is down from 37 days in February and 34 days a year ago. Fifty percent of homes sold in March were on the market for less than a month.

“Realtors® throughout the country are seeing the seasonal ramp-up in buyer demand this spring but without the commensurate increase in new listings coming onto the market,” said Yun. “As a result, competition is swift and homes are going under contract in roughly a month, which is four days faster than last year and a remarkable 17 days faster than March 2016.”®’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in March were San Francisco-Oakland-Hayward, Calif.; Vallejo-Fairfield, Calif.; Colorado Springs, Colo.; Midland, Texas; and San Jose-Sunnyvale-Santa Clara, Calif.

First-time buyers were 30 percent of sales in March, which is up from 29 percent last month but down from 32 percent a year ago. NAR’s 2017 Profile of Home Buyers and Sellers – released in late 2017 – revealed that the annual share of first-time buyers was 34 percent.

NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX Boone Realty, says the extremely tight inventory in the entry-level segment of the market should greatly benefit homeowners looking to trade up this spring. “First-time buyers continue to make up an underperforming share of the market because there are simply not enough homes for sale in their price range,” she said. “Supply conditions improve in higher up price brackets, which means those trading up should see considerable interest in their home, as well as more listings to choose from during their own search.”

All-cash sales were 20 percent of transactions in March, which is down from 24 percent in February and 23 percent a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in March, which is unchanged from February and down from 18 percent a year ago.

Distressed sales – foreclosures and short sales – were 4 percent of sales in March, unchanged from February and down from 6 percent a year ago. Three percent of March sales were foreclosures and 1 percent were short sales.

Single-family and Condo/Co-op Sales

Single-family home sales rose inched forward (0.6 percent) to a seasonally adjusted annual rate of 4.99 million in March from 4.96 million in February, but are 1.0 percent below the 5.04 million sales pace a year ago. The median existing single-family home price was $252,100 in March, up 5.9 percent from March 2017.

Existing condominium and co-op sales increased 5.2 percent to a seasonally adjusted annual rate of 610,000 units in March, but are still 3.2 percent below a year ago. The median existing condo price was $236,100 in March, which is 4.8 percent above a year ago.

Regional Breakdown

March existing-home sales in the Northeast jumped 6.3 percent to an annual rate of 680,000, but are still 9.3 percent below a year ago. The median price in the Northeast was $270,600, which is 3.3 percent above March 2017.

In the Midwest, existing-home sales increased 5.7 percent to an annual rate of 1.29 million in March, but are still 1.5 percent below a year ago. The median price in the Midwest was $192,200, up 5.1 percent from a year ago.

Existing-home sales in the South decreased 0.4 percent to an annual rate of 2.40 million in March, but are 0.4 percent above a year ago. The median price in the South was $222,400, up 5.7 percent from a year ago.

Existing-home sales in the West declined 3.1 percent to an annual rate of 1.23 million in March, but are still 0.8 percent above a year ago. The median price in the West was $377,100, up 7.9 percent from March 2017.

National Association of Realtors, “Existing-Home Sales. Mar 2018“, 23 Apr 2018 (10:00) More

flag_usa US: Markit Flash Composite PMI. Apr 2018

Press Release Extract [us_composite_pmi]

Key findings:

  • Flash U.S. Composite Output Index at 54.8 (54.2 in March). 2-month high.
  • Flash U.S. Services Business Activity Index at 54.4 (54.0 in March). 2-month high.
  • Flash U.S. Manufacturing PMI at 56.5 (55.6 in March). 43-month high.
  • Flash U.S. Manufacturing Output Index at 56.4 (55.2 in March). 15-month high


April survey data signalled a further strong increase in private sector output across the U.S, alongside steep growth in new orders and intensifying price pressures.

At 54.8 in April, up from 54.2 in March, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index indicated a faster upturn in business activity across the private sector, driven by accelerated growth at both manufacturing and service sector firms. While the former recorded the steeper rate of expansion, both sectors enjoyed solid rates of growth.

New orders placed with private sector firms rose sharply in April, showing the largest gain since March 2015. The upturn in new business underpinned more buoyant output expectations. Furthermore, the outlook for business activity over the next 12 months rose to the highest since May 2015.

Meanwhile, sustained growth in new orders drove the strongest increase in backlogs of work since March 2015. That said, the pace of job creation softened slightly to a three-month low.

In line with stronger client demand, and rising cost burdens, average prices charged for goods and services increased solidly. The rate of input price inflation was the quickest since July 2013, with panellists noting that the introduction of tariffs had been a key factor pushing raw material costs higher.

The composite index is based on original survey data from the IHS Markit U.S. Services PMI and the IHS Markit U.S. Manufacturing PMI.

IHS Markit U.S. Services PMI™

The seasonally adjusted IHS Markit Flash U.S. Services PMI™ Business Activity Index posted 54.4 in April, up from 54.0 in March. Although below the long-run series average, the latest reading indicated the twenty-sixth successive month of output expansion at service sector firms.

As has been the case throughout the series history, new business at service providers increased in April. Notably, the rate of growth was the fastest since March 2015 and led to a solid rise in outstanding business.

Average cost burdens continued to rise in April, with the rate of input price inflation edging up slightly since March. Average prices charged meanwhile increased at a pace broadly in line with that seen in March, albeit one that was weaker than seen for input costs.

IHS Markit U.S. Manufacturing PMI™

Manufacturers reported the greatest improvement in overall business conditions since September 2014 in April. This was highlighted by the seasonally adjusted IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) rising from 55.6 in March to 56.5.

The headline PMI was boosted by marked expansions in output and new orders, with the latter growing at the quickest pace in over three- and-a-half years. A steeper deterioration in vendor performance also lifted the headline index.

Stronger growth in new orders drove a solid increase in the level of outstanding business at manufacturers. Robust client demand and signs of sustained pressure on capacities did not, however, lead to improved employment growth. The rate of job creation eased to an eight-month low as firms reportedly pushed for greater efficiency.
Price pressures within the factory sector intensified, with the rate of input cost inflation picking up to the fastest since June 2011. Cost increases were partly linked by producers to the introduction of tariffs. Moreover, greater client demand and higher raw material prices underpinned the quickest rise in average selling prices for almost seven years.

In line with greater production requirements, firms signalled the strongest rise in purchasing activity since September 2014. Survey respondents noted that lengthening delivery times was a key factor leading firms to ramp up their buying activity. Furthermore, average supplier performance deteriorated at the joint-fastest pace in the series history (on par with February 2014, when severe weather disrupted supply chains). Longer lead times were linked to demand exceeding supply but also partly attributed by panellists to new trucking regulations.


Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The US economy picked up pace again at the start of the second quarter. The April PMI surveys registered the second-strongest monthly expansion since last October. Manufacturing is leading the upturn, with factories reporting the strongest output gains for 15 months, and the vast service sector is enjoying a steady, robust expansion.

“After a relatively disappointing start to the year, the second quarter should prove a lot more encouraging. The current data point to an annualised GDP growth rate of 2.5%, with scope for some substantial upside surprises in coming months.

“First, growth in new orders accelerated to show the largest surge in demand for goods and services for just over three years. Second, companies’ expectations of growth over the coming year jumped to a three-year high. Third, hiring remains robust as firms struggle to cope with demand. The surveys point to non-farm payroll growth of approximately 200,000 in April.

“The details of the survey therefore suggest that output growth is on course to accelerate as we move into the summer. Prices are meanwhile being pulled upwards by the strength of the upturn, however, sending hawkish signals for policy makers.”

IHS Markit, “Flash US Composite PMI. Apr 2018“, 23 Apr 2018 (09:45) More

flag_japan Japan update

Nikkei Flash Japan Manufacturing PMI. Apr 2018

Press Release Extract [jp_pmi]

Key points:

  • Flash Japan Manufacturing PMI® rises in April to 53.3, from 53.1 in March.
  • Output, new orders and employment increase at quickened rates.
  • Output price inflation remains marked relative to historical data.



Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

“Survey data depicted a positive backdrop in the Japanese manufacturing sector during April. The improvement in the headline PMI was underpinned by stronger rates of growth in output, new orders and employment. Furthermore, business confidence strengthened, while output prices were hiked to a stronger degree, signalling optimism in demand conditions.

“Although new export orders declined for the first time since August 2016, as the stronger yen begins to impact price competitiveness, the rise in total new business inflows signals stronger domestic demand.”

IHS Markit, “Nikkei Flash Japan Manufacturing PMI. Apr 2018“, 23 Apr 2018 More

Currency: USD/JPY

JPY movements
^ JPY movements against the USD over the past month (mouseover for inverse) Chart:

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:

Stockmarket: CSI300

CSI300 movements
^ CSI 300 movements over the past week [Chart: Google Finance]