Fri 15 Jun 2018


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In Portfolioticker today

read_this Hey Jarvis, how did we go today?

Today at the stock market

bull/bearWall Street stocks ended lower on Friday, capping a day of heavy trading with investors mostly pulling back from initial concerns over an escalating trade dispute between the United States and China.

  • The S&P 500 index fell 3.07 points, or 0.11%, to 2,779.42
  • The Dow Jones Industrial Average fell 84.83 points, or 0.34%, to 25,090.48
  • The Nasdaq Composite index fell 14.66 points, or 0.19%, to 7,746.38
  • For the week, the S&P 500 rose 0.01%, the Dow fell 0.9%, and the Nasdaq rose 1.3%, its fourth consecutive weekly advance
  • Of the 11 major sectors of the S&P 500 six ended the day in negative territory. The energy sector was the biggest percentage loser, down 2.1% as oil prices fell more than 3% ahead of next week’s OPEC meeting
  • Declining issues outnumbered advancing ones on the NYSE by a 1.21-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favored advancers
  • The S&P 500 posted 23 new 52-week highs and four new lows; the Nasdaq Composite recorded 152 new highs and 40 new lows.
  • Volume on U.S. exchanges was 9.9 billion shares, compared to the 6.9 billion average for the full session over the last 20 trading days.

Friday also marked “quadruple witching day,” the quarterly simultaneous expiration of U.S. options and futures contracts, which tends to boost trading volume as investors replace expiring positions.

Volume hit the highest point since 8 Feb 2018, when the S&P 500 sank to its lowest level of the year so far.

Companies considered the most sensitive to trade war worries were among the day’s biggest drags. Shares of Boeing Inc, the single-largest U.S. exporter to China, fell 1.3%, while tariff-sensitive construction equipment maker Caterpillar Inc and chemical company DowDupont Inc were down 2.0% and 0.9%, respectively.Reuters

The current trade conflict between the United States and China “will lead to serious consequences for economic growth and job creation. The impact of trade conflict between the world’s two largest economies will lead to serious consequences for economic growth and job creation and hurt those that are most vulnerable across the globe,” global commodities trader Cargill Inc said on Friday.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) 2,779.42 -0.12% 2,673.61 +3.95%
DJIA INDU 25,090.48 -0.34% 24,719.22 +1.50%
NASDAQ IXIC 7,746.38 -0.19% 6,903.39 +12.21%

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 AUD 3.553 -0.76% 3.068 +15.82%
Valuation Rate USD/AUD 0.74957 -0.53% 0.78528 -4.55%
AUD-denominated Index AUD 4.740 -0.24% 3.909 +21.27%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 17 YTD
Alphabet A GOOGL $1,159.27 -0.08% $1,053.00 +10.09%
Alphabet C GOOG $1,152.26 +0.01% $1,045.65 +10.19%
Apple AAPL $188.84 -1.03% $169.23 +11.58%
Amazon AMZN $1,715.97 -0.46% $1,169.54 +46.72%
Ebay EBAY $38.89 -0.29% $37.76 +2.99%
Facebook FB $195.85 -0.49% $176.46 +10.98%
PayPal PYPL $85.31 -0.36% $73.61 +15.89%
Twitter TWTR $45.80 -2.06% $24.01 +90.75%
Visa V $135.10 +0.07% $114.02 +18.48%
VMware VMW $150.46 +0.13% $125.32 +20.06%

Selected Tech News Headlines

  • Amazon is stacking Whole Foods with execs to weave it into Jeff Bezos’ broader vision: “A year after Amazon‘s $13.7 billion purchase of Whole Foods, the organic grocer’s outspoken CEO, John Mackey, remains at the helm. But Amazon isn’t leaving Mackey, who co-founded Whole Foods in 1980, in control of the integration or the future of the business. According to an organization chart viewed by CNBC, Mackey is working alongside two Amazon executives, Rosanna Godden and Heather Dystrup-Chiang, to ensure a smooth transition. The org chart also paints a clearer picture of Amazon‘s priorities. Rather than reporting directly to Jeff Wilke, the CEO of Amazon‘s worldwide consumer business, Mackey, Godden and Dystrup-Chiang work under Steve Kessel. He is in charge of all physical store operations, including Amazon’s bookstores and cashierless convenience stores as well as Prime Now, Fresh delivery and Audible.com. Kessel’s expanded role was covered by The Wall Street Journal late last year. The management structure shows that, far from letting Mackey run Whole Foods as an independent operation, Amazon CEO Jeff Bezos is stacking the business with veterans of the e-commerce company who can weave the grocery chain’s 484 stores into his broader vision for the future of physical retail.CNBC

  • Apple expects to sell more iPhones with LCD screens than pricey OLED models in its coming lineup: “Apple Inc. is developing production plans for its next iPhones that stress cheaper liquid-crystal displays, in a sign of consumers’ sensitivity to the price of smartphones. Apple expects LCD models to make up the majority of iPhone sales in its lineup to be released this fall, a greater proportion than analysts had anticipated, and plans to use the displays next year as well, said people involved in the Apple supply chain. The production planning suggests the transition to a newer type of screen called organic light-emitting diode, or OLED, is likely to be slower than many in the industry believed a year ago, when the iPhone maker was preparing its first OLED smartphone. Analysts say demand was weaker than their initial forecasts for that phone, the iPhone X, due mainly to its price tag, which starts at $999.WSJ

  • Apple announces multi-year partnership with Oprah Winfrey: Apple Inc today announced a unique, multi-year content partnership with Oprah Winfrey, the esteemed producer, actress, talk show host, philanthropist and CEO of OWN. Together, Winfrey and Apple will create original programs that embrace her incomparable ability to connect with audiences around the world. Winfrey’s projects will be released as part of a lineup of original content from Apple.” Apple

Currencies: USD/AUD

USD/USD

audusd_20180608
^ AUD vs Bloomberg Dollar Spot Index (DXY) movements today Chart: Bloomberg

USD

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

Overseas investors sold Treasuries for a second consecutive month in Apr 2018, as holdings of central banks and government institutions declined, data from the Treasury Department showed on Friday. Overseas investors sold USD 4.78 billion in U.S. Treasuries in Apr 2018, following outflows of USD4.92 billion in Mar 2018. Data also showed China’s holdings of Treasuries declined to USD 1.18 trillion in Apr 2018 after posting increases in Mar 2018 and Feb 2018.Reuters

The Bloomberg Dollar Spot Index (DXY) rose less than 0.05%.
The EUR rose 0.4% to USD 1.1609.
Britain’s GBP rose 0.1% to USD 1.3278.
Japan’s JPY rose less than 0.05% to 110.61 per USD.

The yield on 10-year Treasuries fell 1 basis point to 2.92%.
Germany’s 10-year yield fell 2 basis points to 0.40%.
Britain’s 10-year yield fell 1 basis point to 1.328%.
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): $64.70/barrel -3.27% Chart
  • ICE (London) Brent North Sea Crude: $73.33/barrel -3.44% Chart
  • NYMEX Natural gas futures: $3.03/MMBTU +2.06% Chart

flag_usa Deteriorating US Trade Relationship

flag_china China

CNBC

In a quick response to U.S. tariffs, Beijing announced on Friday its own duties on American products, including the politically sensitive areas of agriculture products and automobiles. The Chinese State Council’s commission on tariffs and customs said in an online statement that a 25% tariff will take effect on 6 Jul 2018 on $34 billion of U.S. goods. The list includes soybeans, electric vehicles, a range of hybrid electric vehicles, a variety of seafood and pork, according to the Ministry of Commerce.

The tariffs counter the United States Trade Representative’s announcement earlier on Friday that the U.S. will initially impose an additional 25% tariff on 818 Chinese imports worth about $34 billion on 6 Jul 2018. Duties on an additional $16 billion worth of goods from China will need to undergo public review. If approved, that would bring the total to $50 billion worth of Chinese goods.CNBC

Associated Press

It’s a quick response from the Beijing government to President Donald Trump’s tariff increase on Chinese goods. The Chinese Commerce Ministry says it will immediately impose penalties of “equal strength” on U.S. products. The ministry says it’s also scrapping deals to buy more American farm goods and other exports — steps that were intended to help ease a dispute over China’s trade surplus and China’s technology policy. A ministry statement isn’t giving details, but a $50 billion list of possible targets announced in Apr 2018 included soybeans, light aircraft, orange juice, whiskey and beef. Trump’s tariffs are in response to complaints that Beijing steals or pressures foreign companies to hand over technology.Article

flag_europe Europe and Canada

Reuters

Let us not understate the macroeconomic impact (of Washington’s trade policies). It would be serious, not only if the United States took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe, and Germany. The economic impacts of tariffs enacted by Washington will grow as retaliations come from affected countries like Canada as well as European nations like Germany”, Christine LaGarde, head of the International Monetary Fund said at Foreign Policy annual Awards Dinner in Washington, on 13 Jun 2018.Article

New York Times

As the Trump administration imposes tariffs on allies and rivals alike, provoking broad retaliation, global commerce is suffering disruption, flashing signs of strains that could hamper economic growth.

Before most trade measures fully take effect, businesses are already grappling with the consequences — threats to their supplies, uncertainty over the terms of trade and gnawing fear about what comes next. As the conflict broadens, shipments are slowing at ports and airfreight terminals around the world. Prices for crucial raw materials are rising.

At factories from Germany to Mexico, orders are being cut and investments delayed. American farmers are losing sales as trading partners hit back with duties of their own.

Workers at a steel mill in Edmonton in Canada, scrambled to recall rail cars headed to the United States border, incurring extra freight charges reaching CAD 100,000 (about USD 76,000), after Trump this month slapped tariffs on imported metals. A Seattle customer soon canceled an order. “The impact was felt immediatelyThe penny is really dropping now as to what this means to people’s businesses,” said Jon Hobbs president of AltaSteel. Roughly one-fifth of his company’s business involves shipping steel to American customers.Article

flag_europe EU: International Trade in Goods. Apr 2018 NYT

Press Release Extract [eu_trade]

Euro area

The first estimate for euro area (EA19) exports of goods to the rest of the world in April 2018 was €182.9 billion, an increase of 8.0% compared with April 2017 (€169.3 bn). Imports from the rest of the world stood at €166.2 bn, a rise of 8.1% compared with April 2017 (€153.7 bn). As a result, the euro area recorded a €16.7 bn surplus in trade in goods with the rest of the world in April 2018, compared with +€15.7 bn in April 2017. Intra-euro area trade rose to €157.4 bn in April 2018, up by 9.8% compared with April 2017.

eu_trade_20180615

In January to April 2018, euro area exports of goods to the rest of the world rose to €738.2 bn (an increase of 3.8% compared with January-April 2017), while imports rose to €673.8 bn (an increase of 3.2% compared with JanuaryApril 2017). As a result the euro area recorded a surplus of €64.4 bn, compared with +€58.7 bn in January-April 2017. Intra-euro area trade rose to €644.4 bn in January-April 2018, up by 5.7% compared with January-April 2017.

European Union

The first estimate for extra-EU28 exports of goods in April 2018 was €154.8 billion, up by 6.8% compared with April 2017 (€144.9 bn). Imports from the rest of the world stood at €155.9 bn, up by 6.6% compared with April 2017 (€146.3 bn). As a result, the EU28 recorded a €1.0 bn deficit in trade in goods with the rest of the world in April 2018, compared with -€1.4 bn in April 2017. Intra-EU28 trade rose to €283.8 bn in April 2018, +9.2% compared with April 2017.

eu28_trade_20180615

In January to April 2018, extra-EU28 exports of goods rose to €625.7 bn (an increase of 2.7% compared with January-April 2017), while imports rose to €634.0 bn (an increase of 2.3% compared with January-April 2017). As a result, the EU28 recorded a deficit of €8.3 bn, compared with -€10.4 bn in January-April 2017. Intra-EU28 trade rose to €1 160.2 bn in January-April 2018, +5.2% compared with January-April 2017.

Eurostat, “International Trade in Goods. Apr 2018“, 11 Jun 2018 More

flag_europe EU: Inflation. May 2018

Press Release Extract [eu_wages]

Euro area annual inflation rate was 1.9% in May 2018, up from 1.3% in April. A year earlier, the rate was 1.4%. European Union annual inflation was 2.0% in May 2018, up from 1.5% in April. A year earlier, the rate was 1.6%.

eu_cpi_20180615

The lowest annual rates were registered in Ireland (0.7%) and Greece (0.8%). The highest annual rates were recorded in Romania (4.6%) and Estonia (3.1%). Compared with April 2018, annual inflation fell in one Member State, remained stable in one and rose in twenty-six.

eu_cpi_states_20180615

In May 2018, the highest contribution to the annual euro area inflation rate came from services (+0.72 percentage points), followed by energy (+0.58 pp), food, alcohol & tobacco (+0.50 pp) and non-energy industrial goods (+0.08 pp).

Eurostat, “Annual inflation up to 1.9% in the euro area, Up to 2.0% in the EU. May 2018“, 11 Jun 2018 More

flag_europe EU: Labour Cost Index. Q1/2018

Press Release Extract [eu_wages]

Hourly labour costs rose by 2.0% in the euro area (EA19) and by 2.7% in the EU28 in the first quarter of 2018, compared with the same quarter of the previous year. In the fourth quarter of 2017, hourly labour costs increased by 1.4% and 2.3% respectively. These figures are published by Eurostat, the statistical office of the European Union.

The two main components of labour costs are wages & salaries and non-wage costs. In the euro area, the cost of wages & salaries per hour worked grew by 1.8% and the non-wage component by 2.6%, in the first quarter of 2018 compared with the same quarter of the previous year. In the fourth quarter of 2017, the annual changes were +1.6% and +0.8% respectively. In the EU28, the cost of hourly wages & salaries rose by 2.7% and the non-wage component by 2.9% in the first quarter of 2018. In the fourth quarter of 2017, annual changes were +2.4% and +1.9% respectively.

Breakdown by economic activity

In the first quarter of 2018 compared with the same quarter of the previous year, hourly labour costs in the euro area rose by 2.0% in industry, by 2.0% in construction, by 2.5% in the services and by 1.2% in the (mainly) nonbusiness economy. In the EU28, labour costs per hour grew by 3.1% in industry, by 3.6% in construction, by 2.9% in services and by 2.1% in the (mainly) non-business economy.

Member States

In the first quarter of 2018, the highest annual increases in hourly labour costs for the whole economy were registered in Romania (+12.7%), Latvia (+11.2%) and Hungary (+10.3%), while a decrease was recorded in Portugal (-1.5%).

Eurostat, “Labour Cost Index. Q1/2018“, 11 Jun 2018 More

flag_usa US: Consumer Confidence Index (Prelim). Jun 2018

Press Release Extract [ser_uom]
Index Jun 2018 May 2018 Jun 2017 M-M% Y-Y%
Index of Consumer Sentiment 99.3 98.0 95.0 +1.3% +4.5%
Current Economic Conditions 117.9 111.8 112.4 +5.5% +4.9%
Index of Consumer Expectations 87.4 89.1 83.8 -1.9% +4.3%

Surveys of Consumers chief economist, Richard Curtin

us_uom_20180615

Consumer sentiment rose slightly in early June due to consumers’ more favorable assessments of their current financial situation and more favorable views of current buying conditions for household durables. The Expectations Index, in contrast, declined to its lowest level since the start of the year due to less favorable prospects for the overall economy. The sharpest divide was between the record number of households who mentioned recent income gains and the highest expected year-ahead inflation rate since 2015. At some point in every economic expansion, favorable income and job prospects act to offset higher inflation and interest rate expectations. Only when inflation and interest rates are expected to persistently exceed income and job prospects will consumers begin to curtail their discretionary spending. Indeed, greater certainty about future income and job prospects have become the main drivers of more favorable purchase plans. The importance of favorable job prospects for discretionary spending on durables is highlighted in the chart, which shows the correspondence between consumers’ unemployment expectations and the annual per capita change in expenditures on durable goods from BEA accounts. The unemployment rate during the year ahead was more often expected to decline than increase (29% versus 23%), with most (48%) expecting it to remain unchanged at its current low, which should modestly accelerate purchases. Moreover, the continued small declines that are now anticipated in the unemployment rate, as well as more robust gains in household income, will bolster real personal consumption expenditures during the year ahead.

University of Michigan, “Consumer Confidence Index (Preliminary). Jun 2018“, 15 Jun 2018 (10:00 EDT) More

flag_japan Japan update

Bank of Japan Monetary Policy

Statement on Monetary Policy

1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided upon the following.

(1) Yield curve control

The Bank decided, by an 8-1 majority vote, to set the following guideline for market operations for the intermeeting period.

The short-term policy interest rate:

The Bank will apply a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank.

The long-term interest rate:

The Bank will purchase Japanese government bonds (JGBs) so that 10-year JGB yields will remain at around zero percent. With regard to the amount of JGBs to be purchased, the Bank will conduct purchases at more or less the current pace — an annual pace of increase in the amount outstanding of its JGB holdings of about 80 trillion yen — aiming to achieve the target level of the long-term interest rate specified by the guideline.

(2) Guidelines for asset purchases

With regard to asset purchases other than JGB purchases, the Bank decided, by a unanimous vote, to set the following guidelines.

a) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 6 trillion yen and about 90 billion yen, respectively.

b) As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen, respectively.

2. Japan’s economy is expanding moderately, with a virtuous cycle from income to spending operating. Overseas economies have continued to grow firmly on the whole. In this situation, exports have been on an increasing trend. On the domestic demand side, business fixed investment has continued on an increasing trend with corporate profits and business sentiment maintaining their improving trend. Private consumption has been increasing moderately, albeit with fluctuations, against the background of steady improvement in the employment and income situation. Housing investment has been weakening somewhat. Meanwhile, public investment has been more or less flat, remaining at a relatively high level. Reflecting these increases in demand both at home and abroad, industrial production has been on an increasing trend, and labor market conditions have continued to tighten steadily. Financial conditions are highly accommodative. On the price front, the year-on-year rate of change in the consumer price index (CPI, all items less fresh food) is in the range of 0.5-1.0 percent. Inflation expectations have been more or less unchanged.

3. With regard to the outlook, Japan’s economy is likely to continue its moderate expansion. Domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the corporate and household sectors, mainly against the background of highly accommodative financial conditions and the underpinnings through government spending. Exports are expected to continue their moderate increasing trend on the back of the firm growth in overseas economies. The year-on-year rate of change in the CPI is likely to continue on an uptrend and increase toward 2 percent, mainly on the back of an improvement in the output gap and a rise in medium- to long-term inflation expectations.

4. Risks to the outlook include the following: the U.S. economic policies and their impact on global financial markets; developments in emerging and commodity-exporting economies; negotiations on the United Kingdom’s exit from the European Union (EU) and their effects; and geopolitical risks.

5. The Bank will continue with “Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control,” aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner. The Bank will make policy adjustments as appropriate, taking account of developments in economic activity and prices as well as financial conditions, with a view to maintaining the momentum toward achieving the price stability target.

Bank of Japan, “Statement on Monetary Policy“, 15 Jun 2018 More

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]