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In Portfolioticker today
- Today at the stock market
- The portfolio today
- Energy: Oil and Gas Futures
- AU: The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
Today at the stock market
“Wall Street’s three major indexes declined on Friday as investors worried about a jump in U.S. bond yields, with technology stocks leading the decline on nerves about upcoming earnings reports and iPhone demand.
Despite Friday’s decline the S&P eked out a gain of 0.5% for the week to show its second weekly gain in a row.
Equity investors were jittery as the 10-year Treasury yield reached its highest level since Jan 2014 as a bond selloff continued for a second day, driving the yield curve steeper after two weeks of flattening.
Benchmark 10-year notes last fell 12/32 in price to yield 2.9583%, from 2.914% Thursday.
When yields are high, investors favor bonds over equities including sectors such as consumer staples and real estate, which promise high dividends and slow, predictable growth. But high interest rates can boost bank profits so the financial sector managed to show a 0.05% gain, making it the best performer out of the S&P’s 11 industry sectors.
The consumer staples sector was the biggest percentage decliner with a 1.7% fall, led by PepsiCo.
“We’re seeing a follow through from yesterday’s action when the key was weakness in consumer staples. We came to this earnings season with very optimistic expectations and we’re seeing some very fundamental bottoms up issues at these companies,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut
- Procter & Gamble fell 2.9% on top of a 4.2% drop the day before when it said shrinking retailer inventories and higher costs squeezed its margins.
- Philip Morris International also had a second day of declines after getting crushed due to weak shipment volumes in its quarterly report.
Apple fell 4.1%, making it the biggest drag on the major indexes after Morgan Stanley estimated weak demand for its latest iPhones, a day after Taiwan Semiconductor raised fears of softer smartphone sales.
Alphabet, Facebook, Intel and Microsoft are among the major technology companies reporting next week.
S&P 500 companies are expected to report their strongest first-quarter profit gains in seven years. Of the 87 companies that have reported so far, 79.3% have topped profit expectations, according to Thomson Reuters I/B/E/S.” Reuters
^ 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)||2,670.14||-0.86%||2,238.83||-0.13%|
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting
|Index||Currency||Today||Change||31 Dec 17||YTD|
Portfolio stock prices
|Stock||Ticker||Today||Change||31 Dec 17||YTD|
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg
“The USD rose to a 2-week high against a basket of currencies on Friday on rising U.S. yields, while the GBP extended a decline in the wake of dovish comments from the head of the Bank of England.
The EUR fell to a two-week low against the USD, for its biggest weekly drop in 2 months, as investors trimmed record high bets before a European Central Bank meeting next week where policymakers are largely expected to signal no change in policy.
Commodity-linked currencies came under pressure thanks to a drop in Chinese stocks, with the AUD and NZD hitting their lowest levels in at least 2 weeks.
“Higher U.S. yields have contributed to the rise in the dollar,” said Chuck Tomes, senior investment analyst at Manulife Asset Management in Boston.
This week, Federal Reserve officials signalled further interest rate increases in 2018 based on evidence of steady U.S. growth, while the heads of the ECB and the Bank of England seemed in no rush to push rates higher in the wake of disappointing economic data out of Britain and Europe.
Still, the USD’s overall prospect remains cloudy due to expectations of the United States’ growing trade and budget deficits, analysts said.
Expectations have grown that ECB policymakers may take another small step in exiting the bank’s ultra-easy monetary policy after dropping a long-standing pledge to increase bond buying if needed at its meeting in March.
On Friday, ECB President Mario Draghi told central bankers and ministers at an event in Washington that the 19-nation euro zone has been expanding robustly and needs strong global growth and open trade for the expansion to continue.
But some analysts doubt the ECB would signal further changes in policy next week.
“The speed of euro zone activity has declined after the very strong activity we had seen in 2017,” said Ugo Lancioni, head of currency management with Neuberger Berman in London. “The ECB may be cautious.”
Britain’s GBP has fallen on weaker-than-expected inflation and retail sales data and comments from BOE Governor Mark Carney on Thursday, which traders interpreted as the BOE’s being less committed to raising rates in May 2018 due to recent “mixed” data.” Reuters
“The Bloomberg Dollar Spot Index (DXY) rose 0.5% to the highest in a month.
The EUR fell 0.5% to USD 1.2287, the weakest in 2 weeks.
Britain’s GBP fell 0.4% to USD 1.4035, the weakest in more than 2 weeks.
Japan’s JPY fell 0.2% to 107.59/USD, the weakest in almost 2 months.
The yield on 10-year Treasuries rose 5 basis points to 2.95835%, reaching the highest in 8 weeks.
Germany’s 10-year yield fell 1 basis point to 0.59%.
Japan’s 10-year yield rose 2 basis points to 0.06%, the highest in 7 weeks.” Bloomberg
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com
Oil and Gas Futures
“Oil prices edged up on Friday, stabilizing after an earlier slide driven by U.S. President Donald Trump’s criticism of the Organization of the Petroleum Exporting Countries’s (OPEC) role in pushing up global oil prices.
Brent crude oil futures gained 28 cents, or 0.4%, to settle at $74.06/barrel. West Texas Intermediate crude futures for delivery in Jun 2018, the most active U.S. contract, were up 7 cents at $68.40. The May WTI contract, which expired on Friday, gained 9 cents, or 0.1%, to settle at $68.38.
Since early 2017, OPEC and its allies have curbed output in the hopes of eliminating a global oil glut.
Prices held up, even under Trump’s comments, said Walter Zimmerman, chief technical analyst at United-ICAP. “Oil looks like it wants to explore the upside a little more,” Zimmerman said.
OPEC Secretary-General Mohammad Barkindo said that the organization does not have a price objective, but that it is working to restore stability to oil markets.
Earlier this week, both Brent and WTI hit their highest levels since Nov 2014, at $74.75/barrel and $69.56/barrel respectively, buoyed by geopolitical risk and a tightening market. For the week, both benchmarks gained over 1%.
“The only thing [Trump] can really do is drain the SPR (Strategic Petroleum Reserve). Now, I have not seen any indication that the administration plans on doing that,” said Bob Yawger, director of energy futures at Mizuho in New York.
If Trump does start discussing the possibility of draining the strategic petroleum reserves, or SPR, that would pressure prices, Yawger said.
“We have a difficult time seeing how OPEC would in any way be swayed here in terms of changing course, in terms of policy,” said Michael Tran, commodity strategist at RBC Capital Markets. Trump has recently been a bullish factor for oil, Tran said. “One of the major variables that’s fueling the rally in oil prices is the market’s perception that his administration is taking an increasingly hawkish stance on foreign policy,” he said.
USA has until 12 May 2018 to decide whether it will leave the Iran nuclear deal, which would further tighten global supplies.
U.S. drillers added oil rigs for the third consecutive week in the week to 20 Apr 2018 bringing the total count to 820, the highest since Mar 2015, according to General Electric’s Baker Hughes energy services firm.” Reuters
Prices are as at 15:49 EDT
- NYMEX West Texas Intermediate (WTI): $68.38/barrel +0.13% (14:49) Chart
- ICE (London) Brent North Sea Crude: $73.84/barrel +0.08% Chart
- NYMEX Natural gas futures: $2.74/MMBTU +3.05% Chart
AU: Financial Services Royal Commission
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Financial Services Royal Commission) has turned its attention to the fees charged by the big four banks and AMP for advice they didn’t actually give their customers. [transcripts]. Rowena Orr QC, senior counsel assisting the Royal Commission, says Westpac, the NAB, the ANZ and the Commonwealth have all admitted misconduct relating to fees for no service. The Australian Securities and Investments Commission (ASIC) had told the commission that $383 million in compensation has been paid to consumers for poor advice.
The number of financial advisers in Australia has increased to more than 25,000 from about 18,000 at the end of 2009 but only 35% of these had informed ASIC that they had a university degree.
Peter Kell, deputy chair of ASIC, said that ASIC is aware of 8 companies charging fees for no services:
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
Stockmarket: Nikkei 225
^ Nikkei 225 movements over the past week [Chart: Google Finance]
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
^ CSI 300 movements over the past week [Chart: Google Finance]