The Star Online: Business
The Star Online: Business |
- Wall Street week ahead: 'Just right' jobs data could help equities
- Vodafone says paid no UK corporation tax in two years
- Wall St. rallies after U.S. jobs data, ends up for week
| Wall Street week ahead: 'Just right' jobs data could help equities Posted: 07 Jun 2013 10:30 PM PDT NEW YORK: The U.S. May jobs report came in just right for investors - neither too weak nor too strong to rock the boat - but market participants are now questioning what's next for stocks. The equity market is on nebulous middle ground. The S&P 500 is just 1.5 percent away from its all-time closing high, but other than Friday's rally on the jobs data, it has been stuck in a period of uncertainty. The Labor Department added 175,000 jobs in May, slightly higher than expected, but at a level that indicates the status quo should hold for the Federal Reserve's stimulus program. Some had worried that if job growth far exceeded expectations, the Fed would reduce bond-buying sooner than expected, while others were concerned that an exceptionally weak number would reveal a fundamentally soft labor market. The data's ability to relieve both fears may benefit stocks. "The number had a little something in it for everybody, in terms of those who suspect tapering might begin sooner and those who think it might start later," said Mark Luschini, chief investment strategist of Janney Montgomery Scott in Philadelphia, adding that the May payrolls figure could "prime market participants to be more positive toward equities leading into next week's trading." The program is widely cited as a major contributor to the S&P 500's <.spx> surge of 15.2 percent in 2013, when it has hit a repeated series of record highs. Wall Street's performance has been closely tethered to the Fed's stimulus program, benefiting from the belief that the economy is just weak enough to keep the Fed buying bonds. When Fed Chief Ben Bernanke said on May 22 that the central bank may decide to reduce purchases if the economy shows signs of significant improvement, stocks fell and bond yields surged. The uncertainty has also increased volatility, with the S&P 500 frequently making daily moves of 1 percent or staging dramatic midday reversals. The CBOE Volatility Index <.vix>, or VIX, has risen more than 20 percent over the past three weeks, although at a level of 15.14, it is still at a level associated with a relatively calm environment. "Equity markets are in a period of adjustment," said Anastasia Amoroso, global market strategist at J.P. Morgan Funds in New York, which has about $400 billion in assets. "If there's an unannounced change in policy, that could be a shock to the downside." That adjustment is likely to keep trading in a narrow range. On Thursday, the S&P 500 briefly fell under its 50-day moving average of 1,604, as well as below the psychologically important level of 1,600, before rebounding. However, the benchmark index remains below its 14-day moving average of 1,645.08. This year's gains have been broad, with all 10 S&P 500 sectors sharply higher, so it is difficult to determine which sectors may be the most vulnerable to a market pullback. The best-performing sector of the year - health care <.spxhc>, up 20 percent - is a defensive group, as is telecom <.splrcl>, one of the year's weaker performers, with a gain of 8.6 percent for the year to date. Cyclical sectors, which are tied to the pace of economic growth and have been especially sensitive to any indication that Fed policy may be changing, have also outperformed the broad market this year. However, despite those gains and the Fed uncertainty, they may not be vulnerable going forward. The shakier sectors have been the big dividend payers, because higher yields on safe government debt would make those shares less attractive. "Investors haven't simply been 'selling the winners,'" Bespoke Investment Group wrote in a note to clients this week. "What investors have been selling are the high dividend payers, which is not usually what happens on pullbacks. In fact, the opposite usually occurs, as investors flock to 'safer' plays." For the week, the Dow Jones industrial average <.dji> rose 0.9 percent, the S&P 500 added 0.8 percent and the Nasdaq <.ixic> advanced 0.4 percent. Next week, there appear to be few obvious catalysts to change the equation. Only two S&P 500 companies - H&R Block The economic data calendar is light, though May retail sales on Thursday and the preliminary reading on June consumer sentiment on Friday will be closely watched. Inflation data will also be on the agenda. The U.S. Producer Price Index, set for release on Friday, is forecast to rise just 0.1 percent in May, according to economists polled by Reuters, after a drop of 0.7 percent in April. On a year-over-year basis, overall PPI is expected to rise 1.4 percent in May, the Reuters Poll showed. "It looks like we're shaping up for a traditional summer where we'll build a base and perhaps enter into the doldrums of summer trading," said Frank Davis, director of trading at LEK Securities in New York. With the exception of consumer stocks, which could be affected by the retail data, Davis added, "I'm not anticipating any meaningful follow-through to next week, but I'm not anticipating any measurable pulldown either." |
| Vodafone says paid no UK corporation tax in two years Posted: 07 Jun 2013 10:27 PM PDT LONDON: Vodafone Group Plc Revelations of profit shifting by big companies have provoked anger among austerity-weary citizens across Europe and political leaders have pledged to act. Vodafone's annual report published on Friday said the absence of a UK income tax bill for the second year running reflected tough operating conditions at its British operations. Reported profits at Vodafone's main UK unit have collapsed in the past decade, even as sales rose sharply. The company said the cost of buying its third generation (3G) phone license and falling profit margins weighed on UK earnings, although both factors were also observed at its German unit, which has continued to report big profits and tax bills. UK press including British investigative magazine Private Eye have noted strong profits at Vodafone's subsidiaries in Luxembourg, where it has few customers or employees but where companies can enjoy tax rates below 1 percent. Vodafone Procurement Co Sarl, which buys equipment for the group, reported profits of 215 million euros ($284.2 million) for the year to March 2012 and paid no income tax, according to accounts for the period, the most recent for which figures are available. OTHER TAXES Vodafone Luxembourg 5 Co Sarl, which lends money to other group units, reported profits of $2.43 billion for the year to March 2012 and reported a tax bill of less than 1 percent, its accounts show. A Vodafone spokesman said the company did not shift profits out of the UK and that its Luxembourg operations had no impact on its UK tax bill. He said the low Luxembourg tax bill was tied to the fact the units there can offset income against writedowns in the value of assets held by these companies. Vodafone said it also paid hundreds of millions of pounds in other taxes in Britain, such as payroll taxes and value added tax (VAT), a European form of sales tax. The company added on its website: "Companies have legal obligations to pay tax, but those obligations do not extend to paying more than the amount legally required. Companies also have a legal obligation to act in the interests of their shareholders". The company has been under scrutiny since a 2010 deal under which it paid the UK tax authority, Her Majesty's Revenue and Customs (HMRC), 1.25 billion pounds ($1.9 billion) to settle a back-tax claim, for which it took a 2.2 billion pounds provision in its accounts. Some lawmakers criticized that deal as pointing to a too-cosy relationship between big business and HMRC. A subsequent review by a government watchdog said the deal was "reasonable" but criticized processes at HMRC. Tax campaigner Richard Murphy of Tax Research UK said Vodafone's explanation for its lack of a UK tax bill did not stack up. "Vodafone would like us to believe that because they pay their property taxes, VAT and staff's national insurance, that they don't have to pay tax on their income," he said. "That's not the way it works for the rest of us and it's not the way it should work for Vodafone either." ($1 = 0.7564 euros) ($1 = 0.6436 British pounds). - Reuters |
| Wall St. rallies after U.S. jobs data, ends up for week Posted: 07 Jun 2013 10:25 PM PDT NEW YORK: The Dow shot up more than 200 points, scoring its best day since January 2, and the S&P 500 ended a two-week losing streak on Friday after U.S. jobs data eased investors' worries that the Federal Reserve may be reducing its stimulus program in the near future. The S&P 500 and the Nasdaq posted their best daily percentage gains since April 16. All three major U.S. stock indexes rose more than 1 percent for the day, extending gains toward the session's end, with the S&P consumer discretionary index <.splrcd> and other growth sectors leading the way higher. The consumer discretionary index rose 1.8 percent. The S&P industrials index <.splrci> also advanced 1.8 percent. Microsoft Stocks have rallied for most of the year. But the market began to lose ground following Fed Chairman Ben Bernanke's comments on May 22 that the central bank may decide to ease back on its bond-buying programs in the next few policy meetings if data shows the economy is showing improvement. Last Friday, the S&P 500 marked two consecutive weeks of losses for the first time this year. "The market earlier this week traded off precipitously, believing the Fed was close to stopping. Today's numbers make it pretty clear the Fed can't stop or even start tapering in September like they'd like to, so ironically the stock market is up," said Brian Amidei, managing director of HighTower Advisors in Palm Desert, California. The Labor Department's data showed job gains of 175,000 in May, slightly above the economists' forecast, while the U.S. unemployment rate increased to 7.6 percent last month from 7.5 percent in April. The Dow Jones industrial average <.dji> surged 207.50 points, or 1.38 percent, to close at 15,248.12. The Standard & Poor's 500 Index <.spx> advanced 20.82 points, or 1.28 percent, to 1,643.38. The Nasdaq Composite Index <.ixic> climbed 45.16 points, or 1.32 percent, to end at 3,469.22. For the week, the Dow gained 0.9 percent, the S&P 500 rose 0.8 percent, and the Nasdaq added 0.4 percent. The U.S. job market has remained one of the economy's weakest areas since the recent downturn. The Fed, in turn, has linked its monetary policy to improvement in the country's job market. Economists say job gains of at least 200,000 per month over several months are needed to significantly reduce high unemployment. The market's recent volatility suggests investors are starting to price in the eventual end of Fed stimulus, analysts said, raising concerns about how well stocks will fare without it. The stock market's rally this year has largely been driven by the Fed's continued bond purchases. The Dow is up 16.4 percent for 2013, while the S&P 500 is up 15.2 percent and the Nasdaq is up 14.9 percent. "I think the rally is running out of steam," Amidei said, noting that investors have already begun to sell stocks to lock in profits in some industries and sectors. High dividend-yielding shares, which led this year's rally, have been among the weakest performers over the last two weeks. On Friday, Wal-Mart Stores Inc Shares of video recorder pioneer TiVo Inc Volume was roughly 6.4 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, in line with the average daily closing volume of about 6.4 billion this year. Advancers outpaced decliners on the NYSE by a ratio of about 7 to 3. On the Nasdaq, nearly two stocks rose for every one that fell. - Reuters |
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