Despite job growth, valuations may hurt small caps |
- Despite job growth, valuations may hurt small caps
- Bundesliga: Schalke move into top 3 on Barnetta’s lone strike
- ‘Self-styled anarchist’ bids to deliver major blow to India’s Modi in polls
- Mid-year rate hike with strong employment and wages
- Measles outbreak prompts new health plan in California, New Mexico
- Among Greece jitters and interest rate, Wall St ends down
| Despite job growth, valuations may hurt small caps Posted: 06 Feb 2015 05:09 PM PST
With nearly all of their revenue coming from the United States, the companies in the Russell 2000 should be the most obvious beneficiaries of a growing US economy. Yet fund managers and analysts warn that small-cap stocks already trade at valuations high above long-term averages, even after significantly lagging large-company shares in 2014. This could put a cap on further gains. "Small-cap companies have something of an advantage in this economy. But investors have figured that out," said Phil Orlando, chief equity strategist at Federated Investors in New York. Companies in the Russell 2000 look expensive compared with their history, said Steven DeSanctis, an analyst at Bank of America Merrill Lynch, in a Feb. 3 note to clients. The trailing price-to-earnings ratio of the index is at 22.7, which is 40 per cent more than its long-term average of 16.2. Its price-to-sales ratio of 1.6 is nearly 67 per cent higher than its long-term average. High valuations already appear to be cutting in to returns, DeSanctis said. The Russell 2000 is up 11.9 per cent over the last 12 months, compared with a 16.7 per cent gain in the large-cap Standard & Poor's 500 index over that time. Year to date, both indexes are up less than 1 per cent. Still, Steven Raineri, the lead portfolio manager of the Franklin All-Cap Value fund, increased his stake in small-company stocks by 25 per cent over the last year in part because of signs of improvement in the housing market and in consumer confidence. Overall, multi-cap fund managers increased their stake in small-cap stocks 10 per cent over the same time, according to Morningstar data. "We're happy if there's a disconnect and we can find companies we like at prices we're comfortable with," Raineri said. He has been adding to his holdings in companies such as Gibraltar Industries Inc, a US$500 million (RM1.773 billion) market-cap company that makes mailboxes and other products used in the construction of housing developments, and Griffon Corp, an US$813 million market-cap company that manufactures garage doors and landscaping products. Both companies derive 70 per cent or more of their revenue from the United States, according to Thomson Reuters. Overall, in the last five years, 81.3 per cent of revenue for Russell 2000 companies came from the United States, compared with 64.3 per cent of revenue for S&P 500 companies, according to Bank of America Merrill Lynch. Nonfarm payrolls increased 257,000 last month, the Labor Department said yesterday, well above forecasts. The dollar index rose slightly more than 1 per cent on the news. Raineri said that he is more concerned about the dollar continuing to rise quickly than higher share prices for small-cap stocks. A rapid jump in the dollar could be a sign that investors are seeking safety, and could draw investors away from small-cap stocks, he said. "If the dollar gets too strong too fast, it's going to be taken as a sign of the global economy weakening," he said. — Reuters  |
| Bundesliga: Schalke move into top 3 on Barnetta’s lone strike Posted: 06 Feb 2015 05:07 PM PST
Schalke shrugged off the absence of suspended Klaas-Jan Huntelaar to add to their 1-0 win over Hanover and 1-1 draw with champions Bayern Munich since the resumption following the winter break. They have 34 points and are four points behind second-placed Wolfsburg although Roberto di Matteo's Schalke have played a game more. Schalke opened the scoring in the 11th minute when a perfectly-timed cross from Kevin-Prince Boateng found Swiss star Barnetta at the near post to score with his left foot. The 29-year-old now has 29 goals in 250 Bundesliga matches. Yesterday's game started 10 minutes late after a bomb threat although security forces said "there was no proof of a specific threat." — AFP |
| ‘Self-styled anarchist’ bids to deliver major blow to India’s Modi in polls Posted: 06 Feb 2015 05:05 PM PST
Less than a year on from his resignation as head of Delhi's state government after just 49 days, most polls say Kejriwal's anti-corruption party is in line to push Modi's Hindu nationalist Bharatiya Janata Party (BJP) into second place when results are announced on Tuesday. Victory would be particularly sweet for the anti-corruption champion who was badly beaten by Modi when they both contested the parliamentary constituency of Varanasi in May's general election. Most pundits had assumed that Kejriwal was a busted flush, especially after his Aam Aadmi (Common Man) Party won just four seats in parliament. But after apologising for leaving voters without an elected government for a year, Kejriwal has been the undoubted star of the campaign, getting the better of former policewoman Kiran Bedi who is the BJP's choice of chief minister. Modi put his two top lieutenants — BJP president Amit Shah and Finance Minister Arun Jaitley — in charge of the campaign. But it has been beset by divisions, with many BJP activists furious at having to campaign for the 65-year-old Bedi who has a history of disparaging the party. A former reality TV show host, Bedi is a seasoned media performer. But Kejriwal has proved his pulling power among working class and minority voters, with impromptu appearances drawing thousands. Rattled by Kejriwal's popularity, Modi himself has taken to the campaign trail, portraying his rival as a "backstabber" who betrayed voters last time round by quitting so early. Kejriwal began his term in a blaze of glory, taking the metro to his inauguration and initially shunning his official residence. But his government was soon mired in scandal, with a raid on a largely African neighbourhood sparking racism claims. Self-styled anarchist Kejriwal famously declared himself an anarchist during his brief tenure and staged several protests outside government offices. In a press conference yesterday after the official end of campaigning, Jaitley said Aam Aadmi's last spell in government was "nightmarish". "This is the party that is more comfortable spending time on the streets than secretariats. Delhi needs an administrator and not an anarchist," he said. "The BJP has put in all its might in these elections and it is confident of winning a majority." The BJP actually won most seats in the last state election in December 2013 but surprisingly fell short of a majority, allowing Kejriwal to form a government with the help of the centre-left Congress party. It was the last real electoral setback for the BJP which has stormed to victory in a string of state polls since then as well as its landslide general election win. A defeat would not only signal the end of Modi's extended honeymoon with voters, but also present him with a headache as Aam Aadmi is likely to try and stop the federal government pushing through reforms on issues such as land acquisition measures and foreign direct investment in the state of Delhi. Kejriwal, who spent yesteday at the barbers and practising yoga, has been trying to shake off his anarchist reputation in the campaign, promising lower utility bills and free wifi for Delhi's 17 million residents. "BJP, your defeat is inevitable even if you misuse the government administration and arrest all our candidates," he wrote on Twitter. Bedi meanwhile spent Friday visiting a Sikh temple and making chapatis that were later served to devotees. Voting begins at 8.00am (0230 GMT) and polls close 10 hours later. — AFP |
| Mid-year rate hike with strong employment and wages Posted: 06 Feb 2015 05:04 PM PST
Nonfarm payrolls increased 257,000 last month, the Labor Department said on Friday, outstripping Wall Street forecasts. At the same time, data for November and December was revised to show a whopping 147,000 more jobs created than previously reported, bolstering views consumers will have enough muscle to carry the economy through rough global seas. "A mid-year lift-off in the interest rate is fait accompli ... there was good news on many fronts," said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo. At 423,000, November's gain was the largest for any month since May 2010, when employment was boosted by government hiring for a national census. Over the past three months, more than one million jobs have been created, the first time that milestone has been reached since late 1997. The unemployment rate rose one-tenth of a percentage point to 5.7 per cent, but that was because Americans poured into the labor force to hunt for work in a show of increased confidence. The dollar rallied against a basket of currencies and prices for US Treasury debt fell as investors brought forward bets on a rate hike. US stocks ended lower amid concerns over Greece's debt negotiations. Rate futures shifted to show traders now expect a rate increase in September. Before the report, they were anticipating an October hike. Some top Fed officials have been pointing to a June policy tightening. A Reuters survey of Wall Street's largest banks published after the data showed most economists expect a June take-off. "Hundreds of thousands of discouraged workers were optimistic enough to start looking for work in January. Most Fed officials are likely to see this report as good reason to be nervous about potential economic overheating," said Chris Low, chief economist at FTN Financial in New York. Wage gains quicken January marked the 11th straight month of job gains above 200,000, the longest streak since 1994. Sputtering growth overseas and lower oil prices have weighed on US exports and business investment, but the jobs report suggested the economy continued to be a bright spot in an otherwise gloomy world. Wages increased 12 cents last month, the largest gain since June 2007, after falling five cents in December. That took the year-on-year gain to 2.2 per cent, the fastest since August, but still below where Fed officials would like to see it. The US central bank, which has held benchmark borrowing costs near zero since December 2008, ramped up its assessment of the labor market last week, and economists said the jobs data raised the prospect it would push rates higher sooner, despite inflation running below its 2 per cent target. "Employment growth is clearly on fire and it's beginning to put upward pressure on wage growth," said Paul Ashworth, chief US economist at Capital Economics in Toronto. "The Fed can't wait much longer in that environment." Massive tailwind The pick-up in wages is likely to combine with lower oil prices to provide a massive tailwind for consumer spending and keep the economy growing at a healthy clip. In addition to the firmer wages and job growth, the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose two-tenths of a per centage point to 62.9 per cent. The employment-to-population ratio rose to 59.3 per cent, the highest since July 2009, from 59.2 per cent in December. But a broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment rose to 11.3 per cent from 11.2 per cent in December. In January, private payrolls increased by 267,000, while November and December private employment was revised higher. Private payroll gains in November were the largest since September 1997. The manufacturing sector added 22,000 jobs last month, while construction payrolls increased 39,000. Oil and gas extraction employment, however, fell 1,900, reflecting layoffs connected to lower oil prices. Retail employment increased 45,900 after braking sharply in December. Government payrolls fell 10,000, while transportation employment dropped 8,600, the first decline since last February. Temporary staffing slipped 4,100, the first drop in a year. The average workweek was steady at 34.6 hours. — Reuters |
| Measles outbreak prompts new health plan in California, New Mexico Posted: 06 Feb 2015 04:58 PM PST
Announcement of the policy change, which goes beyond the hepatitis B shots already required of all 233,000 UC students, comes amid measles outbreaks that have infected more than 100 people in California and over a dozen more in 19 other US states and Mexico since December. Politicians and education and health officials at the national, state and local levels have found themselves suddenly reacting to the re-emergence of a highly contagious disease that had been declared eliminated as a US-borne virus in 2000, after decades of immunisation efforts. One of New Mexico's largest public school districts, Santa Fe, will start barring unvaccinated students from class unless they have a valid state exemption, the head of the school board said yesterday. The recent flare-up has spurred legislators in California, Oregon and Washington state to consider laws to make it harder for parents legally to opt out of vaccinating school-aged children. Bills in several other states, including New York, Mississippi and West Virginia, would loosen restrictions. US congressional leaders and several possible 2016 presidential hopefuls addressed the issue this week, joining a renewed debate over parents' right to forgo inoculation of their children and fears about potential side effects. The Santa Fe district notified parents this week that any students who lack up-to-date vaccinations or bona fide state waivers for medical or religious grounds will be excluded from class starting on Feb. 17, board President Steven Carrillo said. The district has not determined how many of its 14,000 students are unvaccinated or already exempted, he said. The district action comes as New Mexico documented a steady rise in vaccine exemptions during the past two years, up 17 per cent from 2012 to 2014 to 3,335 children. State Health Department spokesman Kenny Vigil said waivers represent less than 1 per cent of school-aged children statewide, though the department has voiced concern over the trend. Just one measles case has been confirmed in New Mexico this winter, an unvaccinated baby who was hospitalised in December and has since recovered, Vigil said. It was the state's first case since 2012. The origin of the child's infection is unknown, he said, but the case was unrelated to the California outbreak because its onset in late November predates the first Disneyland infection. California public health officials report 103 people have been diagnosed with measles in the state, many linked to exposure to an infected person from outside the country who visited Disneyland in late December. Under the UC vaccination plan, which the university said has been in the works for a year, all incoming students are expected to be immunised against measles, mumps, rubella, chicken pox, meningococcus, tetanus and whooping cough starting in 2016. But the plan will be strictly enforced starting in the fall of 2017. — Reuters |
| Among Greece jitters and interest rate, Wall St ends down Posted: 06 Feb 2015 04:58 PM PST
NEW YORK, Feb 7 — Wall Street stocks fell today as a better-than-expected US jobs report raised expectations that the Federal Reserve will increase interest rates by midyear, while renewed worries over Greece's debt negotiations added to the bearish tone. The S&P 500 index of utilities, often used as a bond proxy by investors in a low-rate environment, fell 4.1 per cent, its biggest daily drop since August 2011, as US government debt yields jumped. In another sign of concern about interest rates, Simon Properties, a real estate investment trust, sank 4 per cent at US$195.08 (RM692.124). But the financial sector, which tends to benefit from rising interest rates, rose 0.7 per cent. Still, all three major indexes registered strong gains for the week, with the Dow industrials rising 3.8 per cent for its biggest weekly gain since January 2013. Nonfarm payrolls increased more than expected in January and wages rebounded, while employment numbers for November and December were revised sharply higher, the US Labor Department reported. The unemployment rate ticked up to 5.7 per cent as a result of an increased labor force. After the report, traders added to bets that the US central bank will start to hike interest rates by midyear. "With the stronger-than-anticipated employment report, there's discussion the Fed might move earlier rather than later ... so we've seen the financial sector do well and the interest rate-sensitive utilities sector do poorly," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. Adding to that, "the negotiations on the Greek debt weighed on the market this afternoon," he said. Euro zone finance ministers are waiting to hear on Feb. 11 how Greece wants to become financially independent, the chairman of the ministers said. Greece must apply for a bailout extension by Feb. 16 at the latest to ensure that the euro zone keeps backing it financially, the Eurogroup chairman told Reuters. The Wall Street Journal yesterday said Greece was rebuffed by lenders for US$5 billion in short-term debt; the country is facing a cash crunch because the EU wants more reforms. The Dow Jones industrial average fell 60.59 points, or 0.34 per cent, to 17,824.29, the S&P 500 lost 7.05 points, or 0.34 per cent, to 2,055.47,, and the Nasdaq Composite dropped 20.70 points, or 0.43 per cent, to 4,744.40. For the week, the S&P 500 was up 3 per cent, its best weekly gain since December, while the Nasdaq was up 2.4 per cent. About 7.7 billion shares changed hands on US exchanges, compared with the 7.9 billion average for the last five sessions, according to data from BATS Global Markets. Among the day's gainers, Twitter jumped 16.4 per cent to US$48.01 after any earnings report on Thursday that beat Wall Street's profit and revenue targets in the fourth quarter. Declining issues outnumbered advancing ones on the New York Stock Exchange by 1,961 to 1,128, for a 1.74-to-1 ratio on the downside. On the Nasdaq, 1,458 issues fell and 1,260 advanced for a 1.16-to-1 ratio favoring decliners. The benchmark S&P 500 index posted 43 new 52-week highs and two new lows; the Nasdaq Composite recorded 99 new highs and 26 new lows. — Reuters |
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