Article / 28 September 2016 at 1:14 GMT

Today's Trade: AGL takes ASX200 higher on buyback plan

Trading Desk / Saxo Capital Markets
  • Local market opened up led by AGL, after buyback surprise
  • US stocks shrugged off 2.7% drop in oil to rally on consumer confidence jump
  • Mexico’s peso led emerging-market currencies up on view Clinton won debate
  • Gold fell on gains in consumer confidence and dollar 

By Saxo Capital Markets (Australia)

Overnight and early trade

The local market opened strongly led by AGL, after the utility announced plans for a buyback. The ASX200 added 0.4% to 5429.7 and the All Ords was up 0.4% at 5516.0.

US stocks shrugged off a drop in oil, rallying as consumer confidence jumped and banking shares rebounded. Mexico’s peso led emerging-market currencies higher on the perception American presidential nominee Hillary Clinton beat Donald Trump in their first debate.

 The perception that Hillary Clinton beat Donald Trump in their first debate pushed the Mexican peso higher. Photo: iStock

The S&P 500 Index furthered its quarterly advance, led higher by technology and retail companies, while European stocks halted a two-day rout as lenders trimmed their losses. 

Mexico’s peso, increasingly a barometer of anxiety around the Trump campaign, jumped the most since February versus the dollar. 

Treasuries advanced to a three-week high as the greenback retreated. Oil tumbled as Iran said it’s unwilling to freeze output at current levels and wants to raise production to 4m barrels a day. Gold and copper also declined.

Equities climbed after data showing US consumer confidence rose to the highest since 2007 bolstered optimism around the world’s largest economy. The report also fueled gains in Europe, where lenders almost erased losses and Deutsche Bank AG was unchanged after plunging to a record low. 

While stocks struggled to find direction in early trading, polls showing Clinton outperformed Trump in the debate were also cited as a reason for relief.

The first of three presidential debates between Trump and Clinton ahead of the November 8 election drew more than 83m viewers, making it the most watched in history. It beat the previous record for the biggest audience set during the 1980 debate between Jimmy Carter and Ronald Reagan, which had 80.6m viewers. A CNN poll showed that 62% of voters who watched the debate said Clinton won the discussion, compared with 27% for Trump. Still, the Republican and Democratic nominees each got 46% of likely voters in a head-to-head contest in a Bloomberg Politics national poll released before the event.

The S&P 500 added 0.6% to 2,159.93 as of 4pm in New York, bringing its quarterly advance to 2.9%. Inc. jumped to a record, while Microsoft Corp. was up 1.9% to pace the rally. The VIX dropped close to 10% overnight to 13.10.

The Stoxx Europe 600 Index added less than 0.1%, wiping out an earlier decline. Banks trimmed losses as Deutsche Bank erased a drop of as much as 3.5%. Commerzbank AG fell after a report that it plans to cut jobs and suspend dividend payments. Credit Suisse Group AG slid as its chief executive officer said the lender is mulling further cost cuts at the global markets unit that posted a loss earlier this year. MSCI’s gauge of global equities rose 0.3%, and emerging-market shares halted a two-day slide, climbing 0.6%.

Futures on Asian indices signaled declines after most benchmarks rallied on Tuesday. Futures on Japan’s Nikkei 225 Stock Average slipped 0.4% in Osaka but jumped 1.1% in Chicago, with most shares on the country’s broader Topix index due to trade without the right to a dividend on Wednesday. Contracts on stock gauges in Australia, South Korea and Hong Kong fell at least 0.1%.

The Mexican peso rebounded from a record low, respite for a currency that has posted the worst performance among major peers the past month amid polls showing that Trump gained ground on Clinton. The US Republican candidate has vowed to renegotiate the North American Free Trade Agreement if he wins and said he’d build a wall between the US and Mexico.

The yen was little changed at 100.44 per dollar, while the euro slipped 0.4%. The Swedish krona led losses among its Group-of-10 peers after Riksbank Governor Stefan Ingves said that he remains determined, if necessary, to fight low inflation with more stimulus. The Egyptian pound slipped to a record low on the black market amid speculation policy makers will weaken the official exchange rate for the second time this year.

US 10-year notes advanced for a second day, with yields falling three basis points, or 0.03 percentage points, to 1.56%, according to Bloomberg Bond Trader data. Merrill Lynch’s Option Volatility Estimate Index, known by the acronym MOVE, declined for a fifth day to 58.9 on Monday, the lowest closing level in 21 months. It has fallen about 14% since September 20, the day before the Federal Reserve’s latest policy review.

European securities from higher-rated nations climbed as investor uneasiness about Deutsche Bank’s financial footing sparked demand for the safest assets at the expense of those from more indebted nations. Germany’s 10-year bond yields fell to the lowest level since July and Finland’s dipped below zero for the first time.

West Texas Intermediate oil for November delivery dropped 2.7% to $44.67 a barrel on the New York Mercantile Exchange.

Nickel surged after top ore supplier Philippines said three-quarters of its mining industry fell short in an audit. Gold futures sank 1% to $1,330.40 an ounce, while copper declined 1.3% in New York.

Source: Bloomberg,

Local markets

  • Bank of New York Australia ADR Index up 0.1%, BHP Billiton ADR little changed at A$21.27 equivalent, 1.1% discount to last Sydney close Rio Tinto ADR up 0.2% to A$42.04 equivalent, 16% discount to last Sydney close
  • Gold futures for December delivery slid 1% to $1,330.40. Gold lost most in more than a month as a surge in US consumer confidence and gains in the dollar damped demand for the metal as a store of value. China, the world’s biggest gold consumer, cut bullion imports from Hong Kong in August to the lowest level since January amid rising property prices and an improving economy. Bullion also fell as Democratic nominee Hillary Clinton saw her odds of winning the US presidency rise after the debate with Republican Donald Trump. Citigroup Inc. has said a Trump win in November could spur volatility in gold. Gold stocks were down 2.35% in Toronto on Tuesday. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil dropped after Saudi Arabia said it doesn’t expect a production accord to be reached when Opec ministers meet Wednesday, but left open the possibility of a deal when they gather in November. Still, Iran and Saudi Arabia face significant hurdles as both nations have yet to agree on their respective new production targets. They have now two months to resolve differences over production limits if they want to secure an agreement that could prevent another year of oversupply on the oil market. West Texas Intermediate for November delivery dropped $1.26 to $44.67. Brent for November settlement slipped $1.38, or 2.9%, to $45.97. A global oil surplus of 400,000 barrels a day is anticipated in the fourth quarter of 2016 after a 300,000 barrel-a-day draw forecast earlier, Goldman Sachs analysts wrote in a research note Tuesday. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore traded on Dalian Commodity Exchange closed down 1.3% at 406 yuan/ton in its second daily decline, even as another investment bank upgraded its assumptions after the commodity has remained stubbornly resilient this year. Most analysts expect the commodity to continue declining from current levels, but its surprising strength over recent months has prompted a number of revisions to more bearish forecasts. Analysts at Morgan Stanley have upgraded their iron ore forecasts by 11% for 2016 and 27% for 2017, the bank said in a research note. The upgrade is a positive for mining giant BHP Billiton, one of the bank’s preferred mining stocks. “Although we still expect iron ore prices to reach a low in the December quarter of 2016, we view fiscal 2016 as the trough year for free cashflow,” Morgan Stanley said. Spot iron ore edged slightly lower by 0.14% to 56.63. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Nickel surged to a six-week high after the Philippines, the world’s top ore supplier, said three quarters of its mining industry fell short of government standards in an audit, raising the prospect of more closures and tighter supply. Of 41 metallic mines in the country, mostly nickel, 20 have been recommended for suspension unless they can respond to shortcomings within days, while about 10 have already been halted. Nickel for delivery in three months rose 0.9% to settle at $10,630 a metric ton on LME. Prices rallied as much as 3.5% earlier to $10,900 a ton, the highest since Aug. 10. Copper for delivery in three months dropped 1.1% to $4,787 a ton ($2.17 a pound). Inventories tracked by the LME expanded to the highest since December 2013 amid increases in Asia. Zinc, nickel, tin and lead climbed in London, while aluminium declined. Copper futures for December delivery fell 1.3 percent to $2.171 a pound. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • ANZ (ANZ): Plans to sell Shanghai Rural stake by year-end, The Australian reports
  • Charter Hall (CHC): Long WALE REIT targets A$1.12bn cap raising, AFR reports
  • Emeco (EHL): Proposed transaction will constitute a distressed exchange, Moody’s says
  • OceanaGold (OGC AU): Seeking clarification after being named in Philippines audit
  • Myer Holdings (MYR): Trades ex-dividend
  • China Bid to End Steel Glut Failing as Rally Revives Mills
  • La Nina Watch Remains, Australian Weather Bureau says
  • Rain in eastern Australia curbing cattle slaughter, group says
  • Reports gambling plague killing one Aussie per day too lucrative to cure

Stock to watch
Caltex (CTX)

We highlighted a key resistance level of $35 on August 23 and subsequently we witnessed a massive squeeze above here for one trading session. Since Caltex (CTX) broke the ascending channel earlier this month, it found the support level at 32, then it has now retraced back up to 34 where the 200-day moving average intersects. We focus on the previous lower uptrend of the previous channel which may now become resistance level but the 200 DMA happens to be restricting further gains for now.

CTX daily chart


The support level 0.76 handle looks to be valid and AUDUSD is gaining upward momentum. The resistance level 0.77 would still be solid but if we continue to see further weakness from the US dollar, then AUDUSD could potentially settle above 0.77. The obvious focus today will be on the comments from some of the FOMC members including Janet Yellen, James Bullard and Esther George.
AUDUSD daily chart
The US500 recovered some of the losses from Monday on the back of the presidential debate, although the gap from Monday is still yet to be filled on the cash S&P500 index. The last two days of AUS200 price action is indicating resilience as it has been failing to close below the psychological level of 5,400. The key resistance level remains at 5,435 which is expected to be tested and could be broken in the near term.
AUS200 daily chart
Source: All charts, Saxo Bank. Create charts with SaxoTrader. Click here to learn more
Today's trade information sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

– Edited by Susan McDonald

Today’s Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch the recording of this Week’s Macro Monday Call at 1030 AEST.


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