Article / 11 August 2015 at 0:35 GMT

Today's Trade: ASX 200 boosted by overseas rally

Trading Desk / Saxo Capital Markets
Australia
  • The local market opened higher on strong overnight leads
  • Spot gold lifted 1%, while WTI and Brent were up 2.8% and 3.9% respectively
  • AUDUSD is maintaining an uptrend from the swing low 0.7235

By Saxo Capital Markets (Australia)

Overnight and early trading

Shares opened higher on local markets. The ASX 200 was up 14.8 points at the open to 5524. The energy and materials sectors were leading the gains with healthcare falling the most.

Resources stocks were also enjoying a strong lift with Rio Tinto and BHP both up.

Among the companies reporting earnings, Domino's Pizza recorded a 40% jump in net profit in 2014-15 as digital innovations boosted sales growth but its share price was punished, along with Cochlear who failed to impress.

Meanwhile, in overseas news:
  • The Stoxx Europe 600 closed 0.7% higher, the French CAC 40 rose 40.66, or 0.79%, to 5,195.41, the DAX pared early losses to close at 11,604.78, or a 0.99% increase. While outside the currency bloc the FTSE 100 rose 17.73, or 0.26%, to 6,736.22
  • Investor sentiment improved overnight as negotiations over a third bailout of Greece advanced. In turn Greece’s index closed 2.1% higher, however the Athens index is still down severely after it reopened last week
  • Greek companies were among the top gainers for the Stoxx 600, the National Bank of Greece SA finished up 3%, while the Greek Organization of Football Prognostics SA was up 7.6%
  • Negotiators are tackling details including Greece’s fiscal outlook and the size of the total bailout, which is estimated to be about €86 billion. Greek finance minister Euclid Tsakalotos commented that discussions with the institutions “are going fairly well”. He also said that discussions should wrap up soon. However, just because a deal may be reached does not mean Greece is out of trouble, as the Greek parliament must still pass tough measures, including unpopular tax hikes – a hard sell that is required by Greek creditors
  • US stocks rallied on the back of a $32bn Berkshire deal; the rally has revived the Dow from steep losses last week
  • Berkshire Hathaway announced it would buy Precision Castparts for about $32bn; in turn, shares in the industrial company soared 19%, the biggest gainer in the S&P
  • Other industrial companies also gained overnight. Boeing and heavy-equipment manufacturer Caterpillar were among the biggest gainers, rising 2.4% and 3.7% respectively
  • The Dow had its first closing gain in August, rising 58.25 points, or 1.4% to 17615.17. The Nasdaq Composite advanced 58.25 points, or 1.2%, to 5101.80, while the S&P 500 gained 26.61 points, or 1.3%, to 2104.18
  • As oil rebounded overnight, so did the S&P energy sector, which gained 3.1%
  • Federal reserve Vice Chairman Stanley Fischer said that US inflation remains low and that the Fed must see inflation return to more “normal levels” before the central bank raises interest rates
  • With an update on US inflation later this week, investors should be able to gain a greater insight into the rate hike decision, however with strong jobs released on Friday, it appears the Fed is on track to lift rates as soon as September
  • Stocks have been trading in a narrow range in recent months and with no conviction towards a US rate hike, this narrow range may be around for some time
  • Oil prices reversed an early loss, jumping 2.5% to $44.96 a barrel while gold futures added 0.9% to $1104.20/oz

US earnings

Tuesday
  • Cree, Computer Sciences, Symantec, Towers Watson, Red Robin Gourmet Burgers, Cyber Ark Software, JA Solar, Silver Wheaton

Wednesday
  • Cisco, Macy's, News Corp., Alibaba, NetEase, Markit, Wayfair

Thursday
  • Nestle, Kohl's, Nordstrom, Applied Materials, Flowers Foods, El Pollo Loco, King Digital, Party City

Friday
  • No earnings

llkkl
 Domino’s Pizza reported a 40% rise in net profits but its share price was punished 
in early trading. Photo: iStock

Local Markets

  • Bank of New York Australia ADR Index +1.6%; BHP Billiton ADR +2.8%; Rio Tinto ADR +4.5%, biggest one-day gain in  around four months
  • Spot gold lifted 1% to close at $1,105. This is the first time gold has closed above $1,100 since July 21. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Crude oil performed strongly with WTI and Brent up 2.8% and 3.9% to $44.81 and $50.24 respectively. Speculative long positions are coming back in to the market after seven weeks of declining positions. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore trading was closed as Singapore celebrates its jubilee of independence, however in China, iron ore for January delivery lost 0.4% to close at 370 yuan/mt on Dalian Commodity Exchange. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were flush with green as a weaker US dollar spurred opportunistic buyers back into the market. Copper rose from a six-year low with copper futures for September delivery rising 2.9% to settle at $2.40 a pound in Comex. Nickel, aluminum, lead, zinc and tin gained in London. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
  • FY earnings expected: Bradken (BKN), Domino’s Pizza (DMP), Cochlear (COH), Magellan (MFG), Transurban (TCL), Greencross (GXL)
  • Origin Energy (ORG): Cut to Baa3 from Baa2 by Moody’s; outlook stable
  • Paladin (PDN): John Borshoff steps down as CEO; Alexander Molyneux appointed interim CEO
  • ANZ Roy-Morgan consumer confidence is out at 930 (AEST) today. Last week’s print was up 0.4 to 112.9
  • NAB Business Survey is out at 1130 (AEST)
  • Ex-div: Suncorp (SUN)

Chart for thought
MYR
 Source: Saxo Bank

Open positions


Broker upgrades

  • Ansell (ANN): Raised to neutral vs underweight at JPMorgan
  • Ansell (ANN): Raised to buy vs neutral at UBS
  • Medibank (MPL): Raised to buy vs hold at Morningstar

Broker downgrade

  • Bendigo & Adelaide (BEN): Cut to neutral vs outperform at Credit Suisse
  • FlexiGroup (FXL): Cut to hold vs buy at Credit Suisse Emerging
  • JB Hi-Fi (JBH): Cut to neutral vs buy at UBS

Data points

Tuesday
  • JPN: M2 Money Stock y/y
  • AUS: NAB Business Confidence (1130am)
  • CNY: New Loans and M2 Money Supply y/y (11-14)
  • EUR: German ZEW Economic Sentiment
  • US: NFIB small business survey, Productivity and costs, Wholesale trade, $24 billion 3-year auction

Wednesday
  • JPN: Monetary Policy Meeting Minutes & PPI y/y
  • AUS: Westpac Consumer Sentiment (1030am); Wage Price Index q/q (1130am)
  • JPN: Revised Industrial Production m/m and Tertiary Industry Activity m/m
  • CNY: Industrial Production y/y, Fixed Asset Investment ytd/y and Retail Sales y/y (330pm)
  • GBP: Average Earnings Index 3m/y, Claimant Count Change & Unemployment Rate
  • US: New York Fed President William Dudley speaks in New York on workforce development; JOLTs, $24 billion 10-year auction; Federal budget

Thursday
  • JPN: Core Machinery Orders m/m
  • AUS: MI Inflation Expectations (11am); RBA Assistant Governor Christopher Kent Speaks (1215pm): Due to deliver a speech titled "Recent Labour Market Developments" at the Economic Society of Australia's 2015 Business Lunch, in Brisbane
  • EUR: ECB Monetary Policy Meeting Accounts
  • US: Initial claims, retail sales, import prices, Business inventories, $16 billion 30-year auction
Friday
  • CNY: Foreign Direct Investment ytd/y (14-18)
  • EUR: French / German Prelim GDP q/q, Final CPI y/y, Flash GDP q/q & Final Core CPI y/y
  • US: PPI, Industrial production, Consumer sentiment

AUDUSD on the rise

The resistance line of the falling wedge has been broken and AUDUSD is maintaining an uptrend from the swing low 0.7235. The upside momentum remains as FOMC member Lockhart’s comment last night was interpreted as less hawkish than the one from the previous WSJ interview. 

The double top was formed at 0.7420 but we expect this will be broken to test the next resistance level 0.7450 and 0.75 handle, while the support level sits at 0.7365.

AUDUSD DO
 Source: Saxo Bank

AUS200.i extends gains

On the back of the positive sentiments driven by Warren Buffett’s M&A deal and the recovery of the major commodity prices, the AUS200 extended its gains after finding support at 5,444. 

Yesterday afternoon’s rebound stopped at the 61.8% retracements level 5,512, but the AUS200 appears to be fast approaching to test the next resistance level 5,560, which happens to be in line with two 50% retracements levels.
 
SP200 DO
 Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more

– Edited by Gayle Bryant

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets.

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