Article / 22 July 2015 at 0:51 GMT

Today's Trade: ASX 200 snaps winning streak

Trading Desk / Saxo Capital Markets
Australia
  • The ASX 200 was sharply weaker at the open on overseas leads
  • Goldminers bucked the trend as the gold price lifted slightly
  • AUDUSD dropped below 0.7350 but rallied 100 pips as the US market opened

By Saxo Capital Markets (Australia)

Overnight and early trading

The local market opened sharply weaker following overnight leads. At the open, the ASX 200 was down 0.8% at 5662 with losses across all sectors. However, gold miners were stronger after the gold price stabilised overnight.

The big four banks were all weaker, as was Telstra. BHP was down 0.5% after delivering a mixed production report.

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 BHP delivered a mixed quarterly report and saw its shares fall at the open. Photo: iStock

Overseas, stocks declined across the board last night as weak earnings took centre stage. Mining stocks were well bid in Europe and Toronto as the price of gold halted its sell-off. Big mining names such as Fresnillo, Antofagasta and BHP Billiton all finished in the green, with Fresnillo trading near the top of the Stoxx 600, after spot gold pared back some of Monday's steep losses.

  • Germany’s DAX dropped 1.12% to 11604.80, France’s CAC-40 lost 0.7% to 6769.07 and the FTSE shed 0.29% to 6769.07
  • SAP reported a 13% rise in second-quarter operating profit, which rose to EUR 1.39 billion ($1.15 billion), the lower end of analysts' estimates. Shares in the technology giant pared morning gains to close over 1.4% lower
  • Remy Cointreau sunk to close around 2.5% lower, after the French alcoholic drinks maker said organic sales fell 9% between April and June compared with the same period last year
  • Swiss drugmaker Novartis said the strength of the US dollar had hit profits. Second-quarter net sales fell 5%, but rose 6% in constant currencies. Novartis subsequently closed around 2% lower
  • AkzoNobel finished around 1% higher after the chemical and paint company said second-quarter revenues were up 6% at EUR 3.9 billion ($4.2 billion), mainly driven by favourable currency effects
  • The Dow Jones Industrial Average declined 181.12 points, or 1%, to 17919.29 while the S&P 500 slipped 9.07 points, or 0.4%, to 2119.21. The Nasdaq Composite shed 10.74 points, or 0.2%, to 5208.12
  • The decline in the Dow came from just two companies and stock-trading volumes were muted. IBM’s stock decline weighed on the Dow by 68 points, while United Technologies’ stock drop dragged the index down by 52 points.
  • IBM fell $10.15, or 5.9%, to $163.07 as its second-quarter revenue fell 13.5%, extending its sales slump to 13 quarters. Its profit declined 16.6% to $3.45 billion, weighed down by acquisition-related charges
  • United Technologies’ lost $7.77, or 7%, to $102.71 as sales fell 5% in the June quarter and lowered its earnings guidance for the year
  • After the closing bell, Apple’s shares were being sold down heavily as it reported a 38% rise in quarterly profit and as its revenue outlook for the current quarter fell short of expectations. Shares were down as much as 7% at $121.63
  • Microsoft shares fell 3.9% after hours after the company posted its biggest quarterly loss ever and said revenue was hurt by weak PC demand

US earnings

Wednesday
  • Coca-Cola, Boeing, American Express, Abbott Labs, Texas Instruments, Cheesecake Factory, Discover Financial, SanDisk, Qualcomm, Fortune Brands, Raymond James, Newmont Mining, Ameriprise, Cirrus Logic, Graco, Sallie Mae, Select Comfort, Morningstar, Weatherford, Xilinx, F5 Networks, St. Jude Medical, Six Flags, AutoNation, Tupperware, Owens Corning

Thursday
  • Caterpillar, Eli Lilly, Amazon.com, General Motors, Comcast, McDonald's, Starbucks, Visa, Capital One, Bristol-Myers Squibb, Union Pacific, Roche Holdings, Dow Chemical, Celgene, Credit Suisse, Dr. Pepper Snapple, Alaska Air, Southwest Air, Dunkin Brands, Pulte, Raytheon, Freeport-McMoran, Stryker, Nasdaq OMX, Kimberly-Clark, Stryker, Pandora, Flextronics, Ruby Tuesday

Friday
  • Biogen, Johnson Controls, State Street, Xerox, Moody's, Cabot Oil and Gas, Spirit Airlines

Local Markets

  • Spot gold lifted 0.4% to 1,101 as it traded with lows of $1,086 and highs of $1,109
  • Overnight gold stocks rose on average 2% in Toronto and we expect our gold stocks to follow. A mild open would indicate buying opportunity as shares would be believed to tick up throughout the day. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Crude oil has recovered from yesterday’s fall, up 0.8% for both WTI and Brent, which were trading at $50.36 and $57.00 respectively. US inventories are expected to fall some 2m/barrels last week, with figures due out tonight. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore weakened 0.6% to $52.10 as Chinese steel mills approach maintenance time, which will put a cap on imports. In addition, BHP have released its fourth-quarter production figures this morning, which show increased production of 13% to a record 254mt. Productivity gains along with future de-bottlenecking will impact iron ore prices. Rio you may remember sung a similar song. BHP in 2016 expects any further growth to come from productivity gains of approximately 7% and is looking for unit costs (ex-shipping and royalties) to be $16/t. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were weak overnight with aluminium falling the most of 1.4% to $1,662/t. Chinese data showed their exports of unwrought aluminium and related products soared 35% in the first half of the year; no doubt due to the tailwinds of a removed export tax. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
  • Australia's second-quarter CPI is out today at 1130 AEST with estimates of 0.8%. This is up from first-quarter CPI of just 0.2% and sets the yearly CPI at 1.7%. The trimmed mean CPI q/q is at 0.6% and 2.1% y/y. With inflation expected to be well within the RBA's 2-3% range, it is neither threatening or constraining current monetary policy
  • RBA governor Glenn Stevens gives a speech at a Sydney luncheon at 1305 AEST
  • Banks: Australian lenders average cash ROE could fall to 14.5% by 2017 vs 15.6% in latest fiscal years: mean estimate of five analysts surveyed by Bloomberg
  • BHP Billiton (BHP): 4Q production due
  • Origin Energy (ORG): Brokers ’circling’ ORG stake in Contact Energy, deal being pitched at NZD4.60/share: AFR
  • OZ Minerals (OZL): Assessing Anglo copper assets in Chile, Australian reports
  • South32 (S32): First separate quarterly production post-spinoff due

Broker upgrades
  • Cabcharge (CAB): Raised to Buy vs Hold at Morningstar
  • OZ Minerals (OZL): Raised to Buy vs Hold at Bell Potter
  • Regis Resources (RRL): Raised to Buy vs Hold at Morningstar

Broker Downgrades
  • Ansell (ANN): Cut to Hold vs Buy at Morningstar
  • Caltex (CTX): Cut to Hold vs Buy at Bell Potter
  • Platinum Asset (PTM): Cut to Hold vs Buy at Morningstar

Data points
Wednesday
  • AUS: CPI q/q & Trimmed Mean CPI q/q (1130am)
  • AUS: RBA Gov Stevens Speaks: Due to speak at the Anika Foundation Luncheon, in Sydney (105pm)
  • GBP MPC Official Bank Rate Votes and MPC Asset Purchase Facility Votes
  • Italian Retail Sales m/m
  • US: HPI m/m, Existing Home Sales, Crude Oil Inventories

Thursday
  • JPN: Trade Balance (950am)
  • EUR Spanish Unemployment Rate
  • UK Retail Sales m/m, BBA Mortgage Approvals
  • US Unemployment Claims

Friday
  • CNY: Markit Flash Manufacturing PMI (1145am)
  • French, German & EUR Flash Manufacturing / Services PMI
  • US Flash Manufacturing PMI & New Home Sales

AUDUSD

The daily candlesticks for USDCAD indicates 1.30 handle is the interim resistance level as USDCAD failed to close above 1.3000 which was tested three days. We expect USDCAD to pull back further down towards the previous resistance level 1.2750 – 1.2800, but we see this as a retracement rather than a reversal, therefore we lower our original stop loss from 1.3070 to 1.3030 as USDCAD is likely to make a genuine breakout next time it rallies back above 1.3000.

Yesterday the AUDUSD dropped below 0.7350 on the back of the RBA monetary policy minutes but rallied 100 pips as the US market opened before finding some resistance level at 0.7450. The forecast for today’s CPI (0.8% at 1130am) is much higher than the previous forecasts, therefore we believe yesterday’s price actions suggest AUDUSD has priced in a relatively high CPI and it is possible to extend the gains towards 0.7500 which is the resistance level that could provide a good opportunity to sell.

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Source: Saxo Bank

ASXSP200.i

The ASX/S&P 200 made a seven-week high at 5,722 yesterday, led by the big four banks but it failed to stay above 5,700 and found some support level at 5,671, which remains as a key level to determine the near-term direction of AUS200. 

On the back of the disappointing earnings from some of the blue chip stocks, the E-mini S&P500 futures could not make a record high and formed a double top pattern. We expect 5,700 would be the psychological resistance level for now and daily close below 5,671 would signal further decline is on the way.

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Source: Saxo Bank. Create your own charts with Saxo Trader; 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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