Today's Trade: ASX a late starter after tech troubles
- ASX stalled by technical problems which halted start of trading until 1130
- S&P 500 eked out a gain on Friday as Apple gains on iPhone 7 release
- Copper proving to be the best base metal play at the moment
By Saxo Capital Markets
Overnight and early trading
The Federal Reserve Bank’s looming rate decision and a rout in oil kept investors on edge amid data that did little to clarify the economy’s strength.
The CBOE Volatility Index swung at least 10% on three days, the most in any week since the Brexit vote.
Apple alone added seven points to the benchmark gauge. Befitting the world’s largest company, its rally spread to a raft of suppliers.
Chipmaker Skyworks Solutions jumped 14% for the biggest advance in the S&P 500, while Qualcomm jumped 4%. The technology group climbed 3% in the week, the most among the 10 major industries.
Just four of the 37 companies in the group advanced, with Range Resources and Marathon Oil sliding at least 9%.
Local markets and commodities
- The S&P/ASX 200 Index futures contract unchanged; futures relative to estimated fair value suggest little change.
- Bank of New York Australia ADR Index -1.2%, BHP Billiton ADR -2% to A$20.02 equivalent, 0.3% discount to last Sydney close, Rio Tinto ADR -1.9% to A$39.95 equivalent, ~14% discount to last Sydney close.
- Gold prices hit a two-week low on Friday, as a stronger US dollar and jitters over the path of monetary policy weighed on demand. Gold for December delivery settled down 0.6% at $1,310.20/oz on the Comex division of the New York Mercantile Exchange, closing out its second consecutive day of losses to its lowest level since September 2. Speculation over a rate increase in September has put pressure on gold prices in recent weeks. Higher rates generally weigh on gold, since the metal pays its holders nothing and struggles to compete with yield-bearing assets when borrowing costs rise. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
- US oil prices fell to a one-month low on Friday and finished down for the third time in four weeks, as increasing exports from Opec and a shutdown on a major US gasoline pipeline continued weighing on prices. Light, sweet crude for October delivery settled down 88 cents, or 2%, to $43.03/barrel on the New York Mercantile Exchange.
- Global benchmark Brent lost 82 cents, or 1.8%, to $45.77/b. Analysts and a brokers are pointing to rising supplies likely on the way from Opec. Royal Dutch Shell and Exxon Mobil have both lifted force majeures on Nigerian oil exports, after militants previously had caused a shut-in of supply. Libya is also planning to resume exports from its Ras Lanuf port that had been impacted by the country’s civil strife. US crude prices lost 6.2% for the week, its second worst week since early July. Brent lost 4.7%. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
- Iron ore remained unchanged at $55.97/tonne due to markets being closed in China for a public holiday. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
- Copper is at last getting a moment in the sun. Prices posted the biggest weekly gain in two months as the metal that’s lagged behind its peers this year gets a boost from signs that demand may strengthen in China, the biggest consumer. Copper analysts and traders remain bullish on the near-term outlook for prices after a slew of Chinese data fueled speculation demand will improve, according to a Bloomberg survey.
- Figures last week showed new credit surpassed estimates after readings for factory output, investment and retail sales also exceeded expectations. Copper for delivery in three months rose 0.1% to $4,788/t ($2.17/pound) on the London Metal Exchange, leaving the weekly gain at 3.3%, the biggest increase since mid-July.
- By contrast, zinc - the top metals performer of 2016 - posted its first back-to-back weekly drop since January. Copper has advanced just 1.8% in 2016, the least among the six main base metals, amid speculation that growth in supply is topping demand to spur a surplus. Anglo American is resuming operations at its Los Bronces copper mine in central Chile after reaching a wage agreement to end a week-long strike. In the next nine months, Codelco, the world’s largest copper producer, is scheduled to negotiate new contracts with about 5,200 workers.
- Zinc has rallied 38% this year amid forecasts for a worldwide deficit following mine depletions, and after some producers including Glencore cut supply. The price - which rose to $2,372/t earlier this month, the highest since May 2015 - slid 0.7% to $2,215/t on Friday. Prices of aluminum, nickel and tin advanced in London, while lead declined. In New York, copper futures for December delivery rose less than 0.1% to settle at $2.16/p on Comex. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
- In other news: Adelaide Brighton (ABC), Boral (BLD): LafargeHolcim may pull out of some countries, Chairman tells SZ; Alumina (AWC): Alcoa sees separation on course for 2H 2016; Charter Hall (CHC): Long WALE REIT priced at A$4/shr: AFR; CSL (CSL): Shire to continue to be ‘acquisitive co.’ in future; Orocobre (ORE): Scheduled to release FY results; NOTE: Adj. net income loss est. A$33.7m (5 analysts); Trades ex-div.: Resolute Mining (RSG), Vocus (VOC); Telstra (TLS): Hosts retail holder meeting in Melbourne; Wellard (WLD): Gina Rinehart, Andrew Forrest may be among potential bidders for co.: Australian.
- AGL Energy (AGL): Raised to buy vs hold at Shaw & Partners
Stock to watch
We see added short opportunities near $A6.20 (original short entry, see here) where a downtrend (from August high) intersects the uptrend from January low, but if we see a breakout above $A6.20 then OZL may potentially continue to rally towards $A6.30-$A6.50.
OZ Minerals monthly chart
AUDUSD at present hovers just above the lower orange channel trendline and we mark potential long opportunities starting just above the 74 handle: 0.7410 down to 0.7380 which are the 2015 double top levels.
The 200 DMA coincidently hovers just below the 74 handle hence given the cluster of levels here, the market may experience a positive move off these levels.
Stops on any long positions at these zones would sit below 7370. But for now 0.7450 would be a solid interim support level as the uptrend (from January 16 low) connects the 50% retracements between May low and August high.
AUDUSD quarterly chart
A look at the AUD versus the Kiwi dollar shows that there is a potential descending wedge development currently underway.
The RSI shows a triple bottom formation and last week started to show signs of life. We highlight potential long opportunities over the AUDNZD up to a limit of 1.0356 and we initially target 1.0555 as this would be the level that meets the downtrend line this week.
However, we would like to see a clear break above 1.0310 as this level used to be a major swing low back in July.
Note, the final confirmation or ultimate buy signal is served upon a break above the upper trendline but this may not occur as quick as one expects, as in order for the descending wedge to be truly defined we need three price points along the upper and lower trendlines.
We have been able to connect the lower trendline using three price points however only two connections have been made on the upper trendline so the 1.0555 level expected this week could serve as that third price point, where potentially the pair may retrace lower.
Stops on any long positions would sit below 2016 lows so we set our stop loss if offered at 1.0225.
AUDNZD monthly chart
Despite the decent bounce back seen in our index, we feel that there is just over 1% worth of gains to be made given we have largely unperformed global markets these past several weeks.
We look at the zones between 5360 to 5380 as resistance levels which would also serve as attractive levels to consider short positions.
AUS 200 monthly chart