Article / 09 August 2016 at 0:35 GMT

Today's Trade: ASX buoyed by ANZ update

Trading Desk / Saxo Capital Markets
  • Local markets opened higher, led by energy and bank stocks
  • ANZ Bank posted a 3% decrease in cash profit on higher expenses for bad debts
  • Oil companies got a boost after Opec said it would hold informal talks in September
  • US stocks fell Monday as declines in healthcare shares offset gains in energy stocks
  • Gold fell to the lowest in more than a week as demand for safe havens declined

By Saxo Capital Markets (Australia)

Overnight and early trading

The ASX 200 opened 0.2% higher at 5500 led by energy and bank stocks. The ANZ Bank reported a 3% decrease in cash profit in the first nine months on higher expenses for bad debts and the news was well received by the market. At the start, it was up 1.8% with other bank stocks also higher. A number of other companies are reporting earnings today.

The ANZ earnings report was well received by the market. It opened 1.2% higher. Photo: iStock 

  • US stocks slipped Monday as declines in healthcare shares offset gains in energy stocks. The pullback came in a relatively light day of trading after a strong July jobs report helped lift the S&P 500 and the Nasdaq Composite to record highs at the end of last week.
  • Roughly 5.8 billion shares changed hands Monday, making it the seventh-lowest volume day of the year so far.
  • Oil companies got a boost after Opec said it would hold informal talks in September, raising hopes for an output freeze and sending US oil prices to a two-week high. US crude rose 2.9% on Monday to $43.02/barrel, after dipping below $40 last week on concerns about a glut of gasoline.
  • Energy companies in the S&P 500 gained 1.2%. Marathon Oil added 38 cents, or 2.7%, to $14.25. Transocean rose 29 cents, or 2.6%, to 11.31.
  • The healthcare sector led declines in the S&P 500, falling 0.8%. Allergan fell $5.54, or 2.2%, to $248.31 after it reported that losses doubled in its latest quarter. Bristol-Myers Squibb fell $2.98, or 4.7%, to $60.30, adding to Friday’s losses after one of its cancer drugs failed in a clinical trial.
  • The Dow Jones Industrial Average fell 14.24 points, or about 0.1%, to 18529.29, its ninth decline in the past 11 sessions. The S&P 500 lost 1.98 points, or roughly 0.1%, to 2180.89, and the Nasdaq Composite fell 7.98 points, or 0.2%, to 5213.14 – both snapping a three-session winning streak.
  • European shares were little changed as investors assessed gains that pushed the Stoxx Europe 600 Index to its biggest three-day increase in more than three weeks. Antofagasta and BHP Billiton climbed 3.3%, pushing miners to the best performance on the equity benchmark, as commodity prices increased. 
  • Barclays was among the biggest advancers on a gauge of banks, rising 3.6% after Exane BNP Paribas upgraded it to outperform, similar to buy, from neutral. Allianz SE rose 3%, leading gains among insurers. A measure of healthcare companies posted the biggest decline on the index. The Stoxx 600 added less than 0.1% to 341.53 at the close of trading, after earlier rising as much as 0.5%. 
  • The Dax advanced 0.6% as data showed industrial production increased in June more than forecast. The gauge was also supported by gains of at least 3% in Commerzbank and Deutsche Bank. The FTSE added 0.2% and the CAC rose 0.1%.

Source: Bloomberg,

Key earnings

  • Australia: Transurban, ANZ Banking Group, IOOF Holdings, REA Group, News Corp, Carsales, Cochlear
  • International: Valeant Pharmaceuticals International Inc. and Walt Disney Co
  • Australia: AGL, CBA, Computershare, Sky City Entertainment, Oz Minerals, Fairfax Media
  • International: Shake Shack, Prudential and Sun Life Financial 
  • Australia: Virgin Australia, Magellan Financial, Goodman Group, Telstra
  • International: Alibaba Group Holding, Deutsche Telekom and Macy’s 
  • Toshiba, A.P. Moeller-Maersk A/S and Sands China

Local markets and commodities

  • Bank of New York Australia ADR Index +0.7%, BHP Billiton ADR +1.5% to $A20.56 equivalent, broadly in line with last Sydney close, Rio Tinto ADR +1.6% to $A43.46 equivalent, 13% discount to last Sydney close
  • Gold fell to the lowest in more than a week as signs of US economic resilience boosted world equities and the dollar, reducing demand for precious metals as a haven. Gold’s rally is slowing this quarter after capping its best first half in almost four decades. The surge that has pushed prices up 27% this year was fuelled by pledges from central banks in Europe and Japan to continue to crank up stimulus, while rates remained low in the US. 
  • Rising borrowing costs hurt the investment appeal of gold and other precious metals because they don’t offer yields or dividends. Gold futures for December delivery slipped 0.2% to settle at $1,341.30/ounce on Comex, after trading at $1,335.30, the lowest intraday since July 29. Goldies in Toronto added 0.85% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR
  • Oil rallied Monday as fresh hopes that Opec members might consider freezing production provided support to the market, despite a continuing glut of crude supply. Opec said Monday that it would hold informal talks at an energy conference in September, renewing belief among analysts that the cartel’s members may revisit production freezes this fall.
  • US crude oil for September delivery settled up $1.22, or 2.9%, to $43.02/barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose $1.12, or 2.53%, to $45.39/barrel on ICE Futures Europe. 
  • Chatter about the potential production freeze comes a week after oil entered a bear market, settling more than 20% below its 2016 high. Crude had rallied above $50/barrel in early June, only to briefly dip below $40/barrel last Monday as concerns about a glut of oil triggered a market selloff. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore prices made a strong start to the week amid gains in the steel and futures markets on Monday August 8. Sentiment was also supported by the strong level of iron-ore imports into China. Iron ore added $0.82 to $61.56/tonne. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Copper and other industrial metals advanced as signs of economic resilience in Germany and the US outweighed demand concerns from China. In Germany, the largest copper user behind China and the US, industrial production increased in June, government data showed Monday, signalling Europe’s largest economy gained momentum ahead of the UK’s vote to exit the European Union. 
  • Copper futures for delivery in September advanced 0.5% to settle at $2.165/pound on Comex, the first gain in four sessions. China’s purchases of unwrought copper and products fell for a fourth month to 360,000 tonnes in July, the lowest since August 2015, customs data show. Imports receded as the nation struggles to clear its surplus after record purchases in the first half spurred by a credit boom and property rebound. 
  • Nickel for delivery in three months on the London Metal Exchange rose 0.5% to $10,770/tonne, the highest close since in almost a year. Prices rose for a second session after the Philippines, the world’s biggest producer of nickel ore, started auditing miners and ordered small-scale producers to stop operations as it follows through on a vow to clean up the industry. 
  • Zinc, copper and lead also advanced on the LME, while aluminium and tin declined. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • In early reporting, Australia and New Zealand Banking Group posted a 3% decrease in cash profit in the first nine months on higher expenses for bad debts. Unaudited cash profit, which excludes one-time items, fell to $A5.2 billion ($4 billion) from $A5.4 billion reported a year earlier, the Melbourne-based lender said in a statement to the stock exchange Tuesday. Australian lenders don’t provide full quarterly earnings and are only required to present half-year and full-year results.
  • AGL Energy (AGL): Alinta owners considering alternatives more than six months after starting sale process: AFR
  • BHP Billiton (BHP): Opens mobile application hub in Shanghai
  • Carsales (CAR): Scheduled to release FY results; NOTE: Adj. net income est. $A109.2mln (13 analysts)
  • Cochlear (COH): Scheduled to release FY results; NOTE: Adj. net income est. $A190.2mln (12 analysts)
  • Fairfax (FXJ): Considering sale of regional newspaper unit to US-based Platinum Equity: Australian
  • IOOF (IFL): Scheduled to release FY results; NOTE: Adj. net income est. $A172.6m (11 analysts)
  • Medibank Private (MPL): May sell parts of Health Solutions arm: AFR
  • Mesoblast (MSB): Scheduled to host corporate update call
  • News Corp. (NWS): Profit misses estimates as ad sales slump
  • REA Group (REA): Scheduled to report FY results; NOTE: Adj. net income est. $A221.8mln (11 analysts)
  • Scentre Group (SCG): Woolworths Holdings sells Market Street, Sydney, property for $A360m to company
  • Transurban (TCL): Scheduled to release FY results; NOTE: Adj. net income est. $A222mln (10 analysts)

Broker upgrades and downgrades

  • Sandfire Resources (SFR): Cut to neutral vs buy at UBS
  • OZ Minerals (OZL): Cut to sell vs neutral at UBS

US500.i and AUDUSD

The price actions of AUS200 were quite subdued in the last 24 hours as it is hovering just below 5,550, which is equivalent to the psychological level 5,500 in SPI futures (AP). We saw a shooting star like candlestick in the daily chart of US500 last night as it made a fresh high 2,186.85 but it closed negative. This price action suggests potential signs of near-term reversal therefore we are seeing a shorting opportunity at the current level with a stop above last night’s swing high 2,186.85.
US500 monthly
Source: Saxo Bank

In the bigger picture, AUDUSD looks to be forming a bottoming out pattern (inverse head and shoulders) and it is now approaching a key breakout level 0.77 handle, however copper (HG) continues to remain under selling pressure, and this should not be ignored, Therefore we would sell any levels between 0.7676-0.77 until there is a genuine breakout above 0.77.
AUDUSD monthly
Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more 

Today's information sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

– Edited by Gayle Bryant

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


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