Article / 17 February 2016 at 0:45 GMT

Today's Trade: ASX casts off early wobbles

Trading Desk / Saxo Capital Markets
Australia
  • The ASX 200 dropped slightly in early trade to 4,902, with the All Ords at 4964
  • ANZ was down 0.8% following its quarterly update and Macquarie down 1.7%
  • In the US, buying momentum carried on from Friday, shaking off oil jitters
  • The S&P 500 closed up 30.80 points, or 1.65%, at 1,895.58

By Saxo Capital Markets

Overnight and early trading

The Australian sharemarket has fallen in early trade, despite a solid session on Wall Street overnight as local mining and financial stocks slip. At the 1015 AEDT official market open, the benchmark S&P/ASX200 index was down 8 points, or 0.16% at 4,902.

Oil prices gave up early gains as traders digested the news. US Nymex crude lost 1.4% to $29.04/barrel while global benchmark Brent crude fell 3.6% to $32.18.

In overnight trading:

  • Following a US holiday on Monday, buying momentum from carried on from Fridays’ session, shaking off declines in oil prices.
  • The Dow Jones Industrial Average closed up 222.57 points, or 1.39%, at 16,196.41, with Boeing (+3.65%) leading advancers and Wal-Mart (-0.42%) and Travelers Cos (-0.11%) the only decliners. The S&P 500 closed up 30.80 points, or 1.65%, at 1,895.58, with consumer discretionary leading all 10 sectors higher. The Nasdaq composite closed up 98.44 points, or 2.27%, at 4,435.96.
  • Last night’s gains takes the performance on the S&P 500 to clock its biggest two-session gain since late August 15.
  • US financials rose with the KBW Nasdaq bank index rising 2.8%. The index is still down more than 16% year to date.
  • Strong earnings contributed to helping lift sentiment: Burger King owner Restaurant Brands International added 6.1% after posting better-than-expected profits. Shares of Hormel Foods rose 7.1% after the food company reported an increase in profits and lifted guidance for the year. Shares of ADT topped the S&P 500, soaring nearly 48%, after the home-security company agreed to be acquired by private-equity firm Apollo Global Management LLC.
  • Oil futures fell 1.4% to $29.04 a barrel, after trading as high as $31.53 earlier in the session after Saudi Arabia, Russia, Qatar and Venezuela said they wouldn’t increase crude-oil output above January’s levels. Note: January levels are elevated levels for both Saudi Arabia and Russia.
  • The CBOE Volatility Index (VIX) held near 24 while gold futures lost 2.6% to settle at $1,207.50 an ounce.
  • Over in Europe, early gains were given up with the Stoxx Europe 600 falling 0.4%. The Dax lost 0.78% followed by the CAC which shed 0.11%. The FTSE managed to log gains, up 0.65%.
  • Banks continued to be the focus point: Standard Chartered was by far the worst performer dropping more than 5% as several brokerages cut their target prices following a recent rally. Commerzbank and Credit Suisse also dropped heavy, down 2.16% and 1.41% respectively. BMPS on the other hand lifted 12%, with other Italian banks following suit, on the back of Mario Draghi's recent hints of further monetary policy easing.
  • Heavyweight miner Anglo American gave away initial gains of 6% to close 1.2% higher as they posted a $5.62 billion net loss for 2015 and at the same time suspending its dividend.
  • In other mining names, Antofagasta and ArcelorMittal closed lower by 0.5% & 1.69% respectively. Glencore continued its recent rally, adding 1.7%.
  • The auto sector moved on the back of news that European car sales rose 6.3% in January, according to the European Automobile Manufacturers Association and as tyre maker Michelin stated its net profits rose 13% in 2015. Michelin also said that it expects demand for passenger car, light truck and truck tyres to continue to rise this year. This news saw shares close up over 3%.

Local markets and commodities


  • Bank of New York Australia ADR Index +1.7%. BHP Billiton ADR +1.3%. Rio Tinto ADR +0.9%.
  • Spot gold has trades with a solid range. After breaking below $1,200 to $1,190 gold was bought up to the heights of $1,216 before now retracing to $1,200 now. There seems to be a little risk on at the moment and gold may be sold off as this equity market lift occurs. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
  • Crude oil continues its highly volatile trading, with WTI and Brent falling 5.4% and 7% to $29.09 and $32.25 respectively. Saudi Arabia and Russia met to discuss output levels. It was the first agreement between Opec and non-Opec on this level.
  • Unfortunately for markets the only agreement made was that output would be frozen and not cut. Given the world is expected to produce on average 1.75 million barrels per day this year, we fail to see how prices will rise from here. While Qatar and Venezuela agreed to the production freezes, Iran and Iraq did not. Iran still has the capacity to bring a further 1 million barrels on the market per day. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
  • Iron ore prices have risen again, this time by 1.1% to 2016 highs of $46.78. Vale is due to report its fourth quarter production figures, which analysts expect to be up from 83 million tonnes to 88.3 million tonnes y/y. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
  • Base metals were mixed but with aluminium being the best performer, up 1.5% to $1,528/t. Alumina has been bought up with strength after failing to make new lows and now setting higher highs in the past month. While Goldman Sachs foresees aluminium to continue its grind on over supply, Rusal is quietly optimistic of a global production deficit in 2016 following several curtailments worldwide taking place in 2015. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AW
  • Westpac Jan. leading index due 1030 AEST.
  • Goldman Asset says Australia stands out in negative-rate world.
  • A2 Milk (ATM): Upgrades FY guidance as 1H profit jumps
  • ANZ Bank (ANZ): Scheduled to release trading update; Shares halted in NZ
  • APA Group (APA), Duet Group (DUE), Origin (ORG): APA, Duet among cos seeking to get Origin to expand its asset sale program: AFR.
  • Aveo Group (AOG): Scheduled to release 1H results; NOTE: Aug. 19: Aveo Sees FY16 Growth Higher y/y.
  • Ardent Leisure (AAD): Scheduled to release 1H results; Rev. est. A$333.7m (3 analysts)
  • Coca-Cola Amatil (CCL): Scheduled to release FY results; Preview.
  • Dexus Property (DXS): Scheduled to release 1H results; 2- analyst adj. EPS est. A$0.303.
  • Domino’s Pizza Enterprises (DMP): Scheduled to release 1H results; Preview.
  • Fletcher Building (FBU): Rev., earnings increased in 1H.
  • Flexigroup (FXL): Scheduled to release 1H results; NOTE: Aug. 10: FlexiGroup Reports FY16 Cash NPAT Guidance of A$92-$94m.
  • Independence Group (IGO): Scheduled to release 1H results; NOTE: Jan. 21: Cuts 2016 exploration spend rate.
  • Lend Lease (LLC): Scheduled to release 1H results; NOTE: Adj. EPS est. A$0.545 (3 analysts).
  • Mesoblast (MSB): Scheduled to release 1H results; NOTE: Dec. 17: 1Q net loss narrows to $13.2m.
  • Primary Health (PRY): Scheduled to release 1H results; NOTE: Adj. EPS est. A$0.102 (3 analysts).
  • Sonic Healthcare (SHL): Scheduled to release 1H results; NOTE: Adj. EPS est. A$0.511 (3 analysts).
  • Vicinty Centres (VCX): Scheduled to release 1H results; NOTE: Dec. 14: Sees FY16 underlying EPS A$0.188-A$0.191.
  • Woodside Petroleum (WPL): Scheduled to release FY results; NOTE: Adj. net income est. $1.02b (13 analysts)

xxx
There's talk of a global production deficit of aluminium in 2016, igniting prices. Photo: iStock

Stock to watch: Magellan (MFG)

MFG on a weekly chart has shown strong growth with its upward trend line. Solid support has been given by this line now on the fourth occasion. Using a fibonacci extension MFG has hit and held the 161.8% retracement level.

On a daily chart, the 200 Daily Moving Average also offered support yesterday on its daily low. The 100 DMA is right on the 100% fibonacci retracement level.

Magellan quarterly chart
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 Source: Saxo Bank

Performance

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The first profit target has been reached on our short position over CBA. Whilst the short trade was initiated at $75.00, we are lowering the entry price to account for the dividend of $1.98. See original post here.

Data

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Broker upgrades and downgrades

  • Amcor (AMC): Cut to hold vs buy at Shaw & Partners
  • CSL (CSL): Cut to neutral vs outperform at Credit Suisse
  • GWA Group (GWA): Raised to neutral vs underperform at Credit Suisse
  • Iluka (ILU): Cut to neutral vs buy at UBS
  •  Monadelphous Group (MND): Raised to neutral vs sell at UBS
  • Orora (ORA): Cut to neutral vs outperform at Credit Suisse

AUDUSD hits resistance

AUDUSD continued to make a higher high yesterday but it found the resistance level at 0.7180 and sold off below 0.71 handle when the commodity prices declined overnight.

Last night’s price actions of AUDUSD indicates the upside momentum is fading away and tomorrow’s Federal Open Market Committee meeting minutes at 0600 would be the major focus for the currencies.

We are anticipating AUDUSD would be under further selling pressure to test the 0.70 handle in the near term.

AUDUSD monthly chart

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 Source: Saxo Bank

Negative sentiment risk for AUS200.I

AUS200 rallied aggressively to break above 4,900 when it reversed the losses from the early morning yesterday. This rally was mainly driven by the strong gains from the other Asian indices and the commodities; however both copper and crude oil made a sharp reversal overnight, therefore we expect the negative sentiments to return soon.

The previous uptrend was broken yesterday so it could now act as an interim support level while the resistance levels are 4,931 and 4985.

AUS200 daily chart
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Source: Saxo Bank - create your own charts with SaxoTrader; click here to learn more

 
Information sources for Today's Trade: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

-- Edited by Adam Courtenay

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch our daily morning call on Periscope at 0945: #SaxoAPAC



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