Article / 31 May 2016 at 1:14 GMT

Today's Trade: ASX weakens as data fears take hold

Trading Desk / Saxo Capital Markets
  • Investors await local and US data, while oil climbs and iron ore retreats
  • Gold fell for a ninth day in its longest slump in a year, slipping under $1,200/oz
  • Trading volumes in the US and Europe more than 50% below their daily average

By Saxo Capital Markets

Overnight and early trading

Nervous investors were selling a broad range of stocks this morning. There were few overnight leads to go on other than a wavering oil price and drop in the iron ore price. The AUD was   approaching 72 US cents ahead of economic data this morning.

The ASX/S&P 200 dropped sharply below 5400 points in early trade, down 31 points, or 0.6%, to 5378.

BHP and Rio were down 0.4% as trading began, while Woodside was also 1.1% lower. The big four banks were also weighing on the ASX, with Westpac down 0.3% and NAB down 0.8%.

In overnight trading:

Anxiety over the prospect of a US interest rate hike as soon as June dominated global trading, battering government debt and most developing-nation currencies.

Emerging market currencies extended losses from Friday, on track for their worst month since August against the US dollar after Federal Reserve chair Janet Yellen signalled Friday that a rate increase is likely some time in the coming months.

Gold fell for a ninth day in its longest slump in a year, while Mexican bonds sank with German bunds amid a tumble in 10-year treasury futures.

A gauge of global stocks held near a four-week high with trading volumes in the Americas and Europe more than 50% below their daily average amid market closures in the US and the UK The yen slumped for a second day.

 Gold traded just under $1200/oz overnight as US dollar strength returned. Photo: iStock

The MSCI Emerging Markets Currency Index declined 0.4% Monday, leaving it down 3% in May after three straight months of gains.

Copper futures slipped 0.8% in New York, snapping a four-day advance. The London Metal Exchange was closed on Monday for a holiday.

West Texas Intermediate crude oil rose 0.6% to $49.60/barrel before this week’s Opec meeting and as fights flared up near Libya’s largest oil shipping port. The total volume traded was about 86% below the 100-day average. See short trade set up over OILUSJUL16 CFD.

Issues including a production freeze will be discussed at the June 2 Opec talks, said Iraq’s Deputy Oil Minister Fayyad Al-Nima, who will head his ministry’s delegation.

Oil is headed for fourth monthly gain, its longest rising streak since April 2011.

Futures on the S&P 500 Index climbed 0.2%, after the US benchmark rallied 0.4% on Friday to close the week up 2.3%. The Stoxx Europe 600 Index rose 0.1%, amid trading volumes 61% below the 30-day average.

The Dax added 0.46% and the CAC rose 0.32%. London's FTSE 100 was closed due to a public holiday.

Shares of Airbus closed 0.5% higher after the French company said it would meet its target of over 650 total deliveries in 2016 after a slow start to the year.

Netherlands-listed shares of Postnl surged to close 3.5% higher after Sunday's news that takeover talks with Belgian mail operator Bpost had failed. Bpost shares closed 2.4% lower on Monday.

Italian banking stocks rallied and then pared gains on Monday after newspaper Corriere della Sera reported on Saturday that pension funds and private pension groups may invest in Atlante - Italy's bank rescue fund.

Banca Monte Dei Paschi Di Siena (BMPS) traded 3.2% higher, before paring gains to close nearly 2% up.

Sources: Bloomberg,

Local markets and commodities

  • The S&P/ASX 200 Index futures -0.1%; futures relative to estimated fair value suggest an early decline of 0.1%
  • Gold fell below $1,200/oz for the first time since mid-February on Monday, as comments from Janet Yellen on the likelihood of higher US interest rates sent the dollar to two-month highs.
  • Gold fell as much as 1% to $1,199.60 an ounce, before rebounding to finish down 0.6% at $1,205.20 an ounce. Trade was thin with public holidays in Britain and the United States on Monday. Silver performed worse, down 1.6%. Gold stocks in Canada lost 0.48%. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR
  • Oil rose as fighting erupted near Libya’s biggest crude-shipping port and Opec delegates prepared to meet this week in Vienna to assess output. West Texas Intermediate for July delivery gained as much as 39 cents to $49.72/b and was 27 cents higher at $49.60 when trading stopped on the New York Mercantile Exchange without a settlement because of the Memorial Day holiday.
  • The contract lost 15 cents to close at $49.33 on Friday. Total volume traded was about 86% below the 100- day average. Brent for July settlement, which expires Tuesday, rose 44 cents, or 0.9%, to close at $49.76/b on the London-based ICE Futures Europe exchange. Prices lost 27 cents to $49.32/b on Friday. The global benchmark closed at a 16 cent premium to WTI. The more-active August contract rose 41 cents to $50.36. It was also a holiday in London.
  • Libya’s Petroleum Facilities Guard captured a town near the Es Sider and Ras Lanuf oil-loading terminals after fierce clashes with Islamic State militants. Strife in Nigeria and wildfires in Canada have also disrupted output. Opec will discuss a possible output freeze when the group gathers on June 2, said Iraq’s Deputy Oil Minister Fayyad Al-Nima, who will head his nation’s delegation. See trade set up here. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore fell 88 cents, or 1.7%, to $50.27 a ton as port inventories are seen to be expanding. Meanwhile Mount Gibson is seeking to acquire resources beyond iron ore. Most of the company's production came from its Extension Hill mine and the Acacia East pit at Koolan Island after the Koolan main pit was flooded in late 2014. The miner strives to keep reducing its unit production costs to cushion profit from price swings. Other Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
  • Copper futures slipped 0.8% in New York, snapping a four-day advance. The London Metal Exchange was closed on Monday for a holiday. Copper also dropped in Shanghai, retreating a second day as a stronger dollar hurt China’s ability to import the metal, while aluminium advanced for a third day as the weaker yuan boosted its export prospects. Copper closed down 0.6% at 35,700 yuan ($5,424) a metric ton on the Shanghai Futures Exchange, while aluminium gained 0.6% to close at 12,295 yuan a ton. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC.
  • In other news: BHP Billiton (BHP): Brazil prosecutors appeal ratification of Samarco accord; Flexigroup (FXL): Hosts investor day; NOTE: Co. in March forecast an increase in NPAT guidance after completing purchase of F&P Finance; Fortescue (FMG): Secures second towage license at Port Hedland; National Australia Bank (NAB): Preparing A$750m-plus hybrid issue: AFR; Oil Search (OSH): May need to increase cash component to win over InterOil holders: Australian; Regis Healthcare (REG): Refinances debt w/ A$370m in new loans; Rio Tinto (RIO): Iron ore declines for 3rd session in 4, according to a price index compiled by Metal Bulletin; Spark (SKI): Sells 8% interest in Duet for A$2.25/security; Virgin Australia (VAH): May give update on capital review as early as today: AFR; Ex Div : Infratil (IFT), Orica (ORI).

Broker upgrades and downgrades

- Rural Funds Group (RFF): Cut to hold vs buy at Bell Potter
- Patties Foods (PFL): Cut to hold vs buy at Bell Potter
- Mantra (MTR): Raised to hold vs sell at Moelis & Co.
- Nanosonics (NAN): Rated new buy at Bell Potter
- Blackmores (BKL): Cut to neutral vs buy at Goldman Sachs
- ALS (ALQ): Cut to underweight vs equalweight at Morgan Stanley

Open positions

Original trade set ups:
XAUUSD see here
EURUSD see here 
OILUSJUL16 see here 


The first quarter company profits came out worse than expected yesterday (-4.7% against 0.5%) ahead of tomorrow’s GDP numbers at 1130 AEDT (0230 GMT).

AUDUSD showed little reaction as the selling momentum is flattening out according to the RSI which is hovering near the oversold level of around 30.

The recent price actions have been within a tight range between the 200 DMA and the previous downtrend which is acting as become support. The resistance is at 0.7250 and the support level is at 0.7150.

AUDUSD monthly chart

Source: Saxo Bank
EURUSD looks to have found the bottom for now at the 200DMA and as US dollar index declined overnight, we expect the current rebound to continue. The support level should remain at 1.11 handle and the resistance level is at 1.1218.

EURUSD monthly chart

Source: Saxo Bank

AUS200.i and US500.I

The US500 had a very subdued trading session in light volume due to the Memorial Day in the US and it remained above the psychological level 2,100.

The next resistance level would be the April high 2,111 while the support level is at 2,085. The price actions of the crude oil (CL) should continue to be monitored as it is still hovering just below 50 which is a key resistance level.

US 500 monthly chart
Source: Saxo Bank

The AUS200 appears to be forming a double top at the key resistance level 5,430, while there is a divergence between the descending RSI and the AUS200 which has been showing a lot of resilience.

The upper resistance level of the ascending channel also seems to be restricting the further rally, therefore AUS200 looks overbought at the current level.

AUS200 monthly chart

Source: Saxo Bank - create your own charts with SaxoTrader. Click here to learn more

Today's Trade information sources: 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

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