Article / 19 February 2018 at 0:24 GMT

Today's Trade: ASX falters amid sluggish trade

Trading Desk / Saxo Capital Markets

  • The S&P/ASX 200 index slipped 9 points, or 0.2% to 5894
  • USD falls after FBI confirmed Russian meddling in US election 
  • US is closed for President’s Day while much of Asia enjoys New Year

By Saxo Capital Markets

Overnight and early trading 

The ASX 200 could not find much strength this morning after US shares ended on a broadly flat note on Friday ahead of a three-day weekend.

BHP shares were down 1.7% and South32 shares slid 1.4% in the resources sector. Commodities were mostly firmer overnight with Brent crude up 0.8% to $64.84/barrel and aluminium up 2.5%.

With US President's day today in America, and much of Asia still closed for the Chinese New Year, trading is expected to be slow.

Japanese shares look set to edge higher Monday after US equities capped their best week in five years, though trading promises to be muted with holidays in Asia and the US, and developments in the Russia probe.

Asian equities will look to extend a bounce following their recent rout and build on their best week since September 2016 even as markets in Hong Kong and China are closed as are those in the US.

The Dow Jones Industrial Average and S&P 500 edged higher Friday to extend their rebounds as stocks showed firm signs of regaining their footing after tumbling earlier this month.

The blue-chip index gained 4.3% over the past five trading days to notch its best week since President Donald Trump’s election, while the S&P 500’s 4.3% move upward was its biggest weekly jump since 2013.

The indices were on pace for an even bigger rally, but they pared gains - and the Nasdaq Composite turned lower on Friday afternoon when a Russian organisation and several individuals were charged with interfering in the US electoral process.

Still, the Nasdaq had risen enough earlier in the week to add 5.3%, its biggest weekly gain in seven years.

 Hong Kong and mainland Chinese markets remain closed for the New Year. Photo: Shutterstock

Jitters about the threat of faster inflation subsided this past week, as many investors said strong economic growth and robust corporate profits should support major indices’ move higher, similar to the sentiment for much of last year. 

The upbeat economic backdrop helped many investors use the recent drawdown as a buying opportunity to add to their stock portfolios at lower prices.

The Dow industrials added 19.01 points, or less than 0.1%, on Friday to 25,219.38, after being up as much as 232 points earlier in the day. The S&P 500 gained 1.02 points, or less than 0.1%, to 2732.22, while the Nasdaq declined 16.96 points, or 0.2%, to 7239.47.

Earlier this month, stocks fell dramatically, pushing the Dow and the S&P 500 into correction territory after strong wage figures in the monthly US jobs report suggested inflation had picked up.

New data this past week further showed inflation is firming, with U.S. producer prices rising in January and consumer-price data exceeding expectations.

The week’s gains came despite a continued climb in government-bond yields. Yields on 10-year US Treasuries rose this week to their highest since January 2014 and were a touch lower Friday, at 2.877%.

While most stock-market sectors posted gains this past week, shares of economically sensitive corners of the market such as banks, industrials and materials companies have outperformed stocks viewed as bond proxies because of their steady dividends.

Financials in the S&P 500 rose 4.7% during the week, while utilities, real estate and telecommunications companies lagged behind. Banks in particular are expected to profit from higher economic growth and higher lending income as bond yields climb.

Elsewhere, the Stoxx Europe 600 gained 1.1% Friday to finish up 3.3% for the week, its biggest weekly gain since December 2016.

Source: Bloomberg,,, CNBC

International earnings

Tuesday: Home Depot, Walmart, Cracker Barrel, Medtronic, Duke Energy, Six Flags, Extra Space Storage, Newfield Exploration, Henry Schein, MGM Resorts, Gannett, BHP Billiton

Wednesday: Delphi Automotive, Advance Auto Parts, Wendy's, Southern Co, Sturm Ruger, Cheesecake Factory, Host Hotels, Owens Corning, Continental Resources, Pandora Media, Invitation Homes, Kaiser Aluminum, Roku, Boston Beer, Avis Budget, Holly-Frontier

Thursday: Barclays, Axa, HP, Wayfair, First Solar, Intuit, Bloomin' Brands, Newmont Mining, Apache, Red Robin Gourmet Burgers, Hormel Foods, Chesapeake Energy, Solar Capital, Universal Forest Products, Wingstop

Friday: Royal Bank of Canada, Berkshire Hathaway, Cinemark, Public Service

Local markets and commodities 

  • S&P/ASX 200 Index futures are down 0.1% to 5,850. Futures relative to fair value suggest an early decline of 0.2%.
  • Bank of New York Australia ADR Index is down 2.1% to 286.8, BHP Billiton ADRs are down 2.4% to A$30.79 equivalent, a 2.3% discount to last Sydney close, Rio Tinto ADRs are down 1.8% to A$73.09 equivalent, a 11.4% discount to last Sydney close.
  • Gold eased from a three-week high on Friday as the dollar index rebounded from an earlier three-year low, but was still on track for its biggest weekly gain in nearly two years on the back of weakness in the US currency and inflation concerns. The dollar hit its lowest since 2014 in overnight trade and is heading for its biggest weekly loss in two years as negative sentiment offset any support the greenback could take from rising Treasury yields. 
  • Spot gold was down 0.04% at $1,352.65/oz off an earlier three-week peak of $1,361.76/oz. US April gold futures were flat at $1,358.80/oz. Spot gold rose 3.2% for week, putting it on track for its biggest weekly rise since April 2016. Gold has fared less well in other currencies, rising 1% in EUR terms and 1.5% in sterling. On the physical side of the market, demand in Asia was muted in places such as China, South Korea, Malaysia and Vietnam. In India, physical gold was sold at a discount for the first time in three weeks as demand slumped due to a jump in local rates. Gold in rupee terms hit a 15-month high of 30,836 rupees on Friday. Gold stocks in Toronto dipped by 2.05% on Friday. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil posted its first weekly increase since last month as rebounding equity markets eased concern about economic growth and a weakening dollar boosted the allure of commodities priced in the US currency. Futures in New York rose 0.6% on Friday and gained 4.2% this week. The greenback touched a three-year low earlier in the day before edging higher, though the increase wasn’t enough to wipe out the previous four days’ losses. 
  • Equity markets recovering from recent routs boosted confidence in bullish energy demand forecasts. New York oil futures started 2018 with the best January in more than a decade, but all those gains were wiped out last week as collapsing equity markets stoked concern about economic growth. At the same time, US shale production has continued to escalate, imperiling Opec's efforts to drain a global glut. West Texas Intermediate crude for March delivery added 34 cents to settle at $61.68/barrel on the New York Mercantile Exchange. Brent for April settlement climbed 51 cents to close at $64.84/b on the London-based ICE Futures Europe exchange. The global benchmark rose 3.3% this week. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • Bulks were relatively unchanged, with Asian exchanges closed for the Chinese New Year. However, reports that China may retaliate against the US if it imposes tariffs on Chinese steel is likely to see markets remain volatile when they reopen later this week. Vale released its Q4 results, with production rising slightly to 93.4 million tonnes. This was no doubt the benefit of new high grade mines it has opened over the past year, feeding the strong demand in China. Spot iron ore added 0.1% or $0.07 closing at $77.29/tonne. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Base metals were stronger, as investors continued to buy back into the market following last week’s heavy losses. While the weaker USD played its part in the rebound, traders also viewed stronger inflation data as a sign of a strong economy. Benchmark copper on the London Metal Exchange ended 0.7% higher at $7,233/t on Friday. The metal, used in power and construction, finished nearly 7% higher on the week in its best performance since November 2016. Aluminium rose 2% to $2,208/t, lead shed 0.2% to $2,613/t, tin ended 0.8% higher at $21,750/t and nickel slipped 1.6% to $13,920/t. LME zinc ended 0.1% higher to $3,575/t, and clocked its best week since August 2017. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC, Coal stocks: WHC, YAL, ATU.

Corporate Australian news 

  • Ex-dividend: Boral, K2 Asset Management; 10.806 Index points from 20 companies going ex-dv this week; NIB raises FY18 Profit Forecast as 1H Premium Revenue Rises 8.6% to ~A$1.05b.
  • NHF sees underlying operating profit at least A$165m, saw at least A$155m, est. A$174m. 1H underlying operating profit up 1.3% to A$96.4m. Interim div. A$0.09. Sees FY18 Australian residents health insurance UOP up less than 3% on narrower margins; Australian health insurance market is “as soft as I can recall,” Managing Director Mark Fitzgibbon says in statement. “Household incomes aren’t growing and there’s sure no shortage of competition in the market place”. NOTE: 1 buy, 7 holds, 4 sells; avg. PT A$6.12.
  • Beach Energy reported net income for the first half of A$95.7 million. 1H underlying profit A$93.1 million. 1H revenue A$392.6 million. Interim dividend per share A$0.01 2 buys, 5 holds, 6 sells; Seek (SEK) sees Ebitda growth 14%-15% in FY18 vs prev. target ~10%; Affirms rev. growth forecast 20%-25%. Tightens reported NPAT profit target range to A$225m-A$230m vs prev. forecast A$220m-A$230m. 1H net A$102m, up 21% y/y. Underlying profit A$114m vs A$113.6m yr ago. Segment Ebitda A$221.2m vs A$170.3m yr ago. Sales rev. A$620.3m, up 27% y/y. Interim div. A$0.24; 4 buys, 5 holds, 5 sells; avg PT A$17.90; oOh!media FY Net Income A$33.2m vs A$24.5m Year ago. FY statutory Ebitda A$87.9m, up 25% y/y and underlying Ebitda A$90.1m, up 22.5% y/y. Final dividend A$0.105 vs A$0.100 a year ago. FY revenue A$380.3m, up 13% y/y.
  • Domain says Pro Forma Revenue Growth Slows in Early 2H vs 1H . First seven weeks of 2H pro forma digital rev. growth 21%; proforma total rev. growth 11%. Sees FY18 pro forma costs to increase 12%-13% vs FY17. Global search underway for new CEO; Purchase of Review Property on track, expected to be completed late Feb. 1H net loss A$3.4m. Proforma 1H net A$24.7m, down 8.1%. Proforma Ebitda A$56.8m, up 8.7%. 1H rev. A$112.7m, up 62% y/y; Proforma rev. A$183.3m, up 12.5%.
  • Abacus Property 1H Underlying Profit A$77.3m, Up 11% Y/y . 1H net profit A$117.5m, down 39% y/y. 1H distribution up 3% to 9 Australian cents/share. With a 67% payout ratio, co. reaffirms targeted distribution of 18 Australian cents/share for FY18; Mantra Group reported net income for the first half of A$25.1 million. 1H revenue A$366.2 million. Accorhotels Transaction on Track for 4Q Fy2018 Completion. Mantra says not to declare half-year dividend. Mantra 1h underlying EBITDAI a$56.6m, down 3.6% y/y . Mantra 1h underlying NPAT a$27.6m, down 6.3% y/y.
  • GWA to focus on bathroom and kitchen business as it determines door and access systems businesses to be noncore. Sale process expected to take 6 months; Greenstone Partners hired as adviser. Door & Access Systems accounted for 22% of FY17 revenue. Expects 2H EBIT to be similar to 1H. Note: FY Ebit est. A$80.04m (7 analysts, range A$77m-A$83.50m). 1H net A$27.7m, up 7% y/y. Rev. A$227.1m, up 2%. EBIT A$41.8m, up 6% y/y. Interim div. A$0.085; BDVD est. A$0.080. 1 buys, 5 holds, 2 sells; avg PT A$2.64.
  • Brambles sees Mid-Single Digit Sales Revenue Growth in FY18. Sees FY18 sales growth in mid-single digits, driven by growth with existing customers. Targets underlying profit growth more than sales growth through cycle; ROIC in mid-teens. 1H net $447.2m vs $146.2m yr ago. Profit boosted by $130.1m from changes to U.S. tax rates. Continuing operating profit $489m, up 47% yy. Underlying profit $493.7m, up 5% y/y. Underlying profit +1% in constant FX on HFG JV, loss of RPC contract. Sales $2.75b, up 9% y/y; est. $2.83b (3 analysts, range $2.72b-$2.99b). Interim div. A$0.145; BDVD est. A$0.15. ROIC 16.2%, down 0.9ppts. Cash flow from operations $311.2m. 3 buys, 5 holds, 1 sells; avg PT A$10.29.
  • InvoCare FY Net A$97.4m, up 37% Y/y. Operating earnings after tax A$63.5m, up 10.6% y/y. FY operating Ebitda A$124.3m, up 7.8% y/y. FY revenue A$456.9 million, up 1.4% y/y. Final dividend per share A$0.275, up 8.2% y/y. Co. expects low single digit 2018 operating Ebitda growth. Co. expects 2018 flat operating EPS.
  • In other news: Labor Extends Lead Over Coalition in Newspoll Amid Joyce Affair;  Australian Renewable Giant Snowy Hydro Mulls Raising A$2 Billion; AMP (AMP AU): Interest in Life Insurance Unit Cools, Board Working on Succession Plan Which May See New CEO in Place in 2H, 2018: AFR; Ardent (AAD AU): Is Said to Reinvest in Dreamworld, Name CEO: Australian; Baby Bunting (BBN AU): Non-Deal Roadshow Scheduled By Morgans for Feb. 19; BHP (BHP AU): Tropical Cyclone Kelvin Crosses Australia’s Kimberley Coast; Catapult Group (CAT AU): Non-Deal Roadshow Set By Morgans for Feb. 26; Macquarie Group (MQG AU): Macquarie Infrastructure Favored by 6 Hedge Funds, 13Fs Show; Rio Tinto (RIO LN): U.S. Proposal of Steel, Aluminum Tariffs May Move Metals Stocks; South32 (S32 AU): S. African Miners May Benefit in ‘Rapid’ Change of Rules: UBS; Treasury Wine (TWE AU): Takes Legal Action vs Penfolds ’Copycat Operator’

Broker re-gradings 

- Folkestone (FET AU): Upgraded to Buy at Moelis & Company; PT A$2.93
- IPH (IPH AU): Downgraded to Hold at Canaccord; PT A$4.40
- Origin Energy (ORG AU): Upgraded to Buy at UBS; Price Target A$10.40
- Sims Metal (SGM AU): Cut to Underperform at Credit Suisse; PT A$14.50
- Star Entertainment (SGR AU): Cut to Neutral at Credit Suisse; PT A$5.90
- Westpac (WBC AU): Downgraded to Equal-weight at Morgan Stanley; PT A$30

Australian corporate releases 

- Monday: Beach Petroleum, Brambles, Domain Holdings, Invocare, Mantra, NIB, Seek
- Tuesday: APN Outdoor, BHP, Monadelphous, Oil Search, Sandfire Resources, Seven West Media, Super Retail, Vocus, Western Areas
- Wednesday: APA, Coca-Cola , Fairfax, Fletcher Building, Independence Group, Lend Lease, McMillan Shakespeare, Santos, Scentre Group, Stockland, Wesfarmers, Worley Parsons
- Thursday: Alumina, Aristocrat, Asaleo Care, Charter Hall, Crown Resorts, Link, Nine Entertainment, Oz Minerals, Perpetual, Platinum, Qantas, Qube
- Friday: Oceana Gold, Southern Cross Media, Woolworths


Last week, USDRUB wiped out all the gains from previous week as Brent oil (LCO) rebounded after the early sell off witnessed this month. 

The weekly low was well below previous week’s open indicating the reversal was quite severe.

The correlation is expected to remain strong between Ruble and oil thus we are cautiously anticipating a break out below 55.70 which has been acting as a valid support level since Q2 2017.

USDRUB quarterly chart
Source: Saxo Bank

Source: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

-- Edited by Adam Courtenay

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