Article / 28 April 2016 at 1:16 GMT

Today's Trade: ASX moves higher, AUD dives

Trading Desk / Saxo Capital Markets
  • Oil price is lifting commodity sentiment generally, aided by a weaker US dollar
  • ASX rallies at the open, but by 1027 AEST it was beginning to falter
  • Iron ore stocks pick up early, with BHP, Rio and Fortescue all up in early trade
  • Apple tumbled $6.53, or 6.3%, to $97.82, its lowest level since February
  • AUDUSD loses ground after fears of Aussie deflation
  • Kiwi jumps to a 7-week high against the AUS after the RBNZ keeps rates on hold

By Saxo Capital Markets

Overnight and early trading

The Australian sharemarket has rallied at the open, following Wall Street higher after crude oil prices jumped in the offshore session.

At the 1015 AEST (0015 GMT) official market open, the benchmark S&P/ASX 200 index rose 32.1 points, or 0.62%, to 5,219.8, while the broader All Ordinaries index gained 32 points, or 0.61 per cent, to 5,282.9.

The positive start came after Brent crude rallied 2% to levels above $US47 a barrel overnight.

A rampant oil price is lifting commodity sentiment generally, aided by a weaker US dollar. At the open, BHP jumped 3.3% and Rio 2.3%, while Fortescue gained 4.2% despite a drop in the iron ore price overnight.

In overnight trading:

US stocks rose overnight and the yield on the 10-year Treasury note fell for the first time in eight sessions after the Federal Reserve suggested it was in no rush to raise interest rates.

Federal Reserve officials left short-term interest rates unchanged Wednesday and signalled they plan to move cautiously, citing a mixed economic backdrop and lingering concerns about low inflation and global economic developments.

The Dow Jones Industrial Average rose 51.23 points, or 0.3%, to 18,041.55, while the S&P 500 gained 3.45 points, or 0.2%, to 2095.15. The Nasdaq Composite fell 25.14 points, or 0.5%, to 4863.14, hit by Apple’s disappointing Tuesday earnings in a fresh sign of weakness for the sector.
 The Kiwi is holding up, but the Aussie looks vulnerable to a downturn. Photo: iStock

The yield on the 10-year Treasury note settled at 1.861% compared with 1.931% Tuesday - its biggest one-day drop since March 8.

Dragged down by shares of technology companies, stocks were trading in negative territory until the Fed released its statement.

US crude oil prices rose 2.9% to $45.33/barrel, climbing above the $45 mark for the first time since November and brushing off a surprise jump in crude stockpiles in weekly data from the US Energy Department. The gains boosted shares of energy companies: the energy sector was the second best performing sector in the S&P500.

Apple tumbled $6.53, or 6.3%, to $97.82, its lowest level since February. Apple’s decline, which marked its largest one-day fall in three months, led technology companies in the S&P 500 lower. The group fell 0.8%, making it the worst performing sector of the day and bringing its decline for the year to 1.2%.

In after market reporting, Facebook shares jumped 8.6% as the social network posted a surge in Q1 revenue. In other earnings news, Boeing shares surged 2.88% after posting earnings of $1.74 a share against $1.82 expected. The CBOE Volatility Index (VIX) was at 13.77.

Over in Europe the Stoxx Europe 600 rose 0.3%. The Dax lifted 0.39%, the FTSE added 0.56% and the CAC rose 0.58%. Greece's ATG equity index, however, under-performed other markets, closing down 2.5%.

This comes after Eurozone finance ministers delayed a meeting scheduled for Thursday and said they needed more time to discuss Greek reforms required for the country to access more bailout fund.

In European earnings, shares of Norway's Statoil rallied over 6% after the company posted a 71% drop in first quarter adjusted operating profit due to the fall in oil prices but this still beat analyst expectations.

Finnish oil refiner Neste reported a bigger-than-expected slide in first-quarter operating profit, sending shares tanking, closing down over 7.5%

German sportswear maker Adidas increased its 2016 financial outlook after it reported a 38% rise in net income from continuing operations 350 million euros. Shares rallied 5.95%. Belgian food retailer Delhaize reported a 291% rise in net profit in the first quarter of 2016 to 109 million euros, sending shares up by 2.14%.

In France, carmaker Peugeot Citroen recorded a 1.4% drop in first-quarter group sales due to negative currency effects, sending shares to close lower by 0.78%.

A number of banks and financial names reported on Wednesday. Barclays group pre-tax profit dropped 25% to £793 million ($1.15 billion) in the first quarter, from the same period last year, but highlighted that it was making "good progress" in concentrating on its core business, where the pre-tax figure was up 18% at £1.6 billion. Shares in Barclays rose 0.49%.

Shares of Spain's Santander rallied 1.57% after it reported first quarter profit came in at 1.63 billion euros ($1.84 billion), a 5% fall from the same time last year.

Local markets and commodities

  • The S&P/ASX 200 Index futures +1%; futures relative to estimated fair value suggest an early gain of 0.8%
  • Bank of New York Australia ADR Index -2.1%. BHP Billiton ADR -0.4%. Rio Tinto ADR +0.5%.
  • Spot gold traded in a tight range in yesterday’s session, finishing the day up just 0.2% at $1,246. Prior to the Fed announcement, gold was up by as much as 0.5% before a quick sell off of 0.7% before recovering. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
  • Crude oil prices were given another fuelled injection with WTI and Brent up 2% and 2.2% to $45.38 and $47.28 respectfully. The EIA have reported last week’s production levels fell in the U.S. (the world’s third largest producer) to 8.94m/b day. Inventories have climbed 2 million /barels for the week, making total inventory levels 540.6m/b. Gasoline demand continues to show strength as it was up 5.6% y/y to 9.4mb/d. With oil rising 16% in April, some traders expect the commodity to fall as prices have run too hard to fast on bets inventories and production would fall further than they have. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
  • Iron ore continues to come down off its highs, down 2.7% to $61.09. Weaker volumes on the futures exchange for Chinese rebar steel prices has met the iron ore market with weaker sentiment. A number of mills are now relatively well stocked for steel and hot rolled coil, leaving traders on the side lines for now. The AFR reported that Tribeca Investment Partners are not surprised by iron ore's rise as China stimulates property demand. In some cases third tier city transactions are up 100%. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
  • Base metals were generally mixed with copper down 0.6% while nickel was the only metal rising, up 0.1%. Copper fell for the third session, making it the greatest slump in three weeks. Copper has now fallen to its 200 Day Moving Average and this level will be key to determine if this was a false break or not. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC.
  • Australia Q1 export price index seen falling 1.5% quarter on quarter, import price index -0.9%, according to Bloomberg survey. Figures due 1130 AEST (0130 GMT).
  • In other news: AUD rally seen ending as pressure grows on RBA to cut rates; Rally in bulk-commodity miners “will end in tears”: Morningstar; ANZ Bank (ANZ): To offer Apple Pay for customers in Australia; Beach Energy (BPT) scheduled to release March quarter output; NOTE: Yday raised FY output target; Flagged job cuts; Bluescope (BSL): Lifts size of debt sale to $500m; Coca-Cola Amatil (CCL): Aggressive discounting to boost volume, mkt shr may prompt analysts to review estimates: AFR; Cochlear (COH): Scheduled to host investor day; Note: In February the company forecast FY16 net A$180m-A$190m; Independence Group (IGO): Scheduled to release March quarter output; NOTE: Affirmed FY output guidance in February; Investa Office Fund (IOF), GPT Group (GPT), Dexus (DXS), Charter Hall (CHC): BIS sees Sydney office rents rising 90% by end 2018: AFR; Northern Star (NST): Scheduled to release March qtr output; Note: Earlier this month co. said March quarter gold sold 143,469 oz against 142,017 oz in December quarter; Stockland (SGP): Q3 market update expected; Note: In February the company forecast FY EPS growth 6.5%-7.5%, FFO/share 9%-10%.

Earnings this week

Thursday:, Viacom, Amgen, Gilead, ConocoPhillips, Deutsche Bank, Colgate-Palmolive, Bristol-Myers Squibb, MasterCard, Altria, Ford, Dow Chemical, Celgene, Air Products, Aetna, UPS, Eaton, Beazer Homes, Marathon Petroleum, Potash

Friday: ExxonMobil, Chevron, AstraZeneca, Eaton, VF Corp, Cabot Oil, Calpine, Moody's, American Tower, Tyco, Phillips 66

Stock to watch: Australia Worldwide Exploration (AWE)

Australia Worldwide Exploration on the surface appears to be ready to run higher with oil prices. Breaking its 200DMA and the 38.2% Fibonacci extension, AWE is looking to test its recent highs and its 50% extension.

AWE also appears to be supported by an upward trend line. However on an RSI it’s looking very overbought. Caution should be exercised for any long holders as any sell off in oil may lead to profit-taking on this stock.

AWE monthly chart


Source: Saxo Bank

Broker upgrades and downgrades

- Mirvac (MGR): Cut to neutral vs overweight at JPMorgan
- Senex Energy (SXY): Cut to hold vs buy at Canaccord Genuity




AUDUSD plunged more than 200 pips as the quarterly CPI number (-0.2%) was the lowest in seven years, while the trimmed mean CPI came out at a record low.

Yesterday’s price actions seem to indicate that we may have seen the top on AUDUSD at 0.7834. We expect AUDUSD to remain under further selling pressure as the probability of the rate cut in the next RBA meeting has now risen from 16% to 53%, therefore we would look to sell any rallies towards 0.77 handle and the key support level is at 0.75 handle.

AUDUSD monthly chart
Source: Saxo Bank

The initial reactions on the shocking CPI figures were very positive as AUS200 rallied more than 50 points but this spike did not last long. After falling short of the recent swing high 5,289, AUS200 made a 100 points reversal driven by heavy declines from the big four banks.

Similar to the AUDUSD, we see yesterday’s selloff as a significant price action which may suggest more downside momentum to come in the coming weeks. The resistance level would be at 5,240 and the support level is the yesterday’s low 5,164

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. Watch its daily morning call on Periscope at 0945: #SaxoAPAC.


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