- S&P/ASX 200 share index jumps 0.6% to a one-week high of 6012 in early trade
- AUD holds relatively steady, awaiting news on jobs from the US overnight
- Energy stocks, buoyed by stronger oil prices, are the big winners
By Saxo Capital Markets
Overnight and early trading
The Aussie banks and energy shares are making the big plays in early trading on the ASX, with the index up around 0.6% in the first hour or so of trading.
Banks are doing the heavy lifting again with Westpac up 1.2% and CBA up 1.1% amid bargain hunting after the Royal Commission news added to the regulatory discount in banks recently.
Energy stocks are strong with Origin enjoying a 3.5% jump and Oil Search up 1.3% after Brent crude rose 1.4% to $62.10/barrel overnight.
The Australian dollar was at US75.13c, remaining under pressure ahead of key US jobs data tonight.
US stocks rose as investors evaluated the outlook for a final tax bill while the dollar advanced for a fourth day and oil rebounded from its worst selloff in two months.
The S&P 500 ended a four-day losing streak, with industrial and consumer discretionary shares among the best performers in a modest but broad rally that saw two stocks gain for every one that dropped.
Gold fell to a four-month low. The pound jumped on speculation that Ireland and Britain were close to a Brexit deal. Brazil’s real and stocks tumbled amid growing skepticism a pension overhaul will be passed this year.
Higher oil prices lift shares but also mean pain at the pump. Photo: Shutterstock
Rising shares of Boeing and other industrial companies pushed major US indices higher Thursday.
The gains put US stocks on the rebound after recent declines. The S&P 500 logged declines in the previous four trading sessions, while the Dow Jones Industrial Average had fallen for two consecutive sessions.
The Nasdaq Composite declined in three of the past four.
The market looked optimistic that Republicans would complete a tax overhaul and lawmakers would reach a deal to avoid a government shutdown which made headlines after close of market that the US House passed a bill to fund the government through to December 22.
The Dow Jones Industrial Average gained 70.57 points, or 0.3%, to 24211.48. The S&P 500 rose 7.71 points, or 0.3%, to 2636.98, while the Nasdaq Composite added 36.47 points, or 0.5%, to 6812.84. It was the biggest gain for all three indexes in a week.
Shares of industrial companies rose 0.9% in the S&P 500. Boeing gained $3.70, or 1.3%, to $281.97, making it one of the biggest contributors to the Dow.
Shares of Boeing have jumped 81% this year on a series of upbeat profit reports, fueling much of the blue-chip index’s 2017 gain. Caterpillar added 2.55, or 1.8%, to 142.89 Thursday.
Several airliners also rose. Southwest Airlines gained 1.90, or 3.1%, to 63.02 after it said capacity and traffic for November rose, boosting its outlook for the fourth quarter.
Shares of American Airlines Group rose 1.27, or 2.6%, to 50.88, while Alaska Air Group added 1.54, or 2.3%, to 69.37.
Shares of technology companies in the S&P 500 rose 0.6% to extend their gains through a third consecutive day.
Tech companies had fallen in prior sessions, as investors sold those stocks and moved into shares of companies they expected to benefit more from Republicans’ sweeping tax overhaul. Industrial firms also had been struggling this month.
Some analysts expect stocks to continue to wobble until there is a meaningful development on tax cuts. The Senate voted Wednesday to start formal negotiations with the House to advance final legislation.
Investors also are looking for further clarity on the US economic picture, with monthly employment data due tonight. Economists across the street are expecting for payrolls to grow by 195,000 last month.
The number of Americans filing applications for new unemployment benefits fell last week, according to the Labor Department, suggesting the labor market continues to tighten.
In Europe, data Thursday showed the eurozone economy grew 0.6% in the third quarter, a continuation of the region’s strong performance this year.
The Stoxx Europe 600 rose less than 0.1%.
Information sources: Bloomberg, TradingFloor.com, WSJ.com, CNBC
Local markets and commodities
- S&P/ASX 200 Index futures are up 0.3% to 5998. Futures relative to fair value suggest an early gain of 0.4%.
- Bank of New York Australia ADR Index is up 0.2% to 262.6, BHP Billiton ADRs are down 0.2% to A$27.32 equivalent, a 0.7% premium to last Sydney close, Rio Tinto ADRs are down 0.9% to A$62.65 equivalent, a 9.8% discount to last Sydney close.
- Gold slid to its lowest in four months on Thursday as a bounce in the dollar sparked by optimism over US tax reform plans helped break the metal out of its recent narrow trading range. Prices had been hemmed between $1,265/oz and $1,300/oz since mid-October as a series of record highs in stock markets detracted investment interest from bullion, and as traders awaited an expected increase to US interest rates this month.
- Spot gold plunged 1.4% at $1,248.20/oz. US gold futures for December delivery were 1.41% at $1,248.30/oz. Gold is now awaiting further direction from US non-farm payrolls data this week, a key barometer of the U.S. economy. Next week the Federal Reserve is also expected to announce another rise in U.S. interest rates and to offer guidance on the pace of further increases. Gold stocks in Toronto added 0.22% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
- The bad news bears took a deep breath on a day when there was no price-rattling data to agonise over and oil inched up as a result. A day after fears over mounting US fuel inventories sent future prices spiraling downward, they clawed back a portion of their descent, gaining 1.3% in New York. Oil is on track for a second yearly gain after Opec and partners including Russia agreed to extend supply cuts through all of next year.
- West Texas Intermediate for January delivery rose 73 cents to settle at $56.69/barrel on the New York Mercantile Exchange. Total volume traded was about 25% below the 100-day average. Brent for February settlement added 98 cents to end the session at $62.20/oz on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $5.45 to February WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
- Iron ore prices sunk further, with most action in the spot physical market. Investors continue to fret about the outlook for demand in China. However they also got a reminder of the potential reaction from producers if prices push too high. Vale has warned that it has up to 50 million tonnes of spare capacity in iron ore available to balance the market if needed. The company remains concerned that high prices would bring back unwanted excess in the market and is thus mindful of keeping prices from surging too high. Spot iron ore added 1.9% or $1.31 to close at $66.22. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
- Benchmark copper on the London Metal Exchange closed 0.2% higher at $6,564/t. Copper, which has gained 19% this year, fell on Tuesday to $6,507.50/t, its weakest since October 10. LME three-month aluminium shed 0.4% to finish at $2,010/t after touching a four-month low of $1998.50/t. A confirmed break of support at the 200-day moving average of $2000/t would open the way to further selling. Some Japanese aluminium buyers have agreed to pay some global producers a premium of $103/t for shipments in the first quarter of next year, higher than the $94-$95 premium in the current quarter. Nickel climbed 2.2% to close at US11,045/t, rebounding after touching a new two-month trough of $10,740/t. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- In other news: ASX (ASX AU): Blockchain Scores Major Win as Aussie Exchange Plans ShiftBHP Billiton; BHP AU: Iron Ore Cargoes From Top Miners 22.5M Tons This Week: Bernstein; Crown Resorts (CWN AU): CrownBet Chief Said to Buy Crown’s 62% Stake: Australian; CSL (CSL AU): IPR Challenge to Shire Patent on Cinryze Rejected by PTAB; Independence Group (IGO AU): AngloGold, Tropicana JV Approve Phase 1 of Long Island Strategy; Metcash (MTS AU): Drakes, Wholesale Customer With A$1b Sales, Said to Seek Better Supply Terms: AFR; Sims Metal (SGM AU): Says Stephen Mikkelsen to Start as CFO Feb. 1, 2018; Synlait Raises (SM1 AU): Raises Full-Year Canned Infant Formula Volume Forecast.
- ASX (ASX AU): Downgraded to Sell at UBS; PT A$52.90
- AGL Energy (AGL AU): Upgraded to Buy at Goldman
- Galaxy Resources (GXY AU): Raised to Accumulate at Hartleys Ltd; PT A$3.73
- Navitas (NVT AU): Downgraded to Hold at Blue Ocean; PT A$5.20
- Origin Energy (ORG AU): Upgraded to Buy at Goldman
- Sigma Healthcare (SIG AU): Downgraded to Hold at Morningstar
Australian corporate events
Friday: WBC AGM
This month, platinum (XPTUSD) has fallen more than 5% and now five consecutive daily losses have been printed.
Along with silver (XAGUSD), XPTUSD’s year to date return is negative (1.3%) unlike gold which is up 9%.
XPTUSD is now trading at the previous double bottom (893.60) that was formed during May and July this year. The next support level would be 886.30 that corresponds to Dec 16 low.
XPTUSD monthly chart
Source: Saxo Bank
Today's Trade information sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
--Edited by Adam Courtenay
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