Today's Trade: ASX leaps 1% higher at open
- The ASX-S&P 200 is up almost 8% in ten days, nearly eradicating the year's losses
- BHP jumped 4.3% at the open to $21.24 – a fresh five-month high
- Oil rally lifted energy producers globally with the S&P 500 at a four-month high
- Volkswagen's stock among the top performers, up 6.61% on hopes of a resolution
By Saxo Capital Markets
Overnight and early trading
Resources continue to steamroll higher with the ASX 200 close to erasing the year's losses folowing another strong night for commodity prices.
At 1030 AEDT (0030 GMT) the S&P/ASX 200 was 1% higher at 5265.5, which takes the local rally to almost 8% in 10 days. Major banks, CSL, Wesfarmers and Woodside were all seeing solid gains but it’s the BHP show on the ASX again today.
The mining giant jumped as much as 4.3% at the open to $21.24 – a fresh five-month high – as the price of iron ore popped to $US64 a tonne overnight and the price of crude rose around 4%. BHP was up another 4.2% and Rio a healthy 2.9%, while Fortescue has added a further 5.5%.
In overnight trading:
US stocks edged higher as an oil rally lifted energy producers, with the S&P 500 Index holding at a four-month high amid a slate of corporate earnings that gave investors little clear direction.
An afternoon rally stumbled in the final hour of trading, leaving equities little changed: The Dow Jones Industrial Average added 42.67 points, or 0.2%, to 18096.27. The blue-chip index rose as much as 114 points during the session.
After rising as much as 0.5% the S&P 500 edged up 1.60, or 0.1%, to 2102.40, and the Nasdaq Composite advanced 7.80, or 0.2%, to 4948.13.
now packed on 33.5% in just 10 sessions. Photo: iStock
The CBOE Volatility Index, which is based on prices of S&P 500 options that investors tend to rush to when they are fearful of stock declines, hit a fresh intraday low for the year, touching 12.50. The index ended 0.3% higher at 13.28, its third-lowest close this year.
Volkswagen's stock was among the top performers, gaining 6.61% on hopes of a resolution to its emissions-test-rigging case with US authorities. Volkswagen-owned luxury carmaker Porsche closed more than 6% higher as a result.
Thursday: Alphabet, Microsoft, General Motors, Visa, Starbucks, Bank of NY Mellon, Biogen, Under Armour, Southwest Air, Stanley Black and Decker, Imax, Novartis, Union Paicific, DR Horton, Fifth Third, Johnson Controls, Pulte Group, Polaris, Alaska Air, Verizon, Travelers, ETrade, Norfolk Southern, Boston Beer
Local markets and commodities
- The S&P/ASX 200 Index futures +0.7%; futures relative to estimated fair value suggest an early gain of 0.9%.
- Bank of New York Australia ADR Index +1.2%. BHP Billiton ADR +3.4%. Rio Tinto ADR +4.8%.
- Spot gold edged slightly lower as it traded down 0.5% to $1,244/oz. Silver rose another 0.2% to $16.97/oz as it now sits at 11 month highs. Up 11% for the month silver is the best performer in the Bloomberg commodity index. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
- Crude oil has surged impressively with WTI and Brent up 6.9% and 5.9% to $42.74 and $45.53 respectively. The market didn’t selloff after failed talks in Doha as a strike in Kuwait took more than 1m/b from the market each day. Now the strike is over, an output decline in the US is holding the market's attention. In the US, EIA data reported an output fell to 8.95m/b day and inventories rose by less than 2m/b for the week, beating expectations. However total inventories are now at 538m/b. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
- Iron ore has soared to a 10-month high as it rose 3.1% to $64.77. BHP has announced its output may be 260m/t, down 4% from last year. This is in addition to Rio’s cut to their guidance which is making the supply side dynamics looking a little better. Add to this Japan’s imports in March rose a strong 10% m/m to 11.33m/t and China’s policy makers supporting growth. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
- Base metals were mostly positive, with aluminium being the best performer. Aluminium had its strongest gains this year on speculation on raw-materials demand in China will turn around. Friday’s industrial production figures showed evidence the monetary and fiscal policy are starting to have an impact. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC.
- In other corporate news: AMP (AMP), Challenger (CGF), Suncorp (SUN), QBE Insurance (QBE), Insurance Australia Group (IAG): ASIC to conduct inquiry into life insurance industry: AFR; Asciano (AIO): Court made orders for meeting of holders June 3; shareholders to vote on joint consortium proposal; Australian Pharmaceutical Industries (API): Scheduled to release 1H results; NOTE: 2-analyst revised estimates of A$1.75 billion; Brambles (BXB): Scheduled to provide 3Q trading update; NOTE: Sees FY16 adj. profit $1.02b-$1.04b at June 30 FX rates February 22; Cimic (CIM): Schedulded to hold annual meeting, release 1Q results; NOTE: Co. forecast 2016 NPAT A$520m-A$580m February 10; Crown Resorts (CWN): Las Vegas Sands 1Q adj. EPS, rev. misses estimates; Iluka Resources (ILU): Scheduled to release 1Q output; OZ Minerals (OZL): Scheduled to release 1Q output; NOTE: Sees 2016 copper output 115kt-125kt; gold output 125k-135k ozs; Qantas (QAN): Vietnam Jetstar Pacific to get $139m more in investment: Times; South32 (S32): Scheduled to release 3Q output; NOTE: Feb. 25: Co. cut FY16 Illawarra metallurgical coal target, Plans to cut 17% workforce by end FY17; Ten Network (TEN): Scheduled to release 1H results; NOTE: Co. said in Oct. targeting total TV costs ex-selling costs +6.5%.
Stock to watch: South32 (S32)
South 32 monthly chart
- Asaleo Care (AHY): Cut to neutral vs outperform at Credit Suisse
The overnight price action of AUDUSD was subdued given the strong rally from both copper and iron ore. AUDUSD broke the previous high 0.7826 by 3 pips but it quickly faded off.
The US dollar strengthened against the major currencies and if this continues, then we may start to see more weakness from AUDUSD.
We still maintain our resistance level at 0.7850 which is expected to provide good shorting opportunities, while the support level is at 0.76 handle. USDJPY appears to have found the double bottom above the key support level 107.50 and we expect USDJPY to extend the rally towards the next resistance level 111
However the AUS200 managed to close above 5,200 despite the early sell off on the morning open. The price actions of the Shanghai Composite would be a major focus today as it bounced off 2,900 to recover majority of the losses towards the close of the yesterday’s session. The support level for our AUS200 is at 5,200 and the resistance level should be the overnight swing high 5,273.
-- 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 AEST: #SaxoStratsAPAC.