Article / 25 March 2015 at 1:51 GMT

Today's Trade: ASX shrugs off weak Wall St lead

Trading Desk / Saxo Capital Markets
Australia
  • Aussie shares defied a weak lead from Wall St to record some early gains
  • Despite the US CPI data, inflation in the US remains subdued
  • Spot gold hovered around existing levels, up just 0.2% to $1,193

Overnight and early trading

In early trading today shares defied a weak lead from Wall St to record some early gains, helped along by a good start by CBA. At 10.30am the ASX 200 was 13 points higher up by 0.2 per cent, at 5982.4, while the All Ords is 12 points up at 5946.6. CBA is 0.3 per cent higher and Westpac 0.2 per cent, with NAB flat and ANZ marginally lower.

US stocks closed lower Tuesday, capping off a quiet trading session as the most recent push toward record highs ran out of steam. The Dow Jones Industrial Average fell 104.90 points, or 0.6%, to 18011.14. The S&P 500 declined 12.92 points, or 0.6%, to 2091.50, and the Nasdaq Composite lost 16.25 points, or 0.3%, to 4994.73.

US consumer prices rose 0.2% in February from a month earlier, the first increase since October and the biggest since June, the Labor Department said, but in line with expectations. Prices excluding volatile food and energy costs also rose 0.2%.

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 Aussie banks were taking the market higher, in early Wednesday trading. Photo: iStock

Despite the increase, the figures indicated that inflation in the US remains subdued, a factor that’s likely to keep the Federal Reserve cautious in its approach to raising interest rates. The Fed is keeping an eye on both employment and inflation as it prepares to raise short-term rates, an event widely expected later this year.

European stocks rose, as data indicated recovery in the Eurozone is picking up steam and as the EUR’s attempt to drive higher against the dollar proved short-lived. A recent drop in the EUR toward parity against the dollar has helped fuel gains for shares of European exporters. At the close, the Stoxx 50 gained 0.87%, the FTSE 100 slid 0.26%, the CAC 30 advanced 0.67% and the DAX added 0.92%.

Local Markets

  • The S&P/ASX 200 Index futures contract fell 0.2% to 5,968 with futures relative to estimated fair value suggest an early gain of 0.1%
  • Bank of New York Australia ADR Index fell 0.4% with BHP Billiton ADR down 0.7% and Rio Tinto ADR falling much further, down 2.6%
  • Spot gold hovered around existing levels, up just 0.2% to $1,193 as the dollar basket (DXC1) paused on its recent fall. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • WTI held up overnight, rising 1% to US$47.42 as solid US data lifted confidence. Brent was pushed down 1.2% as weaker Chinese data soften demand. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore shed 1.9% to $55.86 as a failing lift in steel demand in China continues to impact our major commodity export. Twiggy Forrest has come out and proposed to capping the supply of iron ore and to lift the spot price. Despite this being a form of collusion, we don’t see BHP, RIO and Vale sympathetically agreeing to his idea. Iron ore stocks: AGO, FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were weaker with Chinese PMI data trumped stronger US new home sales data. Nickel showing the greatest wound, down 2.3% to $13,955 after soft demand for pig iron. Nickel reserves touched record highs reached earlier this month at LME. Nickel stocks: WSA, SIR
  • Companies trading ex-dividend: Crown Resorts (CWN), Fletcher Building (FBU), Flight Centre (FLT), Seven Group (SVW), Spark New Zealand (SPK), Webjet (WEB), Western Areas (WSA)
 
Data points

Wednesday
  • AUS: RBA Financial Stability Review
  • EUR: German Ifo Business Climate
  • FOMC Member Evans to deliver a speech titled "Monetary Policy and the Economy" at the Official Monetary and Financial Institutions Forum, in London. Audience questions expected
  • US: Core Durable Goods Orders m/m, Durable Goods Orders m/m, Crude Oil Inventories
Thursday
  • - EUR: GfK German Consumer Climate, M3 Money Supply y/y, Private Loans y/y
  • - GBP: Retail Sales m/m, FPC Statement, CBI Realized Sales
  • - FOMC Member Lockhart Speaks: Due to speak about the economic outlook and monetary policy at the Engage International Investment Education Symposium, in Detroit
  • - US: Unemployment Claims
Friday
  • JPN: Household Spending y/y, Tokyo Core CPI y/y, Unemployment Rate, Retail Sales y/y
  • German Import Prices m/m
  • MPC Member Haldane Speaks: Due to speak about socio-economic complexity at the Lorentz Center, in Amsterdam
  • BOE Gov Carney Speaks: Due to participate in a panel discussion titled "Debt and Financial Stability - Regulatory Challenges" at the Bundesbank conference, in Frankfur
  • MPC Member Broadbent Speaks: Due to speak about at Imperial Business School, in London
  • FOMC Member Fischer Speaks: Due to deliver a speech titled "The Nonbank Financial Sector: Issues and Regulation" at the Deutsche Bundesbank Conference titled "Debt and Financial Stability - Regulatory Challenges," in Frankfurt
  • Fed Chair Yellen Speaks: Due to speak about monetary policy at the Federal Reserve Bank Conference titled "The New Normal for Monetary Policy," at San Fransisco
  • USP: Final GDP q/q, Revised UoM Consumer Sentiment, Revised UoM inflation expectations

Current ASX Trades

  • Flightcentre (Ticker: FLT:xasx): Entered short position on March 9 at AUD43.05. Stop loss has been trailed now to our open price of AUD43.05 (-0.0%). First profit target was reached on March 11 at AUD40.56 (+5.8%), second profit target is AUD39.74 (+7.6%) and final profit target is AUD38.40 (+10.8%). [NOTE: Flight Centre goes ex-dividend on March 25 at 55 cents and a short position over this ex date will result in the shorter paying this dividend amount multiplied by the number of shares shorted]
  • AMP Limited (Ticker: AMP:xasx): Entered long position February 6 at AUD6.10. First profit target was reached on the Febraury 18 at AUD6.49 (+6.4%) and second profit target at AUD7.12 (+16.7%) and third and final profit target at AUD8.00 (+31%) remains in place. Stop loss trailed to entry price of AUD6.10

Broker Upgrades
- Genworth Australia (GMA): Raised to overweight against neutral at Commonwealth Bank
- Sonic Health (SHL): Raised to neutral versus underperform at Credit Suisse
- WorleyParsons (WOR): Raised to buy versus neutral at HSBC

Broker Downgrades
No downgrades today

AUDUSD

The major headline overnight was the better than expected US CPI figures but the reaction was very mixed. Initially AUDUSD sold off 40 pips or so along with EURUSD falling after the strong CPI but then it quickly made a fresh high at 0.7938, although this did not last long.

AUDUSD is trading between 0.7900 and 0.7850, and we believe the overnight price actions confirm that CPI was not the most significant factor and the USD weakening is not over yet.

Current gold rally looks to continue towards 1,200 and until this level is tested, US weakness is expected to persist. Also there is speculation from IFR Asia’s senior strategist saying the People's Bank of China may be forced to cut the reserve requirement ratio as early as this weekend. Today RBA announces its semi-annual Financial Stability Review (11:30am) and this should not impact AUDUSD too much, however core durable goods orders data (11:30pm) from US could be interesting.

Long AUDUSD

Entry: Limit 0.7847

Target: 0.7949

Stop loss: 0.7830
 
XAUUSD

The ASX/S&P200 was weak after US CPI number showed strength which supports a US rate hike. The market is expected to trade in a choppy manner today and therefore we do not have any trade setup today but we see some good short term opportunities on Gold (XAUUSD) based on current price actions and some basic technical levels. $1,183 has been major support levels a number of times in the past, especially twice in 2013 that initiated two big rallies. Furthermore recent breakout of this key level $1,183 happened where the downtrend channel crossed it. The key resistance level would be at 1,200 which is expected to be tested as the US weakening continues.

Buy XAUUSD

Entry: Limit $1,187

Target: $1,201

Stop loss:
$1,181
 
 XAUAUD monthly chart
XAU
 Source: Saxo Bank

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets

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