Article / 02 September 2016 at 0:43 GMT

Today's Trade: ASX slide continues ahead of US jobs data

Trading Desk / Saxo Capital Markets
  • ISM report shows unexpected malaise in US manufacturing
  • Greenback loses ground against most of its major counterparts
  • Investors await Friday's US non-farm payrolls data 
  • ASX200 on track for a more than 2% weekly loss

By Saxo Capital Markets (Australia)

Overnight and early trade

The ASX/S&P 200 opened 0.4% lower at 5395.5 following overseas leads and is on track for a more than 2% weekly loss.

 The US dollar declined on the back of the disappointing ISM manufacturing PMI. Photo: iStock

  • Treasuries climbed and the dollar fell as an unexpected malaise in American manufacturing had traders trimming wagers that the Federal Reserve will boost interest rates this month. Oil extended its slide. Shorter-dated Treasuries, which are more sensitive to the outlook for monetary policy, outperformed longer-maturity securities. 
  • The USD lost ground against most of its major counterparts, while the S&P 500 Index slipped less than a point, squarely within the same 1.5% band it has now occupied for 36 straight days -- the tightest trading range since 1964.
  • The S&P 500 slipped less than a point to 2,170.86 on Thursday, reversing a drop of as much as 0.6%. The Dow Jones Industrial Average rose 18.42 points, or 0.1%, to 18419.30 after being down 105 points early in the session. 
  • Wal-Mart Stores led gains in the blue-chip index, rising 1.40, or 2%, to 72.84 after the retailer announced plans to cut thousands of back-office jobs. The Nasdaq Composite gained 13.99 points, or 0.3%, to 5227.21 as technology shares rose. 
  • Bank shares, which have risen recently on heightened expectations that the Fed was on track to raise interest rates this year, fell. Financial shares in the S&P 500 lost 0.4% after ending August as the best-performing sector of the month.
  • Benchmark 10-year Treasury yields fell one basis point, or 0.01 percentage point, to 1.57% as of 4 pm in New York. Yields on two-year notes dropped two basis points to 0.79%. The gap between five- and 30-year yields rose to 105 basis points.
  • Treasuries posted their worst month in over a year in August after policy makers signaled to markets that the case to raise interest rates was strengthening. The Fed has kept rates on hold through five meetings this year following a hike in December that was the first in nearly a decade.
  • Spanish government bonds declined for a third day as the country’s Treasury sold almost € 4bn ($4.5 bn) of conventional debt and investor demand fell at the auction of 30-year securities.
  • European stocks reversed earlier gains to close lower: the Dax lost 0.55%, followed by the FTSE which dropped 0.52%. The CAC finished the day flat.
  • Futures on Asian stock indexes signaled declines, with contracts on benchmarks in Australia, South Korea, Hong Kong and mainland China down at least 0.1% in most recent trading. Nikkei 225 Stock Average futures dropped 0.1% to 16,930 in Osaka, before yen-denominated contracts on the Japanese equity measure rose 0.3% to 16,955.
  • West Texas Intermediate crude for October delivery declined 3.5% to $43.16 a barrel on the New York Mercantile Exchange. Futures have dropped 9.3% over the past four days.
  • Gold futures for December delivery increased 0.4% to settle at $1,317.10 an ounce on the Comex in New York, rising for the first time in three days. Swings in the metal have abated as investors move to the sidelines ahead of Friday’s payrolls data.
  • Orange juice futures surged to a five-week high as a tropical storm headed toward Florida, the center of the US citrus industry.

Source: Bloomberg,

Key earnings

AU: Energy World Corp Ltd

Local markets

  • S&P/ASX 200 is scheduled to release quarterly rebalance update.
  • Bank of New York Australia ADR Index up 0.8%, BHP Billiton ADR up 0.8% to A$20.02 equivalent, 1% premium to last Sydney close, Rio Tinto ADR up 2% to A$40.76 equivalent, 13% discount to last Sydney close.
  • Gold volatility dropped to the lowest this year as investors await a US jobs report on Friday for further clues about an economy that will influence the timing of interest-rate increases. The metal’s 60-day volatility on Thursday fell to the lowest since December ahead of the August data. 
  • The probability of a rate increase this month was 32%, up from 18% at the beginning of August. 
  • Gold futures for December delivery increased 0.4% to settle at $1,317.10 an ounce at 1:48 pm on the Comex in New York, rising for the first time in three days. Silver futures for December delivery gained 1.3% to $18.943 an ounce on the Comex, the biggest gain in three weeks. Gold’s 24% gain in 2016 has been dented after Federal Reserve officials indicated a greater likelihood of tightening before the end of the year. 
  • Traders will scrutinise Friday’s payrolls report in light of Fed Vice Chairman Stanley Fischer’s comment on Tuesday that the bank will base decisions at its September 20-21 meeting on data. 
  • Figures from ADP Research Institute on Wednesday showed companies added workers in August in line with projections. 
  • Goldies in Toronto rallied 3.61% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil tumbled, heading for the biggest weekly decline in eight months, after US government data showed crude supplies at the highest seasonal level in more than 20 years. West Texas Intermediate for October delivery declined $1.54 to settle at $43.16 a barrel on the New York Mercantile Exchange. It’s the lowest close since August 10. WTI is heading for the biggest weekly decline since the week ended January 15 and futures have dropped 9.3% in four days in New York. Total volume traded was 9.5% above the 100-day average. Brent for November settlement slid $1.44, or 3.1%, to $45.45 a barrel on the London-based ICE Futures Europe exchange, also the lowest close since August 10. October Brent futures fell 2.8% to expire at $47.04 on Wednesday. 
  • Supplies rose by 2.28 m barrels last week, according to the Energy Information Administration. Russian Energy Minister Alexander Novak said he sees no need for oil-producing nations to impose an output cap given current price levels. The comments come before Opec members and other oil producers meet in Algiers from September 26 to 28. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • The most-active January iron ore on the Dalian Commodity Exchange fell as far as 408 yuan ($US61) a tonne, its lowest since August 1, before closing 0.5% higher at 417.50 yuan. A recovery in steel prices from session lows helped the raw material regain some lost ground. On the Shanghai Futures Exchange, construction steel product rebar ended 0.8% lower at 2402 yuan a tonne, after touching a one-month trough of 2362 yuan earlier. Weaker futures had weakened bids for physical cargoes in China, traders said. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Zinc, lead and tin climbed to their highest level in more than a year after China’s official factory gauge unexpectedly rose last month, signalling improved demand from the world’s top metal user. The manufacturing purchasing managers' index rose to 50.4 in August, near a two-year high, the statistics bureau said on Thursday, up from July’s 49.9, compared with the 49.8 median estimate of economists surveyed by Bloomberg. The pickup strengthens the case that China’s economic stabilisation remains intact even as credit growth slows and the central bank refrains from cutting interest rates. 
  • Copper was little changed in New York as traders assessed the prospect of strikes at two mines in Chile, the biggest copper-producing nation. Zinc for delivery in three months rose 1.2% to settle at $2,338 a metric ton on the London Metal Exchange, earlier touching $2,347, the highest since May 2015. The metal for immediate delivery settled Wednesday at a $8.75 a ton premium to the benchmark contract, the widest backwardation since May 2015. Copper futures for December delivery slid 0.1% to $2.0755 a pound on Comex. 
  • Chile, the biggest copper-producing nation, is facing the prospect of strikes at two mines as companies seek to contain labour costs amid slumping prices and shrinking margins. One of the main unions at Codelco’s Salvador mine in northern Chile voted against the state-owned miner’s pay offer, at the same time as workers at the giant Los Bronces deposit rebuffed a final offer by owner Anglo American Plc. With copper prices down more than 30% in the past two years, Codelco offered workers at its smallest mine a wage increase limited to inflation and a bonus for cost cutting as it seeks to return the operation to profitability. At the Los Bronces mine, London-based Anglo called on workers to reconsider its offer, which it said is fair given “the industry’s demanding situation”.  Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC

  • Alumina (AWC): Reaches pact with Alcoa on AWAC JV
  • Aurizon (AZJ): Submission of 2017 network access extended to Nov.
  • Elemental (ELM): Binding pacts signed with strategic investors
  • Trades ex-div.: Fantastic Holdings (FAN), Fortescue (FMG), Regis Healthcare (REG), Select Harvests (SHV)
  • Mesoblast (MSB): Names Bill Burns vice chairman
  • Nuplex (NPX): Allnex gets EC antitrust approval for takeover
  • Rio Tinto (RIO): Glencore may be considering buy of Rio’s $1b coal assets: AFR
  • TPG Telecom (TPM): Singapore says co. among bidders for 4th mobile license

Broker upgrades and downgrades

  • CYBG (CYB): UK listing cut to neutral vs outperform at Macquarie
  • Independence Group (IGO): Cut to hold from buy at Bell Potter

Stock to watch
Macquarie Group (MQG)

Macquarie has surged 25% since it found a support level at $65 and now looks to be forming a rising wedge so we could expect a potential reversal if we see a break out below $80.

While the upside momentum cannot be ignored, MQG appears to be trading at an overbought level.

Applying a Fibonacci extension of the range that called the 2015 top to the recent June lows shows an end target of $82.25, so we cannot rule out a further push to this level.
MQG daily chart

After the US dollar (DX) found a solid resistance level at the 200-day moving average, it declined on the back of the disappointing ISM manufacturing PMI and total vehicle sales numbers. The support level remains at 0.75 handle for AUDUSD and further rally is possible if we see weak non-farm payroll data tonight at 10.30pm local time.

AUDUSD daily chart  
The S&P500 has been trading in a 1.5% range for 36 days, its tightest trading since 1964, but we expect this tight range to end tonight. The price actions of US500 were choppy ahead of tonight’s non-farm payroll data and AUS200 continued to extend the losses in the SYCOM session. 15 of 19 past Augusts have seen payrolls trailing estimates, and when this happened S&P500 declined an average 0.4%. 

Bad NFP numbers could trigger negative reactions for US500 but since Fed members have been talking up the rate hike scenario recently any good figures could reinforce the September rate hike which means risk-off for the equity indices.

AUS200 daily chart
 All charts: 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 Susan McDonald

Today’s Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch the recording of this Week’s Macro Monday Call at 1030 AEST. Watch our daily morning call on Periscope at 9:45am: #SaxoStratsAPAC and follow us up on

Saxo Capital Markets (Australia) Pty Ltd | A part of Saxo Bank Group
ABN 32 110 128 286 | AFSL 280372
Level 25, 2 Park Street SYDNEY NSW 2000
Phone: +61 (2) 8267 9000 | Fax: +61 (2) 8267 9050
Please visit our website at:

The daily outlook is brought to you by Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286, AFSL 280372 (Saxo Capital Markets), in association with which is the property of Saxo Bank A/S, the parent company of Saxo Capital Markets. is a social trading facility offering clients of Saxo Bank Group access to in-depth market news, commentary, analysis and much more.
The content of the daily outlook should not be considered as a ‘personal’ or specific investment advice catered for your specific need, objectives or financial situation, or be construed as an express or implied promise, guarantee or implication by Saxo Capital Markets that clients will profit from the strategies expressed or that losses in connection therewith can or will be limited.
None of the information contained in the daily outlook constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. Saxo Capital Markets; shall not be responsible for any loss arising from any investment based on any forecast or other information contained in the daily outlook. Past performance is not a reliable indicator of future performance. Information contained in this daily outlook may have previously been distributed to; and acted upon; by other clients and persons who have shown interest in Saxo Capital Markets, as well as internal affiliates/employees of Saxo Capital Markets. Any trade ideas or positions contained herein relating to products or services offered by Saxo Capital Markets may be inconsistent to trades/positions entered into by Saxo Capital Markets and/or its affiliates. Further, any information contained may consist of opinions and views of the ‘Sales Trading Desk’ as a team, however does not reflect the ‘specific’ opinion of Saxo Capital Markets.
Trades in accordance with the information contained in the daily outlook, especially, but not limited to, leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the daily outlook do not occur as anticipated. Prior to making any investment or entering into any transaction, you should carefully consider your financial situation and consult your independent financial expert in order to understand the risks involved and ensure the suitability for you of any investment or transaction decision you enter. Any information or opinions in this material are not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be unlawful. Please refer to our Combined Financial Services Guide & Product Disclosure Statement available via Please also consider whether acquiring or continuing to hold financial products is suitable for you, prior to trading and investing.
If you would like to unsubscribe from the Daily Outlook, please reply ‘Opt Out’ to this email with your Client ID.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail