Article / 10 August 2016 at 1:15 GMT

Today's Trade: ASX slips as earnings fail to please

Trading Desk / Saxo Capital Markets

  • The benchmark top 200 index is 20 points, or 0.3%, lower at 5533.
  • Fairfax plunges 6% after posting a heavy loss on flagged writedowns
  • Overseas, US stocks indices continue to move higher

By Saxo Capital Markets

Early trading and overnight

The big miners are all being sold off in early trade on the ASX/S&P 200, and the banks are flat after a couple of badly received company profit updates has dragged the ASX lower in early trade, with CBA's record earnings figure not impressing.

The benchmark top 200 index was 20 points lower (-0.3%) at 1025 AEDT (0025 GMT).

The iron ore miners were in the midst of the selloff. BHP fell 1% and Rio 1.3%, while Fortescue lost 1.6% and South32 was down nearly 2%.

Overnight, the Nasdaq Composite closed at a record as US stocks edged higher. The S&P 500 hit an intraday high but closed shy of its record reached Friday after the strong July jobs report.

The Dow Jones Industrial Average came within 10 points of its July 20 closing high before paring gains.

Trading has been relatively calm recently as major US indices reach new milestones. The S&P 500 hasn’t had a daily move of 1% or more in either direction since July 8.

Many analysts and traders said they expect more of the same in coming weeks, especially as earnings season winds down.

Data have largely indicated the US economy is growing at a moderate pace, albeit with some weak spots. Productivity, measured as the output of goods and services produced by American workers per hour worked, fell at a seasonally adjusted annual rate of 0.5% in the second quarter, the Labor Department said Tuesday, the third consecutive quarterly drop.

The Dow industrials rose 3.76 points Tuesday, or 0.02%, to 18533.05. The S&P 500 added 0.85 point, or less than 0.1%, to 2181.74. The Nasdaq Composite climbed 12.34 points, or 0.2%, to 5225.48, surpassing its prior record of 5221.12 set Friday.

The yield on the 10-year Treasury note declined to 1.545% Tuesday from 1.587% Monday.
US crude oil fell 0.6% to $42.77/barrel after fluctuating between losses and gains.

Plans for informal talks by Opec have revived some investors’ hopes for a production freeze. But others remain skeptical that Opec members will agree on a deal and warn that oil could fall further. Prices are 17% below their 2016 high hit June 8.

The decline in oil weighed on energy shares in the S&P 500, dragging the sector down 0.5% and making it the biggest decliner in the index Tuesday.

Valeant Pharmaceuticals International surged $5.71, or 25%, to $28.16 after the drug maker reported a wider quarterly loss but affirmed its guidance for the year. It was the stock’s largest one-day percentage increase on record.

Norwegian Cruise Line Holdings fell $5.05 or 12%, to $37.91 - its lowest close since October 2014 - after the company cut its 2016 guidance. Royal Caribbean Cruises fell $5, or 6.8%, to 68.98. Carnival fell $1.43, or 3.1%, to $45.05.

 Disappointing morning: The Aussie big diggers have been sold off in early ASX trade

In Europe, stocks rallied across the board. The broad Stoxx Europe 600 index climbed 0.9%. Germany’s Dax index rose 2.5% to be up more than 20% from its February low - a bull market.

Sources: Bloomberg,

Key earnings

AUS: AGL, CBA, Computershare, Sky City Entertainment, Oz Minerals, Fairfax Media
Int’l: Shake Shack, Prudential and Sun Life Financial

AUS: Virgin Australia, Magellan Financial, Goodman Group, Telstra
Int’l: Alibaba Group Holding, Deutsche Telekom and Macy’s 

Toshiba, A.P. Moeller-Maersk and Sands China.

Local markets and commodities

  • The S&P/ASX 200 Index futures +0.2%; futures relative to estimated fair value suggest an early gain of 0.1%.
  • Bank of New York Australia ADR Index +0.8%, BHP Billiton ADR -0.8% to $A20.37 equivalent, 1% discount to last Sydney close, Rio Tinto ADR -1.2% to $A42.87 equivalent, ~16% discount to last Sydney close.
  • Commonwealth Bank of Australia, the nation’s largest lender, posted a 3% increase in full-year profit to a record for the seventh consecutive year, driven by higher earnings at its retail banking unit. Cash profit, which excludes one-time items, rose to $A9.45 billion ($7.25 billion) from $A9.14 billion a year earlier, the Sydney-based lender said in a regulatory filing Wednesday. That compared with the $A9.5 billion mean estimate of 13 analysts surveyed by Bloomberg. Final dividend was flat at $A2.22 per share, fully franked, taking the full-year dividend to $A4.20 which is also flat on the previous year. The bank paid out 76.5 per cent of its profits as dividends.
  • Gold rebounded from the lowest in a week as the dollar weakened, boosting demand for precious metals as a store of value. Gold futures for December delivery gained 0.4 percent to settle at $1,346.70/oz on Comex, after slipping 1.9% in the previous two sessions. On Monday, prices touched $1,335.30/oz, the lowest since July 29. Goldies on Toronto gains 0.49% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
  • Oil prices fell Tuesday as US government forecasters raised their outlook for domestic production and traders grew skeptical that Opec would consider production caps next month. US crude oil for August delivery settled down 25 cents, or 0.6%, at $42.77/barrel on the New York Mercantile Exchange.
  • Brent, the global benchmark, fell 41 cents, or 0.9%, to $44.98/b on ICE Futures Europe. Oil prices sank in 2014 and 2015 as robust production in the US and elsewhere created a global glut of crude oil. The market remains oversupplied, but many analysts say that declining US output and robust demand are helping to soak up the excess.
  • US output is set to fall more slowly than previously expected, the Energy Information Administration said in its short-term energy outlook Tuesday. The EIA expects U.S. output to average 8.73 million barrels a day this year and 8.31 million barrels a day next year, up from its prior forecasts of 8.61 million and 8.2 million, respectively. U.S. production averaged 9.4 million barrels a day last year. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
  • Iron ore for September delivery on Dalian Commodity Exchange ended China’s morning session little changed after trading around highest close in nearly 19 months. Iron ore futures lost 0.2% at 502 yuan/mt in Shanghai, after rising 1.6% and falling 1.8%. Rio Tinto Group, the world’s second-biggest mining company, said a proposed $A7.2 billion ($5.5 billion) tax increase in Western Australia is “ill conceived” and would be detrimental to the growth of its iron ore business in the state.
  • Brendon Grylls announced the tax proposal after being appointed the new leader of the state’s Nationals party on Tuesday. The plan to raise the production rental cost on Rio and rival BHP Billiton $A5 a metric ton from 25 Australian cents would be a pillar of the Nationals campaign for the 2017 state election, according to a statement. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
  • Copper fell to its lowest in four weeks amid seasonally weak demand in China and concern that Beijing may not cut rates soon. Three month copper on the London Metal Exchange closed down 0.7% at $US4779/tonne, having hit a low of $US4761, its weakest since July 12. LME tin ended up 0.7% at $US18,425 after touching a peak of $US18,470, the strongest since February 2015.
  • Traders said that a string of environmental inspections at smelters in China since last month has already curbed local tin output, and could lead to higher imports of refined metal. LME nickel ended up 0.1% at $US10,780/t. A crackdown on nickel mines in Philippines that has lifted prices by more than 20% over the past two months could see prices jump further.
  • Standard Chartered said in a report. "If the Philippines authorities force widespread and extended closures beyond the current piecemeal approach, the market balance would significantly tighten and likely support at least another 10-20 percent price move higher." LME aluminium closed unchanged at $US1642 while zinc dipped 0.2% to $US2274 and lead gained 0.8% to $US1804.50. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • In other news:  Australian stats bureau website hacked during census: ABC; AGL Energy (AGL): Scheduled to release FY results; NOTE: Adj. net income est. A$711m (11 analysts); Computershare (CPU): Scheduled to release FY results; NOTE: Mgmt net income est. $301.8m (13 analysts); Domino’s Pizza Enterprises (DMP): Allegro in talks to buy Eagle Boys and Pizza Hut Australia: AFR; Downer EDI (DOW): Fitch affirms co. at BBB;Fairfax Media (FXJ): Scheduled to release FY results; NOTE: Adj. net income est. A$145.6m (9 analysts); G8 Education (GEM): Scheduled to release 1H results; NOTE: Adj. net income est. A$38.1m (3 analysts); Infigen (IFN): Rated new hold at Canaccord; Link Administration (LNK): Co. yet to submit 2nd round bid for Tricor Holdings: Australian; New Hope (NHC): Raised to neutral from underperform at Credit Suisse; Rio Tinto (RIO): Rejects proposed $7.2b iron ore mining tax hike; Seven Group (SVW): Caterpillar equipment sales poised for 4th down yr: Bloomberg Intelligence; Sky City (SKC): FY net NZ$145.7m; Net income GAAP est. NZ$148.8m (6 analysts); South32 (S32): Cut to sell vs hold at Shaw & Partners; Tabcorp (TAH): Trades ex-dividend;Transurban (TCL): Macquarie said to handle A$253.6m Transurban block trade: AFR;Woodside (WPL): Low oil, LNG prices may cause 1H EPS decline: Bloomberg Intelligence.

Broker gradings
- ANZ Bank (ANZ): Raised to buy at Bell Potter
- Aristocrat Leisure (ALL): Cut to neutral vs outperform at Credit Suisse
- Cochlear (COH): Raised to buy at BofAML
- Fortescue (FMG): Cut to sell vs hold at Shaw & Partners
- Whitehaven Coal (WHC): Cut to sell vs hold at Shaw & Partners
- Newcrest (NCM): Cut to sell vs hold at Shaw & Partners
- Nufarm (NUF): Cut to hold vs buy at Wilsons
- REA Group (REA): Cut to neutral vs outperform at Credit Suisse

US500.i and AUDUSD

While both bond prices (ZN) and gold (XAUUSD) rose, the US500 continued to trade in an almost identical range as the previous day. The Dow Jones Transport Index was weighed down by the airlines sector so this sector would be worth monitoring in the next coming days.

We are seeing converging price actions as the upper resistance line of the rising wedge seems to restrict further gains for now. We still maintain our bearish bias on US500 but a daily close below 2,175 (uptrend from June low) would be needed as a confirmation of reversal. AUS200 remains resilient following positive leads from both the Dax and the S&P 500.
 US 500 monthly chart

Source: Saxo Bank

As the US dollar retreated, AUDUSD extended the gains to break the July high 0.7676 and now approaching the key breakout level 0.77.

We would not be surprised if we see a false break above 0.77 as we are expecting a lot of buy stops above this level, therefore we would sell as long as AUDUSD makes a daily close below 0.77.

AUDUSD monthly chart
Source: Saxo Bank

Today's Trade 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 the recording of this Week’s Macro Monday Call at 1030 AEST.


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
- 沪ICP备13028953号-1

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