Article / 30 January 2017 at 0:58 GMT

Today's Trade: ASX plummets on global macro fears

Trading Desk / Saxo Capital Markets
  • S&P/ASX 200 reacts negatively to Trump’s policy banning immigration
  • The index is down 1.1% at 5650 points, on track for biggest fall in two months 
  • The big miners and banks are all trading lower, but QBE rose 4.5%
  • Aconex hit hard after a profit warning, losing 30% at the open 

By Saxo Capital Markets

Overnight and early trade

The Australian market fell precipitously this morning with most of the major stocks losing traction as investors react negatively to Trump's immigration policy banning certain nationals.

The broad-based fall in Australian shares comes amid risk aversion in global markets based on the fear of sudden and extreme policies from the new President.
There are not just worries over the Trump administration's policies but a Federal Reserve Bank meeting looms and the start of the local earnings season is about the fall.

Overseas, the Dow Jones Industrial Average slipped on Friday but still posted its best week since early December after topping 20,000 for the first time.

A busy schedule of corporate earnings coincided with President Donald Trump’s first week in office, with shares of manufacturers and miners leading indices higher.

Materials shares led gains in the S&P 500, posting a 3.4% weekly gain after Trump moved to cut regulation and promote infrastructure projects. It was the sector’s biggest jump since election week. Weighing on stocks was the Energy Select Sector SPDR Fund ETF (XLE) which fell 1% due to falling crude prices, with WTI dropping 1.13% to settle at $53.17/barrel.

Boeing posted its largest weekly gain since November 11, rising 5.1% to $167.70 after the aerospace giant reported better-than-expected earnings that helped carry the Dow above the 20,000 threshold on Wednesday.

The Dow industrials slipped 7.13 points, or less than 0.1%, to 20,093.78 on Friday but ended the week up 1.3%.

The S&P 500 lost 1.99 points, or less than 0.1%, on Friday to 2294.69, while posting a 1% weekly gain. The Nasdaq Composite rose 5.61 points, or 0.1%, to 5660.78, notching a 1.9% gain for the week and closing at a record.

  The Fed meeting will certainly have an effect on the AUD. Photo: Flickr

Microsoft was among the winners on Friday after it posted quarterly gains in its cloud-computing business Thursday. Shares of the technology company rose $1.51, or 2.3%, to $65.78.

Economic growth in the US slowed more than expected in the fourth quarter as a plunge in shipments of soybeans weighed on exports, but steady consumer spending and rising business investment suggested the economy would continue to expand.

Gross domestic product increased at a 1.9% annual rate, the Commerce Department said on Friday in its first estimate of fourth quarter GDP. That was a sharp deceleration from the 3.5% growth pace logged in the third quarter.

European equities fell, with the pan-European Stoxx 600 index dropping 0.3%, as a global stocks rally paused. Stocks in Europe have lagged their U.S. counterparts over the past year.

The CBOE Volatility Index (VIX) sits at a three-year low near 10.5.

Sources: Bloomberg,

Local markets and commodities

  • Bank of New York Australia ADR Index +0.7%, BHP Billiton ADR +0.2% to A$27.31 equivalent, 0.8% discount to last Sydney close, Rio Tinto ADR +1.1% to A$60.07 equivalent, ~11% discount to last Sydney close.
  • Gold futures posted the longest streak of losses since November as buying from China stopped ahead of its week-long holiday to celebrate the Lunar New Year. Gold futures for April delivery fell 0.1% to settle at $1,191.10/oz. Futures earlier fell as much as 0.8%, touching the lowest since January 11. The four-day losing streak is the longest since Nov. 14. Gold stocks in Toronto were up 1% on Friday. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil dropped from a three-week high amid speculation that increased US drilling will boost output, offsetting cuts by Opec and other producers. American crude output is the highest level since April, government data show. WTI for March delivery fell 61 cents to $53.17/barrel. Brent for March settlement dropped 72 cents, or 1.3%, to $55.52/b. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
  • Iron ore spot prices ended the week unchanged on the day as the Chinese market closed up for the Chinese New Year. This had followed a strong end to the Chinese year, with steel futures on the Dalian Commodity Exchange surging higher on news of more capacity closures. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • On Friday, benchmark copper on the LME closed 0.7% up at $US5900 a tonne, ending the week 2.4% higher. Nickel added 0.7% to $9,475/tonne in after touching its lowest since June 30 in the previous session. Aluminium ended 0.2% lower at $1,816 a tonne, having touched a 20-month peak of $1,883 on Tuesday on reports of potential capacity cuts in China. Alumina falls as much as 5.6%, most since Nov. 9, as aluminium extends decline to a second day. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • Other news: Alumina (AWC): Alcoa revenue boosted by alumina, aluminium pricing strength: BI; Australian Agricultural Co. (AAC): Australian government officials will inspect Japanese slaughterhouses as soon as this summer as it prepares to end a 16-year ban on Japanese beef imports, Nikkei says, without citing any source; Boral (BLD): Headwaters doesn’t see Boral making employment offers to executives; Caltex (CTX): Lower refining margin may have ripple effect: BI;Fortescue (FMG): Reports death of development director after air crash;  Infomedia (IFM): Attracts private equity interest: AFR; Newcrest (NCM): Q2 production report expected; NOTE: Co. in October forecast FY17 gold output 2.35mln-2.6mln oz; copper output 80,000-90,000 tones; OZ Minerals (OZL): 4Q production report expected; NOTE: Co. in October forecast 2016 gold output 115k-120k ozs, copper output 115,000-125,000t; Qantas Airways (QAN): Airline offers refunds to those hit by Trump immigration ban: ABC; QBE Insurance (QBE): May move after report Allianz weighing bid at 22% Premium; Rio Tinto (RIO): Equip said in talks to merge with Rio Tinto staff fund: AFR.

Broker gradings

  • Transurban (TCL): Raised to add vs hold at Morgans Financial

Local releases due this week

  • Thursday: Tabcorp, Downer
  • Friday: James Hardie

Stock to watch

We flagged telecommunications company Telstra (TLS) earlier this month indicating a potential pull back; and since finding strong resistance at $A5.28, Telstra has pulled back as our bond yields have grinded higher.

The reactions off $A5.28 looked quite promising as this level also coincided with the 200 day moving average. So we remain bearish biased on this stock in the near term towards the next support level of $A5.
Telstra monthly chart


Source: Saxo Bank

US Dollar Index flirts with breakout level

The US Dollar Index currently flirts at the breakout level just above the 100 handle.

Summarising the price actions over the US dollar in 2016: We saw a breakout above the 2015 resistance levels in mid November of last year and since then it has successfully claimed eleven consecutive weekly prints above this break out level.

The recent losses over the US dollar index can be interpreted as a retracement unless it settles below these levels for two consecutive weeks however for now, we re-commence our bullish outlook on the US Dollar.

USD Index quarterly chart


USDJPY under pressure
USDJPY was under pressure after forming a short term double top and most recently shot above the short-term resistance which connected the January swing highs.

At ¥112.50, which is the recent low, it should be marked as strong support over the USDJPY given its most recent retracement ended here and to the upside ¥115.58 is the initial test which is a 50% retracement followed by ¥116.31 then ¥117.20.

The RSI finds support just above 30 and is now back on the rise and given our analysis over the US Dollar index, the USDJPY should technically march higher from here.

USDJPY monthly chart


AUDUSD show resilience

AUDUSD continued to show resilience above the previous resistance level 0.75 handle for more than a week and this price action leads us to start becoming long biased as both copper and gold are also looking to push higher.

We expect high volatilities this week as we wait for a number of significant data and central bank meetings.

AUDUSD weekly chart
Source: All charts, Saxo Bank - create charts with SaxoTrader. Click here to learn more 

Today's Trade information 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

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Morris Morris
On the Dollar Index we have lateral support and the candle is a hammer. The RSI showing no sign of turning and any fibonacci pivots? The wave that started on Q2 2016 could be wave 5 and would it relate to wave 1 and applying fibs extension could confirm possible impulse or retrace. Very interesting how you correlate the movement in AUD and JPY with that of the overall USD Index.


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