Today's Trade: ASX plummets on global macro fears
- 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
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.
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.
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.
The CBOE Volatility Index (VIX) sits at a three-year low near 10.5.
Sources: Bloomberg, TradingFloor.com
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.
- 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
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
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
We expect high volatilities this week as we wait for a number of significant data and central bank meetings.
AUDUSD weekly chart
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
Saxo Capital Markets (Australia) Pty Ltd | A part of Saxo Bank Group