Article / 30 January 2017 at 0:58 GMT

Today's Trade: ASX plummets on global macro fears

Trading Desk / Saxo Capital Markets
Australia
  • 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.

xxx
  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, 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.

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

1

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

2




















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

3




















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
 
4
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


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: http://www.saxomarkets.com.au
IMPORTANT INFORMATION
Today's Trade is brought to you by Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286, AFSL 280372 (Saxo Capital Markets), in association with TradingFloor.com which is the property of Saxo Bank A/S, the parent company of Saxo Capital Markets. TradingFloor.com 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 Today's Trade 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; TradingFloor.com 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 www.saxomarkets.com.au. 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.
Terms & Agreement | Disclaimer | Financial Services Guide | Privacy Policy | Contact Us |
SAXO CAPITAL MARKETS (AUSTRALIA) PTY LTD
LEVEL 25, 2 PARK STREET SYDNEY NSW 2000 AUSTRALIA

2y
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.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com 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 Tradingfloor.com 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 Tradingfloor.com 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 Tradingfloor.com or as a result of the use of the Tradingfloor.com. 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 Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com 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