Article / 09 May 2016 at 1:32 GMT

Today's Trade: ASX subdued as global data digests

Trading Desk / Saxo Capital Markets
Australia

  • Positive Wall Street lead and commodity prices should drive a solid session
  • Technicals, however, do point to resistance around current levels
  • Confirmation of a July 2 election should also keep trading subdued
  • US stocks closed with gains however clocked their second week of decline

By Saxo Capital Markets

Overnight and early trading

Shares have bounced back from a loss at the open, led higher by the banks as investors reconsider CBA's earnings update. At 1030 AEST (0030 GMT) The ASX/S&P 200 was up 0.3% at 5307.2, while the broader All Ords has gained 0.3% to 5374.4.

The market initially opened lower, dragged down by the big banks, as ANZ trades ex-dividend and CBA reported a slightly softer than expected third-quarter result.

In trading on Friday night:

US stocks closed with gains however clocked their second week of decline. The Dow Jones Industrials Average advanced 79.92 points, or 0.5%, to 17740.63. The S&P 500 rose 6.51, or 0.3%, to 2057.14, and the Nasdaq Composite gained 19.06, or 0.4%, to 4736.16.

For the week, the Dow fell 0.2% and the S&P 500 lost 0.4%. The Nasdaq Composite dropped 0.8% for its third week in a row of declines.

In what was the slowest pace of job creation since September, US employers added 160,000 jobs in April, a smaller increase than the 203,000 jobs forecast estimate. Following this data the Dow fell as much as 80 points and the S&P 500 briefly turned negative for the year before all turning higher.

New York Federal Reserve President William Dudley said in a New York Times article Friday the jobs report was perhaps softer than expectations but gave it little weight in affecting his economic outlook. He added in the piece that two hikes this year remained a "reasonable expectation".

The yield on the 10-year Treasury note rose to 1.779% from 1.756% on Thursday and the dollar slipped 0.1% against the yen to ¥107.11. Gold for May delivery rose 1.7% to $1,292.90 an ounce.

US oil prices rose 0.8% to $44.66/barrel. Oil prices fell 2.7% for the week, however, making energy shares the biggest weekly decliners in the S&P 500.

In earnings news, Square shares dropped $2.83, or 22%, to $10.22 after the payments provider on Thursday posted a wider-than-expected loss in its first quarter. It was the stock’s biggest decrease on record and its sixth successive session of declines.

Activision Blizzard shares jumped 2.96, or 8.5%, to 37.87, rising the most in the S&P 500. The company delivered strong first-quarter earnings Thursday and lifted its full-year outlook.

Apple closed more than half a percent lower. Intraday, the stock temporarily declined more than 1% to below its August 24 intraday low and hitting a fresh 52-week intraday low going back to June 2014.

The iShares Nasdaq Biotechnology ETF (IBB) closed 1.5% lower. The SPDR Banks (KBE) closed higher on the day but fell nearly 3.8% for the week, its worst since mid-January. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell below 15.

Over in Europe the Stoxx Europe 600 fell 0.4% Friday, bringing its weekly loss to 2.9%. The Dax outperformed with mild gains, up 0.18% followed by the FTSE which added 0.14%. The CAC lost 0.42%.

Shares of ArcelorMittal sank some 1.2% despite the steelmaker saying on Friday that it was slightly more positive about the steel market, with a modest improvement in the outlook for China. Core profit (EBITDA) came in at $927 million for the first quarter, a lower figure compared to previous quarter results.

Easyjet shares ended the day off over 1.6% after the budget airline reported a 6.1% rise in passenger numbers in April. Easyjet's load factor, a measure of tickets sold, fell however, to 90.4% in April, down from 90.8%.

Randgold Resources rallied 6.5%, buoyed by a tick up in gold prices, which pushed fellow precious metals firm Fresnillo higher by 6.16%. Basic Resources overall, however, was one of the worst performing sectors, with Anglo American off more than 3% at one point in the day before paring losses to close some 0.9% higher.

Local markets and commodities

  • The S&P/ASX 200 Index futures +0.4%; futures relative to estimated fair value suggest an early decline of 0.1%.
  • Bank of New York Australia ADR Index +0.7%. BHP Billiton ADR +1%. Rio Tinto ADR +1.3%.
  • Spot gold rose 0.9% to $1,289 following US payrolls data for April. Poor data has lifted expectations a delay in a rates lift will take place, driving demand. Over the week gold was down 0.5% after finding resistance at a key psychological level of $1,300. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
  • Crude oil was supported by a weaker USD with WTI and Brent up 1.9% and $1.7% to $44.66/b and $45.37/b respectively. Oil for the week fell to break a month of positive gains. The number of oil rigs in the US have fallen for the week, this time by 4 to 328. To put this in perspective, year-on-year the number of rigs have fallen from 668 to 328 - down 49%. Wild fires in the Canadian oil sands region continue to rage, reducing output by over a third. Chevron's platform is under attack by Nigerian militants. Combined, the bears are hovering close by but appear to be holding off for the time. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
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 Wall Street thinks the nonfarm payrolls jobs data wasn't all bad news. Photo: iStock

  • Iron ore has seen its largest weekly loss since 2011 as it gave up another 3.3% to close at $58.29. Closing below $60/tonne for the first time in three weeks, speculators are pulling away on weaker sentiment on the steel market. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
  • Base metals were mostly up from an initial weakness in the USD. Aluminium bucked the trend, falling 0.5% to $1,598 while copper gained 0.8% to $4,810. It was these levels on copper that formed a ceiling of resistance in December and again in February before the breakout. To fall from here would set copper well below the 200 Day Moving Average with target levels first at $4,700 and then $4,400. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC.
  • In other news: RBA’s new head seen facing risk of rate cuts to 1% says JPMorgan; ANZ Australia April job ads data due 01130 AEST (0130 (GMT); BHP Billiton (BHP): Lawsuit vs Samarco is credit negative: Moody’s; Commonwealth Bank (CBA): Scheduled to release 3Q update; NOTE: In Feb. reported 1H cash profit A$4.804 bn; Fairfax (FXJ): Considering spin off of NZ assets: Australian; Fortescue (FMG): MMK sees Fortescue stake as ‘non core,’ Will cut holding further; Greencross (GXL): Quadrant PE said to sell stake: AFR; Orica (ORI): Scheduled to release 1H results; NOTE: In November company forecast earnings growth next 2 years; Macquarie Group (MQG): Joins CIC, Allianz in seeking majority stake in National Grid gas unit: Sunday Times; Rio Tinto (RIO): New Mongolia output to supply into copper deficit; Ten Network (TEN): Pay-TV operator Foxtel plays down Network 10 bid expectations: AFR.

Stock-to-Watch: JB Hi-Fi (JBH)

JBH has been a stock we’ve been watching for a while. It has threatened to break out a number of times of late, but may be looking for a serious attempt this time as it is fuelled by the recent RBA rate cut.

Both on the daily and weekly chart JBH has given breakout signs with targets of $25.38 and $26.98 being shorter-term targets. A fall below $23.78 for two days in a row would signal this run may need a moment before trying to test again.

JBH yearly chart

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JBH monthly chart

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Source: Both charts, Saxo Bank
 
Earnings this week

Monday: Teva Pharma, Sotheby's, Hertz Global, Rackspace, Liberty Broadband, SolarCity, InvenSense, International Flavors and Fragrances
Tuesday: Disney, Electronic Arts, Nuance Communications, Planet Fitness, Norwegian Cruise Lines, Nokia, Dean Foods, Credit Suisse, Soda Stream, Lumber Liquidators
Wednesday: Macy's, Wendy's, Nissan, Toyota, Allianz
Thursday: Kohl's, Nordstrom, Shake Shack, Nvidia, Party City, Ralph Lauren
Friday: Honda Motor, JC Penney, Brookfield Asset Management

Broker upgrades and downgrades

- Sky Network TV (SKT): Cut to underperform vs neutral at First NZ
- Westfield Corp. (WFD): Cut to neutral vs buy at UBS


Open positions
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Open orders

See views on Apple, Disney here

AUDUSD had the biggest weekly loss since the first week of 2016, breaking below the previous double top level of 0.7380 and fing the support level just above 0.7330 which is the 50% retracements between the January low 0.6826 and the April high 0.7834.

Last Friday’s decline was driven by dovish Reserve Bank of Australia statements as inflation outlook was lowered. The interim resistance level is 0.7380 while the next resistance level should be 0.7450.

AUDUSD monthly chart
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Source: Saxo Bank

AUS200.I

After AUS200 broke below 5,200 on Friday’s early morning open, it made a sharp reversal to rally 100 points. The resistance level 5,300 is expected to be broken today and a daily close above this level would signal further continuation of the upward momentum in the near term.

Weak US payroll numbers seemed to have boosted the sentiments of the stock indices as the chance of the next month’s rate hike plunged down to 8%. Crude oil is also regaining strength on the back of the announcements that the Saudi Arabia’s oil minister would be changed.

AUS 200 monthly chart

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Source: 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 Adam Courtenay

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch their daily morning call on Periscope at 0945: #SaxoAPAC.

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