Today's Trade: ASX takes a ride on US confidence
- Chinese economic 'moderation' puts pressure on the Aussie dollar
- ASX underpinned S&P 500 rising 0.8% and closing in on its high
- Qantas shares jump 1.6% to hit nine-year high of $A5.17
By Saxo Capital Markets in Sydney
Overnight and early trading
Australian shares have moved higher on the back of good gains in US indices overnight, with this morning's standout, Qantas, rising above the $5 mark as it reaps the benefit of a recent ratings upgrade from Moody’s.
There have been with gains across most sectors - bar utilities. At 1030 AEDT (0030 GMT), the ASX/S&P 200 rose 0.6% at 5774.7.
Meanwhile stocks in Asia look set to build on gains seen in US trading after private American hiring data bolstered confidence in the economy, sending the dollar higher and bonds lower.
Equity index futures in Japan, Australia and Hong Kong all climbed after the S&P 500 Index and the Dow Jones Industrial Average closed at all-time highs.
The dollar strengthened as companies added more workers to US payrolls in May than forecast.
Among the top performers, carmakers rose following solid auto sales and energy stocks climbed as the price of oil stabilised.
Stocks have edged higher in recent sessions on relatively low trading volumes as the first-quarter earnings season has mostly concluded, leaving investors struggling for a fresh catalyst.
The monthly average of the CBOE Volatility Index, known as Wall Street’s “fear gauge” in May was the lowest since 2006 and the second lowest in history.
Separately, shares of oil-and-gas companies have weighed on major stock indexes so far this week, as US-traded crude oil fell on investor skepticism that production cuts by Opec and other major producers would make a dent in global crude stocks.
The WSJ Dollar Index rose 0.3% while 10-year Treasury yields edged up to 2.217% from 2.198% Wednesday. Yields rise as prices fall.
Speeches from central bank officials largely drove market attention Thursday ahead of meetings of the European Central Bank and Federal Reserve in the coming weeks.
San Francisco Fed President John Williams also played down anxiety over recent weakness in the US inflation rate and expressed confidence that an improving US economy warrants “three or four rate increases” this year.
Source: Bloomberg, TradingFloor.com
- The S&P/ASX 200 Index futures contract rose 0.3%; futures relative to estimated fair value suggest early gain of 0.5%.
- Bank of New York Australia ADR Index -0.2%, BHP Billiton ADR +0.3% to A$23.87 equivalent, 0.6% premium to last Sydney close, Rio Tinto ADR +0.8% to A$55.12 equivalent, ~11% discount to last Sydney close.
- Gold prices pulled back overnight, hurt by a stronger U.S. dollar and better-than-expected jobs data. Gold for August delivery settled down 0.4% at $1,270.10/oz on Comex. Gold shares were down 0.45% overnight in Toronto. According to data from payroll processor Automatic Data Processing and Moody’s Analytics, the US added 253,000 jobs in May, beating expectations of 180,000. This was the fastest pace of hiring at private US employers since 2014, the Thursday data showed. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
- A decrease in crude stockpiles that spurred an early oil rebound wasn’t enough to counter broader market concerns about US production that continues to rise. West Texas Intermediate for July delivery rose 4 cents to settle at $48.32/b on the New York Mercantile Exchange. The contract lost $1.34, or 2.7%, to close at $48.32/b on Wednesday, the lowest level since May 12. Prices fell 2.1% last month.
- Oil slid below $50/b last week after the agreement by Opec and its allies to prolong supply cuts for nine months disappointed some investors hoping for more. While US stockpiles have fallen for eight straight weeks, American production and drilling continues to climb. Brent for August settlement fell 13 cents to $50.63/b on the London-based ICE Futures Europe exchange. The July contract expired Wednesday after dropping $1.53, or 3%, to $50.31. The global benchmark crude traded at a premium of $2.06 to August WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
- Iron ore prices came under renewed pressure as Chinese traders returned from a two day holiday. Steel and iron ore futures fell by over 6% as traders drove liquidated their positions. Coking coal prices were also slightly weaker. Iron ore tumbled 1.8% to $US55.97 a tonne.
- Nickel prices fell for a third straight month in May and hit their lowest since June last year on Thursday at $US8810/tonne. They have fallen 12% this year, the biggest drop among major base metals. Copper prices rose 0.3% to $2.5875/pound in New York, trading at a one-week high whilst three-month LME copper ended the day up 0.3% at $5,699/tonne. LME aluminium closed down 0.1% at $1927/t, tin finished 0.6% higher at $20,450/t and zinc ended the day down 1.2% at $2570/t, and lead 0.4% lower at $2,110/t.
- In other news: Arrium (ARI): Offers received from shortlisted bidders have conditions to be worked through: AFR; BHP Billiton (BHP): Fire reported at Mt Whaleback ore mine; Suncorp (SUN): Unlikely to make decision on future of life insurance unit before August: AFR
USDJPY once again failed to close below the key support level 110.50 (61.8% retracement of Apr low 108.13 and May high 114.37) and this level coincides with both 200 weekly and daily moving average thus we expect USDJPY to extend recoveries.
AUDUSD spiked after solid AU retail sales and CAPEX data but the rally didn’t last long as disappointing Chinese CAIXIN manufacturing PMI caused a sharp sell off.
Overnight strength from US dollar reinforced decline and AUDUSD is now hovering near the uptrend from January low. Tonight’s focus would be on nonfarm payrolls which is expected to be a strong number.
AUDUSD monthly chart
-- Edited by Adam Courtenay
Today’s Trade is compiled by the Sydney trading desk at Saxo Capital Markets