Today's Trade: ASX turns positive after weak start
- Policy makers appeared to dial back the tough tone on trade
- Stock-trading volumes low in New York, with just 6.2 bn shares in play
- Australia’s S&P/ASX 200 share index has moved up 0.3%
By Saxo Capital Markets
Overnight and early trading
The ASX 200 has turned positive after a poor start, tracking US share index futures.cin early trade at a 2-week high of 5824.4 after falling the same margin at the open.
Markets appear optimistic about China’s President Xi Jinping's statement on trade with the US.
US Stocks inched higher overnight as policy makers appeared to dial back the tough tone on trade that rocked markets at the end of last week.
Major indices powered higher for the much of the session, with the Dow Jones Industrial Average gaining as much as 440 points, before paring most of their gains in the final hour of trading.
As market volatility has roared back in the past two months, big moves - in both directions - have become common at the end of trading sessions.
Investors were spooked just ahead of Monday’s closing bell by headlines that federal investigators had searched the office and home of Michael Cohen, President Donald Trump’s longtime lawyer, but the indices held on to slight gains.
Another possible reason for the big swings: Stock-trading volumes were particularly low Monday, with just 6.2 billion shares changing hands across the New York Stock Exchange and Nasdaq, compared with the year-to-date average daily volume of 7.4 billion shares.
Monday marked the third quietest day of trading this year and the lowest trading volume since February 23, according to the WSJ Market Data Group.
Healthcare and technology stocks powered Monday’s rebound, sending the Dow up 46.34 points, or 0.2%, to 23,979.10. The S&P 500 added 8.7 points, or 0.3%, to 2613.16, and the Nasdaq Composite rose 35.23 points, or 0.5%, to 6950.34.
All three indexes had fallen more than 2% Friday as investors worried that escalating tariffs between the US and China could lead to policies that threaten global economic growth.
Investors said a softer stance by Trump administration officials on rhetoric threatening to impose new tariffs on China led to the slightly brighter tone in the market. They noted that the penalties aren’t imminent and there is time to work out a deal.
Analysts also attributed some of Monday’s improved risk sentiment to news that North Korea confirmed its readiness to discuss denuclearisation of the Korean Peninsula with the US.
As of Friday, 53 S&P 500 companies had issued positive earnings guidance for the quarter, which would mark the highest number since at least 2006, according to FactSet.
Guidance has been particularly strong in the technology sector, even as technology shares have fallen sharply in the past month.
The technology group in the S&P 500 was one of the biggest winners on Monday, advancing 0.8%, a positive sign to some that shares of companies that had led broader US stock indexes higher for months could regain their footing and help markets rebound.
Information sources: Bloomberg, TradingFloor.com, WSJ.com, CNBC
Local markets and commodities
- S&P/ASX 200 Index futures unchanged at 5,793. Futures relative to fair value suggest little early change.
- Bank of New York Australia ADR Index is up 0.2% to 263.4, BHP Billiton ADRs are unchanged at A$28.32 equivalent, a 1.2% discount to last Sydney close, Rio Tinto ADRs are up 0.8% to A$66.13 equivalent, a 10.0% discount to last Sydney close.
- Gold prices rose overnight as the US dollar turned lower, but caution over the prospect of a potential escalation in the China-US trade stand-off, upcoming US data and US Federal Reserve meeting minutes kept prices in a range. Gold futures for June delivery settled up 0.38% at $1,341.20 per ounce. The U.S. dollar index slipped against a basket of currencies and global equities rose as the government played down fears of a trade war with China, though traders remained cautious.
- Measures of 60-day historical volatility for gold and palladium futures are now at their the highest in about a year. Volatility in silver is also marching higher. Gold futures have gained more than 2% this year as Trump’s policies, including recent announcements on import tariffs, spur concerns that a trade war may erupt between China and the US, derailing global economic growth. Gold stocks in Toronto lost 0.62% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
- Crude climbed the most in more than two weeks as concerns eased that the US and China will engage in all-out trade war. West Texas Intermediate for May delivery climbed $1.36 to settle at $63.42/barrel on the New York Mercantile Exchange. Brent for June settlement rose $1.54 to end the session at $68.65/b on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $5.22 premium to June WTI. Worries over the exchange of punitive tariffs between the US and China added to concerns that oil is piling up at storage tanks in America’s biggest crude distribution hub in Oklahoma, and that production from shale fields is on a relentless rise to record levels. That led the US benchmark crude to dip below $62/b last week, after touching a high of more than $66/b the week before. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
- Steel and iron ore futures were stronger across Asia, with steel rebar for Oct delivery rising 2.7% on the Shanghai Futures Exchange. Spot iron ore gained 0.6% to $63.95/tonne. Investors were also buoyed by stronger fundamentals, with data released on Monday showing Port Hedland iron ore exports to China were up strongly in March. Traders pushed aside another rise in iron ore inventories in China. Steelhome data shows stockpiles rose 3 million tonnes to 147.6mt last week. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
- Aluminum posted the biggest gain in more than six years and palladium jumped amid concerns that supply may be disrupted after the US imposed sanctions against Russian oligarchs including Oleg Deripaska and his United Co. Rusal. Rusal is the biggest producer of aluminum outside of China. The Moscow-based company also controls about 28% of Norilsk Nickel, which operates some of the richest mines in palladium, platinum, and nickel. Russia is the world’s largest producer of palladium, a precious metal used to curb pollution from gasoline-fueled engines. Aluminum for delivery in three months jumped 4.8% to settle at $2,139/t on the London Metal Exchange, the biggest gain since November 2011. Alcoa surged over 5% to topping gains in the Russell 3000 Materials & Processing Index. On the New York Mercantile Exchange, palladium futures for June delivery climbed 4.2% to $932.50/oz, the biggest rally for a most-active contract in seven months. Copper was up 0.9% at $US6830 a tonne, zinc was down 0.6% at $US3211, lead lost 0.3% to $US2385, tin added 0.6% to $US21,180 and nickel rose 1.2% to $US13,435. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
- In other news: Ex-Dividend: Gowing Brothers; Santos (STO AU): China’s ENN to ‘Cautiously Consider’ Harbour’s Santos Offer; BHP Billiton (BHP AU): Samarco Yet to Begin Restart Work Despite Getting First Permit; Fortescue (FMG AU): Wants Common Sense Approach to U.S.-China Trade Spat; Liquefied Natural Gas (LNG AU): Is in Talks With Possible Buyers for Magnolia LNG: CEO; Platinum Asset (PTM AU): Saw Net Outflow in March After Big Client Cut Holding; Blue Sky Alternative Investment (BLA AU): Largest Holder Sells Shares After Glaucus Report: AFR; Myer Holdings (MYR AU): Said to be Near Appointment of New CEO: Australian
- Amcor (AMC AU): Upgraded to Equal-weight at Morgan Stanley; PT A$14.80
- Appen (APX AU): Upgraded to Buy at Bell Potter; Price Target A$11
- BHP (BHP AU): Is Diversified Mining ‘Benchmark’; SocGen Upgrades to Buy
- Brambles (BXB AU): Reinstated at Morgan Stanley With Underweight; PT A$9
- Fortescue (FMG AU): Upgraded to Overweight at JPMorgan; PT A$5
- Xero (XRO AU): Rated New Outperform at RBC; PT A$45
Heading in to the crude oil inventory numbers this Thursday morning, crude oil (CL) recovered majority of the losses from last Friday.
USDCAD sold off after a BOC survey indicated the business sales outlook improved in the first quarter despite the recent uncertainties surrounding NAFTA deals on tariffs.
The overnight price actions look ultra weak as it failed quickly at 1.28 then it closed below 1.27 handle, however the low of the day coincided with 1.2686 (50% retracement of 2018 low 1.2249 and 2018 high 1.3124).
Last Wednesday, we hinted a bearish bias on USDCAD if we see a daily close below 1.28 thus we remain bearish and look to sell any rallies with stops above yesterday’s intra day high 1.2818.
USDCAD monthly chart
Source: Saxo Bank
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