Article / 23 July 2015 at 1:21 GMT

Today's Trade: ASX under pressure on commodity price falls

Trading Desk / Saxo Capital Markets
  • The oil and gold sell-off is likely to hit exploration and mining stocks
  • The S&P/ASX 200 showed an early decline
  • The stronger US dollar has chipped away at base metal prices
  • The weak AUDUSD is likely to test key support soon

By Saxo Capital Markets (Australia)

Overnight and early trading

Australian equities opened weaker today on lower commodity prices and overnight falls in overseas markets. The S&P/ASX 200 was down 0.22% at 11:15am, to 5,602.50. The oil and gold sell-off is likely to hurt the miners and exploration stocks.

Stocks lost ground across Europe and the US as gold, oil and Apple dented sentiment going into the European open. Mining stocks in Europe were burnt again as the price of oil and gold continued their sell-off.

In the US, investors continued to dump technology stocks, spooked by disappointing results from Apple and Microsoft Corp.

Share prices for explorers are likely to feel the impact of weaker global crude oil prices.
Photo: iStock

Other overnight and international news:
  • Germany’s DAX dropped 0.72% to 11520.67, France’s CAC-40 lost 0.47% to 5082.57 and the FTSE tanked 1.5% to 101.73
  • Anglo American, BHP Billiton and Glencore were among the worst performers on the FTSE 100, all closing more than 5% lower. Anglo American hit its lowest level in 13 years on Wednesday
  • European companies that do business with Apple also performed poorly, with Dialog Semiconductor and German semiconductor maker Infineon closing down around 5.2% and 6.3% respectively [Apple’s earnings, which were published after the US market close Tuesday and showed sales of the iPhone had missed some analysts’ estimates, led to a fall in global technology stocks]
  • One of the biggest decliners on the pan-European index was ARM Holdings, which designs the basic chip technology found in more than 95% of all smartphones, including the iPhone. Shares closed over 6% lower
  • Danske Bank rallied 3.2% as it reported better-than-expected earnings
  • The Dow Jones Industrial Average lost 68.25 points, or 0.4%, to 17851.04 while the S&P 500 fell 5.06 points, or 0.2%, 2114.15. The Nasdaq Composite was down 36.35 points, or 0.7%, to 5171.77 [The Nasdaq briefly fell more than 1% in the open before trimming losses]
  • Note that even with last night’s pullback, stocks remain near record highs. The S&P 500 is 0.8% away from its record close of 2130.82, and the Nasdaq is 0.9% below its closing high of 5218.86
  • The CBOE Volatility Index (VIX) trading near 12
  • Apple closed ~ 4.29% lower, after plunging more than 6% on the open. Shares tumbled almost 7% to below its 200-day moving average in after-hours trade on Tuesday. The firm's fourth-quarter revenue forecast fell short of forecasts and it missed some targets for iPhone sales
  • Shares in Apple also exceeded their 30-day average trade volume of 43.77 million during morning trade
  • Boeing Co. lifted 1% as its sales rose 11% in the June quarter, helping its profit top analysts’ expectations
  • Baker Hughes shares fell 3.9% after a report said Halliburton Co.’s planned acquisition of Baker Hughes could encounter antitrust issues. Halliburton shares slipped 0.8%-
  • Gold futures declined 1.1% to $1091.40/oz, extending its losing streak to 10 sessions, its longest since 1996. Crude-oil futures fell 3.3% to $49.19 a barrel, notching their 16th decline in the past 20 sessions
US earnings

  • Caterpillar, Eli Lilly,, General Motors, Comcast, McDonald's, Starbucks, Visa, Capital One, Bristol-Myers Squibb, Union Pacific, Roche Holdings, Dow Chemical, Celgene, Credit Suisse, Dr. Pepper Snapple, Alaska Air, Southwest Air, Dunkin Brands, Pulte, Raytheon, Freeport-McMoran, Stryker, Nasdaq OMX, Kimberly-Clark, Stryker, Pandora, Flextronics, Ruby Tuesday

  • Biogen, Johnson Controls, State Street, Xerox, Moody's, Cabot Oil and Gas, Spirit Airlines

Local markets
  • Bank of New York Australia ADR Index -3.2% with BHP Billiton ADR -5%, biggest fall since Nov. 28 and Rio Tinto ADR -2.4%
  • Spot gold fell 0.6% to $1,094 and with lows of $1,086 as it failed to close above $1,100 for the second session in a row. Our desk released a short trade over Newcrest Mining late yesterday as we see further slides in gold to result in a falling NCM share price. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Newcrest (NCM) 4Q output showed that gold output topped estimates and copper coming in at low end of range
  • Crude oil was weaker overnight with WTI and Brent down 1.8% and 0.8% to $49.23 and $56.05 respectfully. WTI was sold off an the EIA printed weekly US oil inventories rose 2.5 million barrels vs market expectation of a 2 million barrel decline. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore gave up 0.7% to trade at $51.76 as Chinese rebar steel prices fell 1%. Crude steel output fell 3m/t in June to 136m/t in comparison to the same month last year. In addition to this, BHP fourth-quarter production report showed they topped analyst expectations in iron ore, adding to the global market over supply. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were down across the board as a stronger US dollar chipped away at prices. Copper and nickel both fell 1.8% as concerns over top end consumption in China holds a negative sentiment. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
  • BC Iron (BCI): 4Q output expected
  • BHP (BHP): FY production looked strong, 2016 challenging with impairments likely: Bernstein
  • Drillsearch (DLS): 4Q output expected
  • Fortescue (FMG): 4Q output expected
  • Ten Network (TEN): David Gordon likely to be new chairman: AFR
  • Reserve Bank of New Zealand cut its cash rate by 25bps to 3%. NZDUSD jumped 100bps on the news as the market had in part priced in a 50bps drop. With a dovish tone in its notes, we expect a further rate cut before the end of the year.
  • NAB 2nd Quarter Business confidence is out today at 11:30am AEST.
  • 2nd Quarter CPI data in Australia was released yesterday, showing moderate growth of 0.7% q/q. Rising fuel prices contributed 0.3% to the figure. Annual growth is putting along at 2.3% with a 6month annualised rate of 2.5%. Thus, right in the middle of the RBA’s 2-3% inflation target.

Chart for thought

The Commonwealth Bank of Australia, one of the nation's big four banks, fell short of $100 and formed a head and shoulder to make a breakout below the key support level at $90 this year. We have noticed that CBA is shaping up a rising wedge since it broke below $80 in early June. This reversal pattern indicates the potential for a temporary retracement which provides selling opportunities as the continuation of the downtrend is expected in the near term.

An ideal entry to the short side would be below the bottom trend line should it break while the stop loss needs to be placed above the top side of the rising wedge and also preferably above the gap at $90.57. Profit target sits at $80, however we expect CBA to fall further down towards $73.17.

Note that a rising wedge is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows.

CBA share price trend

Source: Saxo Bank

Broker upgrade
  • DUET (DUE): Raised to buy vs neutral at UBS VS Cut to equal weight vs overweight at Morgan Stanley

Broker downgrade
  • Energy Developments (ENE): Cut to neutral from outperform at Credit Suisse

Data points
  • JPN: Trade Balance (9:50am)
  • EUR Spanish Unemployment Rate
  • UK Retail Sales m/m, BBA Mortgage Approvals
  • US Unemployment Claims
  • CNY: Markit Flash Manufacturing PMI (11:45am)
  • French, German & EUR Flash Manufacturing / Services PMI
  • US Flash Manufacturing PMI & New Home Sales

AUDUSD to test support

USDCAD: Since the key level of 1.3000 being tested, the retracement of USDCAD was a lot less than we anticipated. Despite being onside 85 pips at one stage, our short trade on USDCAD was stopped out by 30 pips as the crude oil fell 1.8%. USDCAD is expected to extend the gains as it made a new high and closed above 1.300 yesterday.

Yesterday, the Aussie CPI figures were broadly in line with the forecast, but RBA governor Glenn Stevens indicated the possibility of the further rate cut. The AUDUSD continues to trade with choppy price actions near 0.74 handle, but we expect the next support level 0.7300 is likely to be tested soon.

AUS200.i under pressure

Yesterday the AUS200 sold off sharply led by the losses from big banks and BHP, snapping a six-day rally. We expect another weak day ahead as the materials sector is expected to be under selling pressure on the back of the falling commodity prices such as iron ore, copper and oil. The previous pivot level of 5,671 is now the resistance level and the next support level is at 5,564


Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more.

Sources: AFR, SMH, CNBC, BBG, WSJ,

– Edited by Robert Ryan

For more on forex, click here.

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets


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