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Article / 20 September 2016 at 0:52 GMT

Today's Trade: ASX200 edges down post-glitch, markets await BoJ, Fed

Trading Desk / Saxo Capital Markets
Australia
  • Local market edges down at the open after yesterday's outage
  • Markets await Bank of Japan and US Federal Reserve decisions
  • The US dollar falls against most major peers
  • Housing starts the last significant data before Fed unveils decision
  • Gold has biggest gain in almost two weeks 
  • Oil advances as dollar decline increases investor appetite for commodities



By Saxo Capital Markets (Australia)


Overnight and early trade

After Monday's technical glitch that brought down the ASX for most of the trading day, the S&P/ASX 200 index opened today down five points, or 0.09%, to 5,289.8, while the broader All Ordinaries index dipped 7.2 points, or 0.13%, to 5,386.5.

asx
The head of the ASX was forced to apologise for the worst Australian stock outage since 2011. Photo: iStock

The dollar dropped with Treasuries as traders braced for key policy decisions in the US and Japan.
   
The greenback fell against most major peers, while 10-year Treasury yields rose two basis points as investors largely ruled out an interest-rate hike from the US Federal Reserve this week and economists were split on whether the Bank of Japan will boost stimulus. The decline in the dollar bolstered investor appetite for raw materials from crude oil to gold. Equities in Europe and Asia climbed, while the S&P 500 Index failed to hold on to its rally as a slide in technology stocks overshadowed gains in bank shares. Nickel surged.
     
Financial market volatility has picked up over the past two weeks on concern policy makers are contemplating the limits of the measures they’ve used to support growth. Since boosting benchmark rates last December, the Fed has refrained from a subsequent hike amid mixed global economic data. Traders now see only 20% odds of action this Wednesday, down from more than 40% in late August. Meanwhile, the BOJ and the European Central Bank are studying the effectiveness of their own stimulus programs.
   
A report on housing starts due on Tuesday is the last significant piece of US economic data before the Fed unveils its decision. Figures last week offered contrasting evidence on the state of the economy, with the cost of living rising more in August than economists projected, while consumer confidence this month held at its lowest level since April. Confidence among home builders rose to an 11-month high in September, data on Monday showed.
     
The US dollar weakened by 0.2% to $1.1175 per euro and fell 0.4% against the yen to 101.93.
     
Hedge funds and other large speculators cut net bullish futures positions on the dollar for the week ended September 13, according to data from the Commodity Futures Trading Commission. Bets that the dollar would rise outnumbered bearish positions by 113,195 contracts, down from 119,066 in the previous period.
     
The US central bank meets the same day as policy makers from the BOJ. Predictions for what the Japanese central bank will do on Wednesday range widely, complicating the job of currency traders trying to position for the event.
     
The overnight Interbank yuan rate surged the most since January in Hong Kong amid speculation China’s central bank is intervening to fend off bearish bets on the local currency. Colombia’s peso and South Africa’s rand led gains among global peers.
     
Benchmark Treasury 10-year yields rose to 1.71%, based on data compiled by Bloomberg, after gaining two basis points last week.
       
The extra yield, or spread, that investors get for holding Italian 10-year bonds over German securities of a similar maturity declined on Monday for the first time in eight days, after a rally that pushed German yields back below zero.

MSCI’s gauge of global equities climbed 0.5% after a two-week slide as optimism the Fed will delay raising rates rekindled risk demand.

The S&P 500 closed little changed at 2,139.12, after earlier gaining as much as 0.7%. Wells Fargo & Co. and JPMorgan Chase & Co. advanced, while Apple Inc. led losses among technology companies following an 11% surge last week.

The CBOE Volatility Index (VIX) traded near 15.3.

General Motors Co. rallied after Morgan Stanley upgraded the stock to the equivalent of buy from neutral.

The Stoxx Europe 600 Index climbed 1% after a retreat last week made it diverge the most relative to US shares since early December. The rebound in commodities spurred gains in companies from BHP Billiton Ltd. to Anglo American Plc.
   
Hungarian stocks advanced as S&P Global Ratings awarded the country investment-grade status, while Taiwan’s benchmark index rose the most in a year Monday.
   
Asian index futures were mixed, with contracts on Australia’s S&P/ASX 200 Index down at least 0.1% with those on the Kospi index in Seoul and the FTSE China A50 Index. Nikkei 225 Stock Average futures were little changed in Chicago with Japanese markets to resume on Tuesday following a holiday.
     
West Texas Intermediate crude for October delivery, a contract which expires Tuesday, climbed 0.6% to close at $43.30 a barrel on the New York Mercantile Exchange. The more-active November contract rose to $43.86.

Oil still retreated from the day’s highs as a tanker returned to Libya’s Ras Lanuf export terminal to load oil after clashes halted what will be the first overseas crude shipment from the site since 2014. Opec may call an extraordinary meeting if ministers reach consensus at informal talks next week, Secretary General Mohammed Barkindo said on Sunday, according to the Algerian Press Service.

Gold futures for December delivery gained 0.6% to settle at $1,317.80 an ounce on the Comex in New York, their biggest gain since September 6. Aggregate futures trading was 38% below the 100-day average for this time.

Nickel led gains among industrial metals, jumping 4.4%, the most for two months, after the Philippines said it may suspend more nickel mines as part of a nationwide audit due for release this week.

Source: Bloomberg, TradingFloor.com

Local markets

  • Bank of New York Australia ADR Index up 0.9%, BHP Billiton ADR up 1.7% to A$20.23 equivalent, 0.6% premium to last Sydney close, Rio Tinto ADR up 3%, the most since July 26, to A$40.87 equivalent, ~12% discount to last Sydney close.
  • Gold had its biggest gain in almost two weeks as traders pulled back bets on further declines before meetings of the US Federal Reserve and Bank of Japan this week. Gold futures for December delivery gained 0.6% to settle at $1,317.80 an ounce on Comex, marking the biggest gain since Sept. 6. Aggregate futures trading was 38 percent below the 100-day average for this time. On Friday, prices settled at $1,310.20, the lowest since June 23. A decline in the dollar on Monday boosted demand for gold as an alternative asset. The two most-actively traded bullion options on Monday were calls giving holders the right to buy the metal at higher prices. While they’re accumulating options, investors are still not piling into futures, concerned that a surprise move this week will trigger a sell-off. Open interest in gold futures fell for a seventh straight session on Friday, the worst streak since May. Even money managers are backing away, paring their net-long positions by the most in more than three months. Silver futures gained on the Comex in New York, while platinum and palladium futures advanced on the New York Mercantile Exchange. Gold sector in Toronto rose 0.71%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil advanced as the dollar’s decline against its peers increased investor appetite for commodities. West Texas Intermediate for October delivery, which expires on Tuesday, climbed 27 cents to close at $43.30 a barrel on the New York Mercantile Exchange. The more-active November contract rose 24c to $43.86. Total volume traded was 15% below the 100-day average. Brent for November settlement advanced 18c, or 0.4%, to $45.95 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $2.09 premium to WTI for November delivery. The tanker Seadelta returned to Libya’s third-biggest oil port to resume loading 781,000 barrels of oil for shipment to Italy, Nasser Delaab, an inspector at Harouge Oil Operations, said on Monday by phone. Another vessel, the Syra, would arrive in Ras Lanuf later on Monday to ship 600,000 barrels of crude to Italy, he said. Opec may call an extraordinary meeting if ministers reach consensus at informal talks next week, Secretary General Mohammed Barkindo said, according to the Algerian Press Service. Next week’s Opec gathering will be a “meeting of consultation and not of decision-making”, unlike the group’s meeting in Oran, Algeria, in 2008, when it agreed to cut production, Barkindo said on Saturday, according to Algeria’s official news agency. Opec members are close to reaching an agreement on how to stabilise the market, Venezuelan President Nicolas Maduro said on Sunday at a press conference after speaking to his counterparts from Iran and Ecuador. Maduro said he hopes an accord can be reached by the end of the month. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore lost $0.29 to $55.68 after being shut on Friday. Meanwhile, Rio Tinto is becoming more optimistic on the outlook for commodities demand in China after recent data pointed to a pick-up in the construction market. Rio is looking to rebound from its worst profit since 2004 as a slowdown in China hurt commodity prices, eroding earnings and forcing Rio to trim its dividend payment. The country makes up about half of the world’s raw-materials demand and also accounts for half of Rio’s revenues. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Nickel jumped the most in two months after the Philippines said it may suspend more mines as part of a nationwide audit that’s due for release this week. Glencore Plc rallied over 6% overnight. Nickel has climbed 15% in 2016 as the Philippines shutters sites for failing to meet environmental standards, threatening supplies from the nation, the top supplier of the mined metal. The government could tell more mines to stop operating, Environment and Natural Resources Secretary Gina Lopez said in an interview with Bloomberg on Monday after similar comments to Reuters. Nickel for delivery in three months jumped 4.4% to settle at $10,150 a metric ton on the London Metal Exchange, marking the biggest gain since July 12. The commodity lost 6.2% last week, the most since November, after the Philippines postponed the announcement of its audit result. Copper fell from its highest in almost a month as Anglo American restarted operations at a mine in Chile after a strike. Three-month copper on the London Metal Exchange closed down 0.2% at $US4776 a tonne, after hitting its highest in more than three weeks on Friday at $US4794.50 a tonne. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • ASX (ASX): Worst Australian stock outage since 2011 has CEO saying sorry
  • Trades ex-div.: Cleanaway Waste Mgmt (CWY), Sigma Pharma (SIP)
  • Evolution (EVN): Says 60% taken up under retail entitlement offer
  • Fonterra (FSF): Beingmate wins China govt approval for JV
  • Gateway Lifestyle (GTY): FY underlying profit A$44.8m; Adj. net income est. A$44.7m (6 analysts); Ebitda A$41.1m vs est. A$49.7m (6 analysts)
  • GrainCorp (GNC): To conclude AGC pact after withdrawal of CBH proposal
  • Henderson (HGG): To reopen frozen UK property fund in mid-October
  • Scentre Group (SCG): Seeking buyers for Auckland WestCity Mall
  • Suncorp (SUN): Considers subordinated debt issue: AFR
  • Sydney Airport (SYD): Scheduled to release August sales, rev. data
  • TPG Telecom (TPM): Scheduled to release FY results; NOTE: Adj. net income est. A$346.1m (10 analysts): Bloomberg data

Broker upgrades and downgrades

  • Alacer Gold (AQG): Raised to neutral vs underperform at Macquarie
  • BHP Billiton (BHP): BHP, Glencore, Antofagasta cut to neutral at Haitong
                                                                       
Stock to watch

In early August this year, Harvey Norman (HVN.xasx) traded above $4.80, breaking out of a seven-year rounding bottom formation. The recent reactions since its reporting have not been promising, therefore HVN.xasx may continue to fall down to the break-out level at $4.80 where we may explore for long opportunities.

Harvey Norman weekly chart
 
1
 
AUS200 & AUDUSD

Both the trading volume and the price actions of AUS200 were extremely restricted as the ASX experienced a technical glitch so it shut early yesterday. US stock indices also looked choppy as we wait for Thursday morning’s FOMC meeting. We would continue to sell near the resistance level at 5,300 which is 50% retracement from the September high of 5,440 and the September low of 5,150.
 
AUS200 daily chart
2
 
AUDUSD pushed higher as the US dollar pulled back but it failed to stay above Tuesday’s high of 0.7567 which is expected to be an interim resistance level, although the upside momentum seems to still exist in the near term. The focus for today would be monetary policy meeting minutes and quarterly HPI at 1130 local time.
 
AUDUSD chart
3
Source all charts: 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 Susan McDonald

Today’s Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch the recording of this week’s Macro Monday Call at 1030 AEST.
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