Today's Trade: ASX200 falls early despite US rally on Xi comments

• US markets rally after Xi Jinping soothes trade war concerns
• Crude oil rallies 3.3%
  
• Facebook shares rise after Mark Zuckerberg’s testimony before Congress
  
• Investors await potential US action after suspected chemical weapons use in Syria
  
• Gold prices rises as US dollar weakens 
  
• Local market falls at the open

By Saxo Capital Markets (Australia)

Overnight and early trading

The ASX200 fell dramatically at the open before recovering, after a good performance by commodities overnight and rally on Wall St.

Major US stock indices climbed on Tuesday, with the Dow Jones adding more than 400 points, as remarks from Chinese President Xi Jinping soothed concerns about a trade war that had rattled markets in recent weeks.

The gains were broad-based, with nine of 11 sectors in the S&P 500 marching higher. Energy stocks in the index led the way, rising 3.3% for their best day since Nov. 30, 2016, as the price of crude oil rallied 3.3% to $65.51 a barrel. The tech sector also helped drive the broader index, rising 2.5% as investors responded positively to Facebook Chief Executive Mark Zuckerberg’s testimony before Congress about the social-media company’s handling of personal-user data.

The Dow Jones Industrial Average rose 428.90 points, or 1.8%, to 24408.00, after climbing as much as 532 points earlier in the session. The S&P 500 rose 43.71 points, or 1.7%, to 2656.87, while the technology-focused Nasdaq Composite climbed 143.96 points, or 2.1%, to 7094.30. All three indices have climbed for five of the past six trading sessions.

Boeing, which has become an unofficial proxy for trade fears, was the best performer in the Dow, rising $12.35, or 3.8%, to $334.83.

Meanwhile, shares of Facebook added 7.11, or 4.5%, to 165.04 — their largest percentage gain in almost two years.

Airline companies were one of the few drags on the market as American Airlines gave a guidance update that failed to please investors. Its shares fell 2.36, or 4.7%, to 47.46, while United Continental slumped 93 cents, or 1.4%, to 67.59, and Southwest Airlines dropped 72 cents, or 1.3%, to 54.13.

Gains for US stocks came as the Stoxx Europe 600 climbed 0.8%. Asian stocks also rose after the Chinese president pledged to significantly broaden market access this year.

Speaking at the Boao Forum, an annual economic summit, Xi pledged Beijing’s commitment to further economic liberalization as well as promising greater intellectual property protection and increased access to China’s financial and manufacturing sectors for foreign companies.

While he made no direct reference to President Donald Trump or China’s simmering trade tensions with the US, his conciliatory tone was taken well by the market.

While the speech succeeded in alleviating fears of a bruising trade war between the US and China, it may not have drawn a line under the recent tit-for-tat tariffs exchanged between the two superpowers.



Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC

                                                                                    

Local markets

• Bank of New York Australia ADR Index is up 3.4% to 272.2, BHP Billiton ADRs are up 5.0% to A$29.50 equivalent, a 2.1% premium to last Sydney close, Rio Tinto ADRs are up 4.3% to A$68.47 equivalent, a 9.3% discount to last Sydney close
  
• Gold prices rose overnight, hitting their highest in nearly a week as the US dollar weakened and investors awaited potential US action against suspected use of chemical weapons in Syria. President Donald Trump on Monday promised quick, forceful action in response to a deadly suspected chemical weapons attack in Syria, appearing to suggest a potential military response. 
• Gold was also supported on the weakening US dollar following Chinese President Xi Jinping's promise to cut import tariffs eased concerns about a trade conflict. Rising for a fourth straight session in the longest run since January, holdings in all bullion-backed exchange-traded funds tracked by Bloomberg extended their ascent to the highest since 2013. Gold, the third-largest commodity-linked ETF, had almost 177 million shares outstanding as of Monday, the most since the Frankfurt-listed fund started trading in 2007. Spot-gold prices have rallied about 2.9% this year, outperforming the S&P 500 Index of equities as the dollar weakens. Gold stocks traded flat in Toronto overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
• Oil advanced above $64 a barrel after Chinese President Xi Jinping’s conciliatory tone in a closely watched speech raised hopes that US-China trade tensions may ease, lifting risk assets around the world. West Texas Intermediate for May delivery rose as much as $1.41 to $64.83 a barrel after rising 2.2% to $63.42 on Monday. Total volume traded on Tuesday was about 72% above the 100-day average. Brent for June settlement was up $1.18 at $69.83 a barrel on the London-based ICE Futures Europe exchange, after advancing 2.3% in the previous session. The global benchmark crude traded at a $5.38 premium to June WTI. Oil has struggled after touching a high of more than $66 a barrel in March as investors worry that tit-for-tat tariff increases between the US and China could hurt wider economic growth and curb energy demand. Record US crude production is also threatening efforts by the Organization of Petroleum Exporting Countries and its allies to curtail output and drain a global glut. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
• Iron ore rose strongly, with iron ore for delivery in April rallying over 2.1%. Concerns over growing supply were also eased after comments from Fortescue Metals. Fortescue said that global iron ore miners are not looking to grow supply of iron ore into China due to high inventories and a well-supplied market. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
• Base metals extended their run with aluminium and copper rising, helped by the latest round of US sanctions on Russian oligarchs and their companies. Copper gained 1.7% to end at $US6945 per tonne in closing rings, the highest since March 16. The copper market will slip into a deficit in the 2020s after being in balance for rest of this decade, Rio Tinto's copper chief said on Tuesday. Zinc rose 1% to finish at $US3243, lead added 0.3% to $US2392, tin fell 1.4% to $US20,875 while nickel climbed 1.9% to $US13,695. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
• OOh!Media (OML AU), HT&E (HT1 AU): Advisers Macquarie Capital Said to Look at HT&E on Behalf of oOh!Media: The Australian
• Ansell (ANN AU): Drops Suit Against Reckett Over Durex Condoms Patents
• Insurance Australia (IAG AU): Scheduled to host investor day
• Oil Search (OSH AU): Exxon’s PNG LNG Is Said to Offer 1st Cargo After Quake Shutdown
• Rio Tinto (RIO LN): Reviewing Sanction Implications on Aluminum Business
• South32 (S32 AU): May Have to Reapply for Cerro Matoso Project in Columbia: AFR
• Infratil (IFT AU): Expects to Deliver FY18 Result at Top End of Guidance

Broker upgrades and dwongrades

• Anatera (ANR AU): Downgraded to Hold at Wilsons; PT A$1.75
  
• BHP (BHP AU): Upgraded to Buy at Deutsche Bank
  
• Millenium Minerals (MOY AU): Cut to Accumulate at Hartleys Ltd; PT A$0.26
  

AUDCAD

All of the major commodity currencies (AUD, CAD and NZD) continue to show strength as they extended gains for two consecutive days. Since spiking above the 1.02 handle last month, AUDCAD has fallen 4.6% to make a fresh two-month low of 0.9771 yesterday but this week’s price actions seem to suggest a potential reversal is on its way. The last two days' candlesticks shows an inverted umbrella (also known as Gravestone Doji) which indicates a bullish reversal pattern if it forms in a heavy downtrend; thus Double Gravestone Doji should indicate selling momentum is nearing an end and AUDCAD is oversold. 

AUDCAD chart