- The Nasdaq closed above 6000 while assets seen as safe, such as gold, retreated
- Asian markets opened higher following Wall St's lead
- The ASX200 was up 0.8% ahead of today's inflation data
- The euro soared as Macron went through to the second round of France's elections
- Trump is expected to unveil a tax plan today to cut the upper corporate rate to 15%
- The Canadian dollar fell after the US slapped a tariff on imported softwood lumber
By Saxo Capital Markets (Australia)
Overnight and early trading
Asian stocks opened higher after corporate results and hopes of US tax reform boosted sentiment for American equities overnight. The ASX200 was up 0.8% by mid-morning and the index is looking towards 6000.
The US has put a tariff of up to 24% on imported Canadian softwood lumber. Photo: Shutterstock
The Dow Jones Industrial Average jumped more then 200 points as Caterpillar Inc. surged 8% and McDonald’s Corp. rose 5% after reporting results. The yen and gold maintained losses. The Canadian dollar tumbled after Donald Trump slapped an up-to-24% tariff on imported softwood lumber.
Global equities hit an all-time high this month as the US economy continues to show signs of improvement amid better-than-forecast earnings results. US President Donald Trump is expected to unveil a tax plan on Wednesday that would cut the upper corporate rate to 15%. While shares also rallied as European political risk abated, tensions around North Korea continued to simmer. In China, concerns of a crackdown from regulators has left the world’s second-largest stock market trading near a four-month low.
The Dow Jones Industrial Average
rose 232.23 points, or 1.1%, to 20996.12, its biggest one-day gain since March 1. The S&P 500 climbed 14.46 points, or 0.6%, to 2388.61 and the Nasdaq Composite
added 41.67 points, or 0.7%, to a fresh record of 6025.49, closing above 6000 for the first time. Shares of Dow component Caterpillar climbed $7.61, or 7.9%, to $104.42, its largest percentage gain since 201, after the machinery company boosted its forecasts for the year. McDonald’s shares added 7.47, or 5.6%, to 141.70 after the company reported a rise in sales. DuPont rose 2.84, or 3.6%, to 82.21 after the company said sales rose in the first quarter and its pending merger with Dow Chemical was on track to be closed by August.
Surging technology shares have helped the Nasdaq outperform its peers so far this year. The top five contributors to the Nasdaq’s 2017 gains — Apple Inc., Facebook Inc., Amazon.com Inc., Microsoft Corp. and Alphabet Inc.— account for roughly 40% of the index’s advance. The index hit the 6000 milestone 17 years after it reached 5000 during the dot-com era, in a broad rally overnight that was turbocharged by earnings from bellwether companies including Caterpillar Inc., McDonald’s Corp. and biotechnology giant Biogen Inc.
Assets perceived as safe retreated, with gold for April delivery losing 0.8% to $1,265.60 an ounce. Government bonds ticked lower, with the yield on the 10-year US Treasury note
rising to 2.330% from 2.275% on Monday. Yields rise as bond prices fall.
European stocks closed higher, with the Stoxx Europe 600 rising 0.2% for its fifth consecutive session of gains, and France’s CAC-40
Source: Bloomberg, TradingFloor.com
Wednesday: Boeing, Daimler, Fiat Chrysler, Pepsico, United Technologies, GlaxoSmithKline, Anthem, Alaska Air, Northrop Grumman, General Dynamics, Dr. Pepper Snapple, Hershey, Norfolk Southern, State Street, Credit Suisse, Hess, Seagate Technology, Twitter, Nasdaq, Amgen, Paypal, F5Networks, Tractor Supply, Buffalo Wild Wings, Boston Beer, SixFlags, CR Bard, Whiting Petroleum, Suncor
Thursday: Alphabet, Microsoft, Intel, Amazon.com, Raytheon, Baidu, Starbucks, Expedia, Comcast, Bristol-Myers Squibb, Flex, GoPro, Western Digital, Vertex , Sirius XM Radio, Under Armour, American Airlines, Southwest Air, MGM Growth, Generac, Domino's Pizza, CME Group, KKR, Johnson Controls, Union Pacific, UPS, Total, Celgene, Deutsche Bank, Alexion Pharma, Nintendo, AbbVie, Bayer, Air Products
Friday: Exxon Mobil, Chevron, Colgate-Palmolive, Honda Motor, Barclays, UBS, Sony, Synchrony Financial, Spirit Airlines, Autoliv, Sanofi, Spirit Airlines, Goodyear Tire, Calpine, Cabot Oil and Gas, Phillips 66, Weyerhaeuser
- The local market resumed after a holiday yesterday and was higher ahead of CPI data
- Bank of New York Australia ADR Index up 0.5%, BHP Billiton ADR down 0.4% to A$24.12 equivalent, 0.7% premium to last Sydney close, Rio Tinto ADR up 0.6% to A$53.54 equivalent, ~10% discount to last Sydney close
- Gold prices fell overnight as markets grew less concerned that far-right leader Marine Le Pen would win the French presidential election, increasing investor appetite for risky assets such as stocks while denting bullion. Spot gold was down 0.86% to $1,264.22 per ounce. US gold futures for June delivery were down $10.30 to settle at $1,267.20. Business-friendly centrist Emmanuel Macron won the first round of the French vote on Sunday and opinion polls indicated less support for Le Pen. The news had sent bullion prices to their lowest since April 11 in the previous session, at $1,265.90. "We've moved from having multiple numbers of positive drivers for gold last week, when yields were on the defensive and we had multiple geopolitical risks," said Ole Hansen, head of commodity strategy at Saxo Bank. "But now with the French election (first round) behind us, there is a bit of a surge of risk-on coming back to the market. The main worry was a strong performance by Le Pen." Hansen said gold would trade cautiously this week before a Friday deadline for the US Congress to pass a spending bill funding the government through September or risk a government shutdown. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
- Oil pared gains after the American Petroleum Institute was said to report an unexpected US crude inventory gain and gasoline stockpile increase. Crude supplies rose 897,000 barrels last week, according to an API report on Tuesday, people familiar with the data said. That contrasts with the view from analysts surveyed by Bloomberg who said stockpiles probably fell 1.75 million barrels last week, before Energy Information Administration data on Wednesday. Gasoline stockpiles increased 4.45m barrels, the API was said to report, while analysts were looking for a 500,000-barrel advance. West Texas Intermediate for June delivery increased 33 cents to close at $49.56 a barrel on the New York Mercantile Exchange. Futures touched $48.87, the lowest intraday level since March 29. Total volume traded was about 11% below the 100-day average. WTI traded at $49.32 as of 4.52 pm, after the release of the API data. Brent for June settlement rose 50 cents, or 1%, to $52.10 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.54 premium to WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
- Iron ore was slightly lower as last week’s rebound in prices petered out. Steel and iron ore futures in China fell close to 1% on speculation that additional supply was about to hit the market. Spot iron ore lost $0.46 to 66.07. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
- In BHP’s quarterly production report: BHP cuts copper, coal output targets and narrows iron ore forecast. BHP states that Escondida is returning to full capacity this month; sees Escondida FY output 780k-800k tons, saw 1.07mt. Cuts FY17 met coal output target to 39m-41m tons from 44m tons in wake of Queensland cyclone; affirms energy coal output target 30mt. Narrows FY17 iron ore output target to 231m-234m tons vs previous target 228m-237m tons; sees WAIO output 100% basis 268m-272m tons vs prev. 265m-275m tons.
- The price of copper rose to a one-week high on Tuesday, buoyed by sinking global supply levels. Copper for July delivery settled up 1% to $2.5910 a pound on Comex, its highest close since April 17. Copper’s gains came after a week in which the metal’s total exchange inventory level moved lower. Copper prices gained despite weak Chinese March imports and reports —according to ING — that the Indonesian government had permitted Freeport McMoRan to export 1.1m tons of copper concentrate from its Grasberg mine through February 2018. That said, workers at Grasberg still plan to begin strikes in early May in protest against layoffs. Investors in both base and precious metals will be keeping a close watch on any further details about President Trump’s tax plan, and what might develop into a US government shutdown in the coming week. Further French polling data and US GDP data — due Friday — may also play their part in moving metals markets. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- A2 Milk (ATM): Raises FY17 revenue target to ~NZ$525m vs est. NZ$511m (seven analysts, range NZ$490m to NZ$525m): Bloomberg data; Also Watch: Bellamy’s (BAL), Blackmores (BKL), Bega Cheese amid commentary on strong demand from CBEC into China
- Alumina (AWC): Alcoa pares aluminum surplus estimate for 2017
- BlueScope Steel (BSL), Vocus Group (VOC): Bluescope may enter MSCI Index, Vocus could be deleted: Instinet
- Boral (BLD), James Hardie (JHX): Trump tariffs on Canadian lumber may raise cost of home construction in US
- Boss Resources (BOE): Teranga gold reports two new gold discoveries at Golden Hill
- Crown Resorts (CWN): Wynn’s new Macau casino helps deliver forecast-topping profit
- Henderson Group (HGG): Annual meeting scheduled after market closes
- Senex (SXY), Origin Energy (ORG): Senex said to eye Origin upstream gas business: Australian
- Seven Group (SVW): China helps make Caterpillar great again as sales view brightens; NOTE: Is authorized dealer in West Australia, NSW, North China
- Ten Network (TEN): Hires KordaMentha to advise on loan: The Australian
Broker upgrades and downgrades
- Bendigo & Adelaide Bank (BEN): Raised to equal-weight at Morgan Stanley
- BHP Billiton (BHP):Cut to sell at Goldman, PT 1,100p
- MYOB (MYO): Rated new buy at Goldman Sachs, PT A$4.25
- OZ Minerals (OZL): Raised to buy at APP Securities, PT A$9
- Regis Resources (RRL): Cut to sell at Morningstar
USDCAD and US dollar index
After US President Trump announced a new import tariff on Canadian softwood lumber, USDCAD
rallied hard to hit a fresh high of 1.3626, which corresponds to the highest level since November last year. Stops looked to have been triggered above 1.3575, which acted as a double top in Q4 2016 and also 50% retracements between the 2016 high of 1.4690 and 2016 low of 1.2460. Weekly close above 1.3575 should signal further upside towards 1.3838.
The US dollar index (DX) plunged below the uptrend (from May 2016) as the euro
soared on the back of the French election outcome, where Macron is seen as a strong favourite in the second round. Furthermore DX also has broken the 200-day moving average and the recent March low of 98.67, thus downside momentum is expected to persist towards the next support level at 97.85 if the previous uptrend turns into a resistance line.
US dollar index chart
All charts: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more.
– Edited by Susan McDonald
For more on forex, click here.
Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
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