Article / 16 November 2017 at 23:32 GMT

Today's Trade: ASX200 gets a boost from Wall St

Trading Desk / Saxo Capital Markets
Australia

  • US stocks gain the most in two months after lower house passes tax bill 
  • Wal-Mart shares surge 11% after the company posts strong sales growth
  • ASX200 opens strongly; up 0.5% in early trade
  • The Australian dollar is still below 0.76 against the US dollar


By Saxo Capital Markets (Australia)

Overnight and early trade

After a strong session on Wall St overnight that was driven largely by the Republican tax bill passing in the House of Representatives, the local market jumped at the open. The ASX200 was up 0.5% in early trade.

US stocks gained the most in two months amid a rally in technology shares and rising odds of corporate tax cuts. Treasuries fell and the dollar traded little changed.

Soaring Wal-Mart shares and the passage of a tax-overhaul bill in the House of Representatives helped US stock indices log their biggest gains since September.

Thursday’s moves reflected what has powered much of this year’s rally: improving profits and sales at American companies, plus the prospect that corporate tax cuts could boost earnings even further.

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Shares in Wal-Mart surged 11% after the company posted strong sales growth, thanks in part to its e-commerce. Photo: Shutterstock

After the S&P 500 posted its steepest-one day decline since September a day earlier, investors snapped up shares across several sectors of the stock market on Thursday. Some of the biggest gainers: groups that have struggled this year, such as consumer-staples companies; and technology stocks, major contributors to this year’s gains.

The Dow Jones Industrial Average added 187 points, or 0.8%, to 23458, while the S&P 500 rose 0.8%. Both indiceslogged their biggest one-day percentage gains since September 11. The Nasdaq Composite rose 1.3%.

Upbeat quarterly reports from Wal-Mart Stores and J.M. Smucker helped drive the consumer-staples stocks in the S&P 500 up 1.6%. Shares of Wal-Mart surged 11% after the company posted strong sales growth, thanks in part to its e-commerce.

Shares of J.M. Smucker added 9.5% after the maker of Folgers, peanut butter and fruit spreads beat analysts’ earnings expectations.

US stock indices hit intraday highs after House Republicans passed a bill to overhaul the US tax code.

The Russell 2000 index of small-capitalization companies added 1.6%. Analysts say they have been tracking the index as a proxy for investors’ expectations for a tax plan since they expect the proposal to benefit smaller, more domestically focused companies.

Earlier this week, investors had been dialing back on risk, citing falling commodity prices, concerns about stress in high-yield debt and uncertainty around prospects for a tax overhaul.

The Stoxx Europe 600 rose 0.8% after seven straight sessions of losses — its longest losing streak in a year.

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

Local markets

  • Bank of New York Australia ADR Index is up 0.5% to 267.5, BHP Billiton ADRs are up 0.3% to A$27.23 equivalent, a 0.2% discount to last Sydney close, Rio Tinto ADRs are up 0.4% to A$62.90 equivalent, a 11.7% discount to last Sydney close
  • Gold prices were steady on Thursday as investors weighed the impact of an expected rise in US interest rates against uncertainty over the direction of fiscal policy. Gold is highly exposed to interest rates and returns on other assets because rising rates lift the opportunity cost of holding non-yielding bullion. Spot gold fell flat $1,278.03 an ounce, having touched a three-and-a-half week high of $1,289.09 on Wednesday. US gold futures for December delivery also touched even at $1,278. Gold has traded in a tight range spanning about $24 in November. Gold stocks in Toronto fell 0.18% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil was little changed, arresting two days of losses, as traders’ certainty over the fate of Opec-led output cuts turned to doubt. Futures hovered around $55 a barrel in New York. Opec leaders haven’t yet convinced Russia that oil-production limits set to expire in March should be extended, people with knowledge of the matter said this week. In the US, drillers boosted weekly crude output to the highest in more than three decades, fanning fears of a persistent global glut. Oil surged to 28-month high last week as internal strife rocked Saudi Arabia and simmering conflicts threatened to boil over across the Middle East. Now, all eyes are on the end of this month, when the Organization of Petroleum Exporting Countries and allies such as Russia and Mexico will meet in Vienna to discuss the fate of self-imposed production caps intended to erase a worldwide oversupply of crude. West Texas Intermediate for December delivery was down 8 cents to $55.25 a barrel on the New York Mercantile Exchange. in New York. Total volume traded was about 17% below the 100-day average. The price has fallen 2.5% so far this week. Brent for January settlement slid 17 cents to $61.70 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $6.26 to the January WTI contract. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • Iron ore prices showed signs of recovery after several days of selling. While spot prices eased slightly, futures prices on the Dalian Exchange rose sharply after the People's Bank of China injected cash into the financial system. The move seemed to improve sentiment across most markets, with steel futures also gaining. Data had little impact on prices. China’s iron ore output rose 3.9% in October to 120.1m tonnes. Spot iron ore fell 0.4% or $0.27 to close at $61.57. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper and most other base metal prices fell on persistent worries over Chinese demand, but losses in aluminium were tempered by expectations that a crackdown on polluting industry in China will cut supply. Nickel was the worst LME performer, hitting a three-week low. Benchmark copper on the London Metal Exchange closed 0.5% down at $US6737 a tonne. LME aluminium dipped by 0.2% to end at $US2102 a tonne. Nickel slid 2.7% to close at $US11,370 a tonne, the weakest since October 27, and zinc fell 0.2% to finish at $US3145. Lead dropped 1.3% to close at $US2403.50 after touching its lowest since October 30 at $US2401.50. Tin added 0.1% to $US19,350. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • Fletcher Building (FBU AU): Head of Building Products to Step Down
  • Lendlease (LLC AU): Annual Meeting Scheduled
  • Santos (STO AU): Seen Luring More Bids After Rejecting $7.2 Billion Offer
  • Slater & Gordon (SGH AU): 45,000 U.K. Consumers Join Volkswagen Lawsuit: Lawyers
  • Virgin Australia (VAH AU): Names Rob Sharp to Lead Australian Ops: AFR
  • Woodside (WPL AU), Oil Search (OSH AU), Origin Energy (ORG AU): Norway’s $1 Trillion Wealth Fund Wants Out of Oil and Gas Stocks; NOTE: Norges Bank Investment Management owns ~1% of each co.
  • Xero (XRO AU): CEO Rod Drury Selling 3 Mln Shares at NZ$31.50/Share

Broker upgrades and downgrades

  • AusNet (AST AU): Downgraded to Neutral at Credit Suisse; PT A$1.85
  • Costa (CGC AU): Downgraded to Neutral at UBS; PT A$6.80
  • Southern Cross Electrical Engineering (SXE AU): Cut to Hold at Argonaut Securities

Aussie calendar

Friday: AGM: ResMed Inc, LendLease Group

AUDJPY & NIKKEI

AUDJPY was forming a descending wedge but it broke the uptrend (from the 2016 low of 72.30) on Wednesday. Intersection of the 200-day moving average and 50% retracement (Jun 17 low 81.77 and Sep 17 high 90.30) were also breached, although the decline seems to have paused at 85.55, which corresponds to the Aug 17 low. While temporary retracement is possible, further downside risk remains intact.

AUDJPY chart
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Since topping out last week, the Nikkei was able to find reason to support prices at the original resistance trendline which starts from 2007. The short-term price action and reaction off this trendline translates to a positive backdrop, and the market should expect continued support here on any selling. We continue to monitor for further gains unless prices fail to maintain territory above this trendline.

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

Source: 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


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