The local market was pulled down at the open by losses in casino operator Crown. AUDUSD opened the new week at 0.7618, 1.5% higher than last Thursday's low, boosted by strength in commodities and expectations for a shallow rate hiking cycle in the US.
A 10% plunge in Crown's share price followed reported raids on the company's offices in China. Photo: iStock
- Gains in financial shares lifted stocks on Friday in the wake of better-than-expected earnings reports from three big US banks. Financial stocks in the S&P 500 rose as much as 1.5% after J.P. Morgan Chase, Citigroup and Wells Fargo reported earnings that beat analysts’ estimates, then pared those gains to end the day up 0.5%. Some investors and analysts said Friday’s reports provided an encouraging picture of the lenders’ health, though they weren’t strong enough to offset broader concerns about the slow pace of economic growth or challenges posed to the financial sector by low interest rates.
- Investors are hoping for a rebound in corporate profits, which are projected to fall for the sixth consecutive quarter, according to analysts polled by FactSet. Weak earnings from Alcoa and gene-sequencing company Illumina helped send stocks lower earlier in the week.
- The Dow Jones Industrial Average rose 39.44 points, or 0.2%, to 18138.38. The S&P 500 inched up 0.43 point, or less than 0.1%, to 2132.98 and the Nasdaq Composite gained 0.83, or less than 0.1%, to 5214.16. Major indices posted their second successive week of declines, with the blue-chip index falling 0.6%, while the S&P 500 slipped 1% and the Nasdaq lost 1.5%. The VIX dropped to 16.12.
- Citigroup rose 14 cents, or 0.3%, to $48.61. J.P. Morgan lost 22 cents, or 0.3%, to 67.52 and Wells Fargo slipped four cents, or less than 0.1%, to 44.71. The KBW Nasdaq Bank Index of large US commercial lenders advanced 0.5%. The lenders’ earnings come as many investors expect the US Federal Reserve to nudge up interest rates by year-end, which could boost bank profits by increasing the gap between what they pay on deposits and what they charge on loans. Federal funds futures, used by traders to place bets on central-bank moves, now point to a roughly 69% chance of a rate rise by December, according to CME Group data. Nevertheless, some analysts said they don’t expect interest rates to climb quickly, and banks’ profits are likely to remain pressured.
- US retail sales also managed to meet analysts’ expectations, increasing 0.6% in September from the previous month, the Commerce Department said on Friday. Retail sales are a key gauge of consumer spending, which has been a main driver of the US’s economic growth. US government bonds weakened, with the yield on the benchmark 10-year Treasury note rising to 1.792%, from 1.739% Thursday. Yields rise as prices fall.
- The Stoxx Europe 600 rose 1.3% on Friday, with banks climbing 2.1%. One of the biggest gainers was London-based Man Group, one of the world’s biggest hedge-fund firms. Its shares were up 14% in London after it reported an increase in funds under management and announced the purchase of real-estate investment manager Aalto Invest Holding AG.
- Investors’ expectations of higher interest rates have pushed up the US dollar, which gained 2.1% against the euro and 1.2% against the yen over the past week.
- A weaker yen was a boon for the Japanese Nikkei Stock Average, which closed with a 0.5% gain. Asian stocks more broadly had a small rebound after losses earlier in the week spurred by lackluster Chinese trade data. Data released Friday, however, showed that Chinese producer prices turned positive for the first time since 2012, an encouraging sign for economic activity.
Source: Bloomberg, TradingFloor.com
- Monday: Bank of America, IBM, Netflix, United Continental, Charles Schwab, JB Hunt Transportation, Celanese, Hasbro
- Tuesday: Goldman Sachs, BlackRock, Johnson and Johnson, United Health, Philip Morris, Comerica, Domino's Pizza, Harley-Davidson, Kansas City Southern, Intel, Yahoo, Intuitive Surgical, Pinnacle Financial
- Wednesday: American Express, Morgan Stanley, US Bancorp, M&T Bank, eBay, Abbott Labs, Halliburton, St. Jude Medical, Tupperware, Supervalu, Unifirst, Tractor Supply, SLM, Citrix, Canadian Pacific Railroad, Northern Trust
- Thursday: Microsoft, Verizon, Travelers, Union Pacific, Bank of NY Mellon, Walgreens Boots Alliance, Illinois Tool Works, E*Trade, Dunkin Brands, American Airlines, Alaska Airlines, Pulte Group, Fifth Third, KLA-Tencor, Advanced Micro
- Friday: Daimler, General Electric, Honeywell, McDonald's, Manpower
- Bank of New York Australia ADR Index little changed, BHP Billiton ADR down 0.2% to A$22.28 equivalent, 1.2% discount to last Sydney close, Rio Tinto ADR down 0.2% to A$41.64 equivalent, 18% discount to last Sydney close.
- Gold futures for December delivery slid 0.2% to settle at $1,255.50, after earlier gaining as much as 0.2%. Bullion for immediate delivery was little changed. Gold has slumped this month against the backdrop of a firmer dollar and a drumbeat of commentary from Federal Reserve officials that higher US borrowing costs are needed. The probability that the Fed will raise rates before the end of this year rose to 65%, up from 52% a month ago. Meanwhile, holdings in exchange-traded funds increased to the highest since 2013. Assets in gold-backed ETFs rose 1.94 metric tons to 2,050.3 tons as of Thursday, data compiled by Bloomberg show. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
- Oil prices fell slightly on Friday as traders balanced a stronger dollar and another increase in the US oil rig count against expectations that more Opec talk of output cuts will keep crude above $50 per barrel. Brent settled down 8 cents, or 0.2%, at $51.95 a barrel. For the week, it closed flat. WTI ended down 9 cents at $50.35. It rose about 1% on the week. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore for Jan. delivery on Dalian Commodity Exchange up 2.7% to close Friday at 438.5 yuan/ton, highest since Aug. 25. Spot iron ore advanced 0.61% to 57.28. Rising Chinese steel production and disruptions to domestic iron ore trade may support iron ore imports in the fourth quarter. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
- Copper for delivery in three months fell 0.8% to settle at $4,675, capping a second straight weekly decline. The metal is down 0.6% for 2016. Copper posted a second week of losses after Aurubis AG, Europe’s top refined producer of the metal, signaled weak outlook for next year. Aluminium and tin declined, while zinc, nickel and lead rose on the LME. Suspensions of Philippine nickel mines over environmental concerns have underpinned a rally in nickel which climbed 2.5% this week. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- BHP (BHP): Says Samarco restart “not assured”, Telegraph reports
- Crown Resorts (CWN): Affirmed at BBB by Fitch; off rating watch
- Fantastic (FAN): Steinhoff offer of A$3.50/share looks consistent with strategy, Exane says
- Macquarie Group (MQG): National Grid said to pick Macquarie, Fosun bids as CPPIB exits
- OceanaGold (OGC): World Bank arbitration panel grants $8m award in favor of El Salvador
- Deloitte Access tips property to be the 'worst investment'
AUS200 and AUDUSD
5,500 is existing as a valid resistance level in AUS200
so far this month while the support level is intact at 5,400. Therefore, unless we see a clear break out of this range, further sideways price actions are likely in the near term. The financial sectors are showing resilience but the materials have been under selling pressure and could remain weak as copper is selling off.
AUS200 daily chart
As the US Treasury bond
yield is regaining strength, the US dollar strengthened against the major currencies except the commodity currencies such as AUD and CAD. Since AUDUSD
rebounded off the uptrend (from the Jan 16 low) last week, it continues to extend gains as the AU 10-year bond prices (XT) are struggling below a key support level of 97.75, which acted as a key resistance level in the past.
AUDUSD daily chart
Source: All charts, Saxo Bank. Create 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
Saxo Capital Markets (Australia) Pty Ltd | A part of Saxo Bank Group
ABN 32 110 128 286 | AFSL 280372
Level 25, 2 Park Street SYDNEY NSW 2000
Phone: +61 (2) 8267 9000 | Fax: +61 (2) 8267 9050
Please visit our website at: http://www.saxomarkets.com.au
The daily outlook is brought to you by Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286, AFSL 280372 (Saxo Capital Markets), in association with TradingFloor.com which is the property of Saxo Bank A/S, the parent company of Saxo Capital Markets. TradingFloor.com is a social trading facility offering clients of Saxo Bank Group access to in-depth market news, commentary, analysis and much more.
The content of the daily outlook should not be considered as a ‘personal’ or specific investment advice catered for your specific need, objectives or financial situation, or be construed as an express or implied promise, guarantee or implication by Saxo Capital Markets that clients will profit from the strategies expressed or that losses in connection therewith can or will be limited.
None of the information contained in the daily outlook constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. Saxo Capital Markets; TradingFloor.com shall not be responsible for any loss arising from any investment based on any forecast or other information contained in the daily outlook. Past performance is not a reliable indicator of future performance. Information contained in this daily outlook may have previously been distributed to; and acted upon; by other clients and persons who have shown interest in Saxo Capital Markets, as well as internal affiliates/employees of Saxo Capital Markets. Any trade ideas or positions contained herein relating to products or services offered by Saxo Capital Markets may be inconsistent to trades/positions entered into by Saxo Capital Markets and/or its affiliates. Further, any information contained may consist of opinions and views of the ‘Sales Trading Desk’ as a team, however does not reflect the ‘specific’ opinion of Saxo Capital Markets.
Trades in accordance with the information contained in the daily outlook, especially, but not limited to, leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the daily outlook do not occur as anticipated. Prior to making any investment or entering into any transaction, you should carefully consider your financial situation and consult your independent financial expert in order to understand the risks involved and ensure the suitability for you of any investment or transaction decision you enter. Any information or opinions in this material are not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be unlawful. Please refer to our Combined Financial Services Guide & Product Disclosure Statement available via www.saxomarkets.com.au. Please also consider whether acquiring or continuing to hold financial products is suitable for you, prior to trading and investing.
If you would like to unsubscribe from the Daily Outlook, please reply ‘Opt Out’ to this email with your Client ID.
SAXO CAPITAL MARKETS (AUSTRALIA) PTY LTD
LEVEL 25, 2 PARK STREET SYDNEY NSW 2000 AUSTRALIA