- The S&P 500 slips from an all-time high
- Expectations dwindle for Trump deregulation and tax cuts
- Amazon.com breaches $1,000 a share for the first time
- Oil falls as the market awaits stronger signs Opec-led curbs are having an effect
- UK poll shows Conservative position weakening ahead of election
- ASX200 opens steady, heading towards worst month since January 2016
By Saxo Capital Markets (Australia)
Overnight and early trade
The local market was largely steady at the open after US markets slipped. The ASX200 opened higher by just 0.07% and is on track for its worst monthly performance since January 2016.
Treasuries advanced while Asian equities were poised for a mixed opening after US Federal Reserve
Governor Lael Brainard said soft inflation could cause her to reassess the monetary policy path. Futures on benchmark stock indices in Japan and Australia pointed to slight declines, after the S&P 500 slipped from an all-time high.
A poll in Britain showed Prime Minister Theresa May's lead over the opposition Labour Party dropping ahead of the general election next week. Photo: Shutterstock
US stocks edged lower Tuesday, pressured by declines in banks and oil firms. Major indices traded in a tight range throughout the day, echoing Friday’s quiet session ahead of the long weekend.
US stocks overall have climbed with few large swings so far this year, bolstered by strength in corporate earnings and the US economy. Many investors say they are now trying to gauge how long favorable economic data and relatively low market volatility can last, especially as expectations dwindle for deregulation and tax cuts from the Trump administration.
The Dow Jones Industrial Average fell 50.81 points, or 0.2%, to 21029.47. The S&P 500
slipped 2.91 points, or 0.1%, to 2412.91 and the Nasdaq Composite edged down 7.00, or 0.1%, to 6203.19. The VIX rose 5.81% to 10.38.
Amazon.com breached $1,000 a share for the first time before paring gains to settle up 92 cents, or 0.1%, to $996.70. The firm’s shares, which are categorised as part of the S&P 500 consumer-discretionary sector but are often compared with technology stocks, have climbed 33% in 2017.
Energy was one of the worst-performing sectors in the S&P 500 on Tuesday, falling 1.3%. US crude for July delivery lost 0.3% to settle at $49.66 a barrel. Pipeline operator Kinder Morgan fell 83 cents, or 4.3%, to 18.42, Chesapeake Energy shed 19 cents, or 3.6%, to 5.10 and Devon Energy declined 1.33, or 3.7%, to 34.49.
Bank stocks retreated, with the KBW Nasdaq Bank index of leading US commercial lenders losing 1%.
Government bonds strengthened, with the yield on the 10-year US Treasury note
falling to 2.217% from 2.248% on Friday. Yields fall as bond prices rise.
Moving forward, some money managers say they are concerned that a few sectors of the US economy — such as the auto industry — are flashing warning signs after years of solid performance.
Elsewhere, the Stoxx Europe 600 fell 0.2%, weighed by declines in the shares of banks.
Source: Bloomberg, TradingFloor.com
- Bank of New York Australia ADR Index little changed, BHP Billiton ADR up 0.4% to A$24.09 equivalent, 0.4% premium to last Sydney close, Rio Tinto ADR up 0.8% to A$55.33 equivalent, ~13% discount to last Sydney close
- Gold steadied after setting a one-month high on Monday as rising political uncertainty in Europe stoked safe-haven demand. The metal benefited with the Japanese yen and US Treasuries from a risk-averse mood in global markets. Spot gold touched a one-month high of $1,270.47 before pulling back 0.27% to $1,262.91 per ounce. US gold futures slipped $5.70 to settle at $1,265.70 an ounce as the dollar picked up. Investors were concerned about next week's election in Britain, as well as the prospect of early elections in Italy and worries over Greek debt, which analysts said supported gold and dented stocks. A poll in Britain on Tuesday showed Prime Minister Theresa May's lead over the opposition Labour Party dropping to six percentage points ahead of the general election next week. Gold stocks in Toronto dropped 0.5% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
- Oil fell as the market awaits stronger signs that Opec-led production curbs, extended at a meeting last week, are having an effect. Opec and Russia’s deal to extend output limits through March was met with a selloff as it didn’t include deeper cuts, a plan for the rest of 2018 or a new ally. Saudi Arabia’s Energy Minister Khalid Al-Falih, who sought to reassure markets last week, saying stockpiles will drop faster in the third quarter, met Russian Energy Minister Alexander Novak in Moscow on Tuesday to discuss cooperation between the world’s two top oil exporters. West Texas Intermediate for July delivery settled 14 cents lower at $49.66 a barrel on the New York Mercantile Exchange on Tuesday. There was no settlement on Monday because of the US Memorial Day holiday. Brent for July settlement closed 45 cents lower at $51.84 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $2.18 to WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
- Iron ore prices were unchanged in Asia with Chinese traders out on holidays. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
- Copper edged lower in quiet trade ahead of data on Wednesday that is expected to show a slowdown in Chinese industrial growth. A weaker dollar helped London Metal Exchange copper recoup some of its early losses to finish down $US1.50 at $US5656 a tonne. Three-month aluminium ended down 1.3% at $US1926 a tonne. Zinc finished down 0.5% at $US2625 a tonne and lead fell 0.8% to $US2105. Tin ended up 0.1% at $US20,435 and nickel finished 0.4% higher at $US9115. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- Orica (ORI): Trades ex-dividend
- ANZ Bank (ANZ), Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac (WBC): Aussie bank levy will not have material impact, regulator says
- Automotive Holdings (AHG), AP Eagers (APE), Scentre Group (SCG), Vicinity Centres (VCY), Westfield (WFD): Aussie consumers unhappiest since financial crisis hit retailers
Broker upgrades and downgrades
- Henderson Group (HGGDA): New buy at UBS, PT $35.25; New market perform at KBW, PT $32
- Myer Holdings (MYR): Raised to neutral at Credit Suisse, PT A$0.82
- PSivida (PVA): Climbs in US after Rodman & Renshaw analyst Raghuram Selvaraju initiates coverage at buy
- Super Retail (SUL): Raised to neutral at Credit Suisse, PT A$7.56
- Seek (SEK): Cut to sell at Citi
Stocks to watch
Whilst Commonwealth Bank of Australia (CBA.xasx) reversed off a major 50% retracement level yesterday, National Australia Bank (NAB.xasx) and ANZ fell slightly short of this halfway retracement mark. Perhaps this is what the buyers have been waiting for as positive momentum continued into the close yesterday. The session test ahead is to continue with its gains: We watch for CBA.xasx to settle above the 200-day moving average.
CBA daily chart
NAB daily chart
ANZ daily chart
GBPJPY & NZDUSD
Since the formation of a double top near 148 early this month, GBPJPY has been slumping massively and has now erased half of all the gains from the April rally. There is still scope for further decline towards the next support level of 140.40.
is outperforming other commodity currencies as it has now climbed above the March high of 0.7090. The key resistance level remains at the 0.71 handle where the 200-day MA crosses 50% retracement (Feb high 0.7375 and May low 0.6817), although upside momentum cannot be ruled out.
Source: SaxoTrader. Create your own charts with SaxoTrader; click here to learn more
Today's data 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