The ASX200 opened higher with the big miners, banks and Telstra leading the charge, while energy and healthcare did the dragging. At the start, the benchmark was up 0.4% at 5491. BHP was up 1.1%, Rio 0.6% and Westpac – the best of the big four banks – was 0.9% higher. Telstra was up 1.3%.
US stocks slipped Friday after a slightly weaker-than-expected jobs report
. The Labor Department on Friday said the US economy added 156,000 jobs in September. That fell slightly below expectations, but many analysts said it wasn’t weak enough to challenge the prevailing narrative that the Federal Reserve will raise short-term interest rates by December.
Federal funds futures, used by investors to place bets on central bank policy, showed a roughly 66% chance of a rate increase by year-end, little changed from the previous day’s 63%, according to CME Group data.
Steady dividend-paying stocks led the weekly declines, as more investors warmed to the idea that higher interest rates are likely before the end of the year.
For the week, the S&P 500 utilities sector dropped 3.8%, and the real-estate sector, made up mostly of real-estate investment trusts that pay steady distributions to investors, tumbled 5.3%.
The yield on the 10-year Treasury note
rose to its highest level in more than four months on Thursday. On Friday, it ticked lower to 1.734%, from 1.741% on Thursday. Bond yields fall as prices rise.
The price of US-traded oil on Thursday rose above $50/barrel to its highest level since June. On Friday, oil dropped 1.2% to $49.81/barrel after comments from the Russian energy minister dampened hopes for a broader agreement on production cuts. Still, crude gained 3.3% during the week. The last time US-traded crude oil ended a week at or above $50/barrel was on July 17, 2015, when it ended at $50.89/barrel. The following week, oil fell $3.07, or 6%.
Commodity-linked materials and industrials companies were the biggest decliners Friday. Traders said the drop was fairly expected because of the general lack of conviction around oil’s recent gains.
Ahead of the US stock market opening, investors had been jittery after sharp swings in sterling. Sterling was volatile in European trading. It had dropped as low as $1.1819 during early Asian trading in just minutes. By late New York trading, it had recovered some of those losses to be down 1.4% against the dollar at $1.2435, its lowest late New York level since May 1985.
The Stoxx Europe 600 index
dropped 0.9% Friday. London’s export-heavy FTSE 100 index, which tends to move counter to the British currency, advanced 0.6%, the only major European stock market with a positive move. The Dax dropped 0.74% while the CAC lost 0.67%.
The selloff in sterling followed a week of headlines that brought the UK’s pending exit from the European Union back into focus. British Prime Minister Theresa May had announced a date to begin the UK’s divorce process from the European Union last weekend.
Market participants said the decline in the pound was accelerated by computerised trades at a time of low liquidity, as the pound broke through levels that likely triggered automatic sell orders. A recent increase in algorithmic trading and declining participation of investment banks in the market contributed to the volatility, analysts said, pointing to similarities with previous swift drops in currency markets earlier this summer.
Source: Bloomberg, TradingFloor.com
Local markets and commodities
- Bank of New York Australia ADR Index +0.7%, BHP Billiton ADR +0.8% to $A23.30 equivalent, in line with last Sydney close, Rio Tinto ADR -0.1% to $A43.71 equivalent, 16% discount to last Sydney close
- Gold futures for delivery in December, was trading just above $1,250 before the nonfarm payroll numbers data was released, the lowest since June 8. The precious metal struggled to hold onto its initial gains and after a volatile day with more than 23 million ounces changing hands ended the week more than 5% lower, barely holding onto $1,250/ounce.
- Prices posted their biggest weekly slump in three years after hawkish comments from multiple Fed officials ignited concern that the central bank will soon raise US interest rates. Gold stocks in Toronto edged 0.74% higher on Friday. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
- WTI fell below $50/barrel after Russia cast doubt over a deal any time soon with Opec. Brent crude settled down 58 cents, or 1.1%, at $51.93/barrel on Friday, up more than 85% from a 12-year low in January. Earlier in the day, it hit $52.84 cents, three cents short of a one-year high.
- Opec may have agreed a cut, but it has said little about how reductions will be shared by members. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore slipped 0.2% to $54.40/tonne. The government of Australia forecasts the price of iron ore will fall below $50/tonne next year amid a flood of low-cost supply from large producers, and a slowdown in China's property market. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
- Three-month copper on the London Metal Exchange ended 0.4% higher at $475/tonne. Copper prices could be pressured as Chinese financial markets reopen today after a week-long holiday, analysts said. LME nickel closed down 0.2% at $10,230 as traders shrugged off news that Indonesia could export up to 15 million tonnes of nickel ore in 2017 if it amends a ban on unprocessed ore exports introduced in 2014.
- Zinc rose 0.2% to $2325, lead closed up 1.1% at $2076, while tin ended 0.5% lower at $20,000/tonne. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- Reece (REH): Trades ex-dividend
- AMP (AMP): Company considering quota share deal to reduce earnings volatility: AFR
- Bendigo & Adelaide Bank (BEN): Says share purchase plan opens October 10
- Insurance Australia Group (IAG): Says off-market share buy-back VWAP market price set at $A5.5127
- Macquarie (MQG): UK said to favour firm to acquire Green Bank: Sunday Times
- BHP (BHP): Says Olympic Dam underground operations have recommenced some work
- Nine Entertainment (NEC): Said to sell ANC stake as soon as this week: AFR
- Virgin Australia (VAH): Sells five-year notes
- Fortescue (FMG), Rio Tinto (RIO): Top shipper sees sub-$50 iron ore as China property flashes red
- Graincorp (GNC): Australia wheat crop seen at 28.6mt in 2016-17: INTL FCStone
- Kingsgate (KCN): Mineral ore reserves est. down 0.95mln oz vs 2015
- Newcrest (NCM), Evolution (EVN), Northern Star (NST), Saracen (SAR), Regis Resources (RRL), Resolute Mining (RSG), St Barbara (SBM): Gold bulls flee at fastest pace since May on US rate outlook
- Watpac (WTP): Hires advisory firm Luminis to deal with biggest holder Besix: AFR
- Woodside (WPL), Worleyparsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil declines after Russia sees no deal with OPEC next week
Broker upgrades and downgrades
- Bank of Qld (BOQ): Cut to sell vs neutral at UBS
- Estia Health (EHE): Cut to hold vs buy at Shaw & Partners
- Magellan Financial (MFG): Raised to outperform from neutral at Credit Suisse
Stock to watch: Woodside Petroleum (WPL)
Woodside Petroleum (WPL) rallied 13% in the last two weeks on the back of the strong crude oil prices but it is now trading at a huge resistance level $A30 which coincides with the 2016 high. Furthermore, this level acted as a key support level back in 2011-12, therefore we see a shorting opportunity as crude oil seems to have found a resistance level at $50.
Source: Saxo Trader
AUS200 and AUDUSD
Despite the hawkish comments from some of the Federal Open Market Committee voting members, US dollar weakened as the nonfarm payroll number fell short of the forecast 171,000. The dissenting voters – George and Mester – maintained their optimistic views on the rate hike indicating the job numbers were promising. We expect the US dollar to retrace from the recent rally as the 10-year bond yield also seems to signal reversal price actions. The resistance level would be 0.76 handle for AUDUSD
but further weakness from US dollar could push AUDUSD higher.
Source: Saxo Trader
continued to remain resilient last week as it traded above the previous resistance level 5,436 which appears to have become the support level. The trading volume could be thinner than usual as both Japan and US are closed due to a public holiday. The major focus would be on the second US presidential debate at midday.
Source: Saxo Trader. Create your own charts with SaxoTrader; click here to learn more
Today's information sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
– Edited by Gayle Bryant
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