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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 12 April 2018 at 0:31 GMT

Today's Trade: ASX200 opens lower amid US-Russia fears

Trading Desk / Saxo Capital Markets
Australia

  • US stocks edge lower overnight amid escalating Middle East tensions
  • Trump tweets that US missiles "will be coming” to Syria
  • US sanctions against Russian individuals and entities ripple through markets
  • US crude climbs 2% to $66.82, US Treasury yields edge down and gold prices rise
  • Facebook's Mark Zuckerberg faces a second day of questions from Congress
  • ASX200 opens 0.3% lower


By Saxo Capital Markets (Australia)


Overnight and early trading


The local market started the day cautiously amid increased global geopolitical tensions. The ASX200 was down 15 points, or 0.3%, at the open.

US stocks edged lower overnight, reversing a recent rebound, as investors parsed escalating geopolitical tensions and the latest gauge of US inflation.

The Dow Jones industrials fell 218.55 points, or 0.9%, to 24189.45. The S&P 500 declined 14.68 points, or 0.6%, to 2642.19, and the Nasdaq Composite fell 25.27 points, or 0.4%, to 7069.03. Major indices posted their largest one-day rise in more than two weeks on Tuesday but remain more than 6.8% off all-time highs hit earlier this year.


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 Trump warned he was willing to challenge Russia directly in launching a military strike against Syrian President Bashar al-Assad’s forces. Photo: Shutterstock


Combined trading volumes on the New York Stock Exchange and Nasdaq were the lowest of the year, signalling that investors continue to remain cautious.

Stocks around the world have seesawed in recent sessions, with analysts pointing to comments on trade from the US and China and mounting tensions with Russia and Syria as sources of market stress.

Some investors worry that trade disruptions or other international conflicts could lead to higher costs for corporations and slower economic growth. That unease comes at a point when some analysts were already anxious about the impact of higher interest rates.

President Donald Trump said early on Wednesday that US missiles “will be coming” to Syria, and warned he was willing to challenge Russia directly in launching a military strike against Syrian President Bashar al-Assad’s forces over an alleged chemical-weapons attack.

Recently announced US sanctions against more than three dozen Russian individuals and entities have also rippled through markets, boosting commodity prices by creating supply uncertainty for metals including aluminum and palladium. Russia is a major producer of both materials.

Investors have been tracking a rise in oil prices, as some think conflicts in the Middle East could hinder output and further support prices. US crude oil climbed 2% to $66.82 a barrel — its highest level since December 2014 — and boosted shares of energy firms for the third straight session.

Investors also were digesting the latest updates on the economy and monetary policy. US consumer prices fell in March due to a drop in gasoline prices, but underlying inflation showed signs of picking up, data showed Wednesday. The consumer-price index fell 0.1% from a month earlier, the first decline since May 2017. Excluding energy and food, consumer prices rose 0.2%, extending a trend of steady growth.

The yield on the benchmark 10-year US Treasury note edged down to 2.790% from 2.799% on Tuesday. Yields fall as prices rise. Gold, another haven asset investors favour when they think markets might turn rocky, added 1.1% and was near its highest level of the year.

Minutes from the US Federal Reserve’s March meeting showed officials signaled greater confidence in reaching their 2% inflation target over the coming year and affirmed plans to continue raising short-term interest rates gradually.

Among individual stocks, Facebook shares added $1.28, or 0.8%, to $166.32 in a third straight session of gains. Chief Executive Mark Zuckerberg faced questions from Congress regarding the firm’s handling of user data for the second straight day.

Netflix shares climbed 5.60, or 1.9%, to 303.67 after JPMorgan Chase analysts raised their price target on the streaming giant to $328 from $285.

Cruise line operator Carnival and toy maker Mattel were also among the S&P 500’s best performers, supporting the consumer discretionary sector. Carnival increased its quarterly dividend and reauthorised its stock repurchase program, and Jefferies analysts upgraded Mattel to hold from underperform.

Shares of Fastenal shed 3.37, or 6.2%, to 51.05 after the maker of fasteners and manufacturing tools posted quarterly earnings that were in line with expectations.

Elsewhere, the Stoxx Europe 600 shed 0.6%, following a mixed performance across Asian markets.


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

                                                                                    

Local markets

  • Bank of New York Australia ADR Index is down 0.2% to 271.7, BHP Billiton ADRs are up 0.7% to A$29.72 equivalent, a 0.9% premium to last Sydney close
  • Gold prices pared gains in aftermarket trading on Wednesday after the Federal Reserve released minutes from its latest monetary-policy meeting. Gold futures closed at $1,360 a troy ounce in regular trading on Comex, which was it highest close since March 26. Fed officials at their meeting last month signaled greater confidence in reaching their 2% inflation target over the coming year and believed the economy would grow faster than its sustainable rate for the next few years, the minutes showed. Gold stocks in Toronto soared overnight, with the sector rallying 2.32%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil surged to the highest levels in more than three years as tensions simmered in the Middle East, signaling optimism that a glut that has crippled the market for years is ending. US crude futures jumped $1.31, or 2%, to $66.82 a barrel on the New York Mercantile Exchange. Brent rose $1.02, or 1.4%, to $72.06 a barrel on ICE Futures Europe. Both benchmarks are at their highest levels since December 2014. More than a year’s worth of production cuts by the Organization of the Petroleum Exporting Countries has helped set the stage for this rally, gradually whittling away at a glut that kept prices low for more than three years. Venezuela’s oil output is also in freefall as the country’s economic turmoil deepens. With the prospect of renewed sanctions against Iran, some analysts and investors say prices are poised to climb even higher. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • Spot iron ore retreated 0.8% to US $64.79  a tonne, reversing early gains, after comments from the China Iron & Steel Industry Association Vice Secretary, General Wang Yingsheng, that the Chinese steel industry could be significantly hit if the US-China trade dispute turns into a fully-fledged trade war. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Aluminum approached a six-year high after top exchanges said they’ll stop accepting the metal from United Co. Rusal, increasing concerns about how the market will replace supplies from the Russian smelting giant hobbled by US sanctions. The metal advanced as much as 3.5% on Wednesday to $2,277.50 a metric ton on the London Metal Exchange. That was just $13 away from the peak in December when it touched its highest since March 2012. Prices settled 2.2% higher in London and have rallied as much as 13% since Thursday, the day before the US sanctions were announced. If the gains had held, that would have been the hottest four-day rally in three decades. Copper on Comex fell 0.6% to $3.1170 a pound. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • AMA Group (AMA AU): Blackstone Set to Buy Group’s Panels Business: AFR
  • ANZ Bank (ANZ AU): N.Z. Life Unit Sale Documents Have Been Sent to Interested Parties: AFR
  • Healthscope (HSO AU): BGH Capital, Bain Capital Said to May Be Circling Hospital Operator: The Australian
  • Infigen (IFN AU): Brookfield takes ~9% Stake in Co.
  • Mineral Resources (MIN AU): Cuts Wodgina DSO Lithium Exports Guidance
  • AfterPay (APT AU): To Improve Identity Checks, Cap Late Fees Amid Increased Regulatory  scrutiny: SMH

Broker upgrades and downgrades

  • HT&E (HT1 AU): Gets Indicative Offer From oOh!Media For Adshel Business
  • AMP (AMP AU): Upgraded to Buy at Morningstar
  • Afterpay Touch (APT AU): Downgraded to Neutral at Goldman; PT A$6.30
  • BT Investment (BTT AU): Upgraded to Buy at Morningstar
  • Rio Tinto (RIO AU): Upgraded to Buy at CLSA
  • Rio Tinto (RIO AU): Downgraded to Sell at Morningstar
  • Sims Metal (SGM AU): Upgraded to Overweight at JPMorgan; PT A$17.20


XAUUSD

Gold rallied 1% as uncertainties escalated over Syrian tensions and the US dollar weakened on the negative US CPI number (down 0.1%) which came out below the expected 0%. The overnight high fell a little short of the 2018 high of 1,366.08 which also has been acting as a major resistance level since 2014. The long-term downtrend has been breached in Q3 last year and a rounding bottom has been forming for the past four years.


XAUUSD chart

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Source: Saxo Bank. Create your own 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


Today’s Trade is compiled by the Sydney trading desk at Saxo Capital Markets.
1y
anatolyvyacheslavoil anatolyvyacheslavoil
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