Article / 06 December 2015 at 23:32 GMT

Today's Trade: ASX200 gains on Wall St rally, but miners sputter

Trading Desk / Saxo Capital Markets
Australia
  • The S&P/ASX200 made an early gain, and followed Wall Street rise on Friday
  • Iron ore prices have fallen again, and Opec has kept crude output levels high
  • The resources sector is likely to impose a ceiling on S&P/ASX200 gains
  • While the AUDUSD rebounded after its post-nonfarm payrolls fall, it looks fragile

By Saxo Capital Markets Australia


Overnight and early trading
  • The S&P/ASX200 soared at the open; it was up 1.34% to 5,220.60 at 1030 AEST (2330 GMT), taking its lead from a rally on Wall Street.
  • US stocks Friday to end a tumultuous week after a strong U.S. jobs report cleared the way for the Federal Reserve to raise interest rates.


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While copper and other metals prices have firmed, iron ore prices have taken a tumble, so the top iron ore miners are likely to keep any S&P/ASX200 rise in check. Photo: iStock


  • The Dow Jones Industrial Average rose 369.96 points, or 2.1%, to 17847.63, for its biggest increase since Sept. 8. The S&P 500 rose 42.07, or 2.1%, to 2091.69, while the Nasdaq Composite rose 104.74, or 2.1%, to 5142.27.
  • Friday’s surge only narrowly tipped the Dow back into positive territory for 2015, a year that has experienced large swings. The Dow is up 0.1% so far this year and rose 0.3% this past week.
  • Falling oil prices (WTI down 2.7%) led the S&P 500’s energy-company index to lose 0.5% - down 19% for the year now.
  • The widely anticipated US data showed a larger-than- forecast 211,000 increase in November U.S. payrolls (vs 200,000 est).
  • The 298,000 gain a month earlier that was bigger than previously estimated. The jobless rate held at 5%, a more than seven-year low.
  • All 30 Dow components rose. The biggest gainer, Apple, advanced $3.83, or 3.3%, to $119.03.
  • The rate-sensitive financial sector gained 2.7% and helped lead Friday’s rally. J.P. Morgan shares rose 2.09, or 3.2%, to 67.89.
  • The Stoxx Europe 600 fell 0.4% Friday after falling 3.1% Thursday—its biggest daily loss since August. The Dax fell 0.34%, the FTSE was down 0.59% & the CAC lost 0.33%
  • ECB President Mario Draghi sought to reassure investors Friday. The central bank would “no doubt” step up stimulus measures if needed, Draghi said at an Economic Club of New York event.
  • Earnings boosted some stocks in the STOXX 600. British builder Berkeley Group topped the index, soaring at the close, near 7.5% after it reported a rise in first half sales and declared an interim dividend.
  • Swedish medical technology group Elekta ended 4.4% higher after it reported second-quarter core earnings above market forecasts.
  • Volkswagen-owned Audi announced that Ulrich Hackenberg, an engineer suspended as part of the emissions scandal, would leave the management board. Volkswagen chief executive Matthias Mueller will become supervisory board chairman. Volkswagen shares rose sharply on the news, however pared to close up 1%.
  • Insurer Axa finished over 3% higher after UBS raised its price target for the French firm's stock. This comes after Axa promised higher dividends after it won approval for a capital model it proposed under new European Union rules French supermarket chain Carrefour ended 1.7% up after its chief executive said that trading was "good" last month and the Paris terror attacks only briefly weighed on sales, according to Reuters.
Local markets
  • Bank of New York Australia ADR Index +0.8%, BHP Billiton ADR +0.9% to A$18.04 equivalent, 0.6% premium to last Sydney close, Rio Tinto ADR -0.2% to A$43.27 equivalent, 2.5% discount to last Sydney close.
  • Gold jumped the most since April as traders took long view on rates: Gold futures for February delivery gained 2.2% to settle at $1,084.10/oz on Comex. Prices touched $1,045.40 on December 3, the lowest since 2010. Newmont, the top US gold producer, jumped 7.7% as the S&P 500 Index advanced 2.%. Barrick Gold, the world’s top producer, surged 6.6% in Toronto. While a government report showing gains for US jobs reinforced expectations that the Fed will raise rates this month, bullion investors saw past the headline numbers. The underemployment rate crept higher, reflecting a rise in the number working part-time for economic reasons, one of Fed chair Janet Yellen’s favorite measures of labour-market slack. That spurred hope for gold bulls that the pace of tightening will be slow. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
  • Oil dropped after Opec signalled it would maintain production levels that are near records. Opec is committed to production of about 31.5 million barrels a day, Nigeria’s Minister of State for Petroleum Resources and Opec President Emmanuel Ibe Kachikwu said in Vienna after the group’s meeting. Ministers may gather again before June if prices keep falling, he said. West Texas Intermediate crude for January delivery dropped $1.11, or 2.7%, to close at $39.97 a barrel on the New York Mercantile Exchange. It declined 4.2% last week. The volume of all futures traded was 22% above the 100-day average. Brent for January settlement slipped $0.84, or 1.9%, to end the session at $43/barrel on the London-based ICE Futures Europe exchange. It decreased 4.1% this week. The European benchmark crude closed at a $3.03 premium to WTI. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore prices for immediate delivery to China's Tianjin port dropped 2.2% to $39.40 a tonne, the lowest ever recorded by price assessor The Steel Index, which goes back to 2008. Prior to TSI's records and ahead of the spot-based system that followed the annual pricing era, it was the weakest since 2005, according to data compiled by Goldman Sachs. Iron ore prices fell 7.4% for the week, their steepest slide since declining almost 8 per cent in early July. Rio Tinto iron ore chief executive Andrew Harding reaffirmed on Friday the price drop towards long-term averages shouldn't be a shock whilst Fortescue director Peter Meurs said prices were going to have some struggles for some time. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
  • Copper futures gained last week for the first time since October after a report showed US employers added more jobs than forecast in November, boosting demand prospects. Copper futures for March delivery added 0.9% to settle at $2.079/pound on Comex, capping the first weekly gain since October 9. Stockpiles of copper tracked by the London Metal Exchange dropped to 237,625 tonnes, the lowest since January. Copper for delivery in three months on the LME climbed 1.2% to $4,612 a ton ($2.09 a pound). Lead, nickel, tin and zinc also advanced in London. Aluminium rose 3.9% last week, the biggest such increase since May. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
  • Asciano (AIO): Extends maturities of A$1.3b syndicated loan; Qube (QUB) said to explore revised offer for Asciano with PEP: AFR
  • Healthscope (HSO), Ramsay Health (RHC): China’s Luye buys Australian hospital operator in expansion push
  • M2 (MTU), Vocus (VOC): New Zealand commerce commission approved merger
  • Nine Entertainment (NEC), Fairfax Media (FXJ), Seven West Media (SVW), Southern Cross Media (SXL), Ten Network (TEN): Govt set to loosen media regulation: Australian
  • Rio Tinto (RIO): CEO has interest in buying copper assets: AFR
  • Spotless (SPO): Says announcement on revised outlook were made promptly
  • Telstra (TLS): Telstra Retail Group Executive Karsten Wildberger has resigned; Australia said in talks to sell NBN to telcos: AFR
  
Broker upgrade
  • JB Hi-Fi (JBH): Raised to buy vs neutral at UBS

Broker downgrade
  • None today

Data points

Monday:
  • AUS: ANZ Job Advertisements m/m (1130 AEST)
  • JPN: BOJ Gov Kuroda Speaks
  • GBP: BOE Gov Carney Speaks: Due to testify before the European Parliament Committee on Economic and Monetary Affairs, in Brussels
Tuesday:
  • JPN: Current Account, Final GDP q/q
  • AUS: NAB Business Confidence (1130 AEST)
  • CNY: Trade Balance
  • GBP: Manufacturing Production m/m, Industrial Production m/m
  • EUR: ECOFIN Meetings
  • US: JOLTS Job Openings
Wednesday:
  • AUS: Westpac Consumer Sentiment (10:30am), Home Loans m/m (11:30am)
  • JPN: Core Machinery Orders m/m, M2 Money Stock y/y
  • CNY: CPI y/y, PPI y/y (12:30pm), M2 Money Supply y/y + New Loans (10th-17th)
  • US: Crude Oil Inventories,
Thursday:
  • AUS: MI Inflation Expectations (11am), Employment Change & Unemployment Rate (1130 AEST)
  • CHF: Libor Rate, SNB Monetary Policy Assessment & SNB Press Conference (1930 AEST)
  • GBP: MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate, Asset Purchase Facility, MPC Asset Purchase Facility Votes
  • US: Unemployment Claims, Import Prices m/m
  • EUR: German Buba President Weidmann Speaks: Due to deliver a speech titled "A central bank's take on improving the euro area stability" at the Bank of Portugal, in Lisbon
Friday:
  • EUR: Targeted LTRO
  • US: Core Retail Sales m/m, PPI m/m, Retail Sales m/m, Core PPI m/m, Prelim UoM Consumer Sentiment, Business Inventories m/m, Prelim UoM Inflation Expectations
Saturday:
  • CNY: Industrial Production y/y, Fixed Asset Investment ytd/y, Retail Sales y/y

Watch for AUDUSD weakness

The initial reaction of the AUDUSD on the solid nonfarm payroll number (211,000 versus 201,000) was negative, as it dropped 50 pips. But it quickly reversed to test the October high at 0.7380, which is also 38.2% Fibonacci retracement of the May high of 0.8162 and the September low of 0.6894.

The double top appears to have formed and unless we see a genuine break out above this level 0.7380, we may start to see some signs of weakness.
 
AUDUSD tests highs
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Germany 30 index (GER30.i)

The 5,120 level proved to be a strong support level as the AUS200 rebounded on the back of the positive leads from the US markets as both S&P500 and Dow Jones rallied to recover all of the Thursday’s losses. The key resistance levels for AUS200 are 5,184 and 5,165 as these have been previous support levels in the last two weeks. Meanwhile price moves for the GER30 look very interesting, as it closed at the downtrend line near 10,850, which is the 50% retracement level between the April top 12,400 and September low 9,300.

Germany 30 index (GER30.i) trend.

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

– Edited by Robert Ryan

Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

For more on forex, click here.

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch our daily morning call on Periscope at 0945am: #SaxoAPAC




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