Article / 02 May 2017 at 2:14 GMT

Today's Trade: ASX200 weighed down by ANZ results

Trading Desk / Saxo Capital Markets
Australia
  • ASX200 opened down on disappointing ANZ results 
  • The Australian dollar was holding at around 0.75 ahead of the RBA rates decision
  • ANZ’s first-half profit rose 23% but missed consensus
  • Oil closed at its lowest in more than a month

By Saxo Capital Markets (Australia)

Overnight and early trading

The local market opened lower after disappointing results from ANZ. The ASX200 was down down 17 points or 0.3% at 5939 in early trade. 

Earlier, stocks in Japan were set to climb as the yen weakened, with most of Asia’s other major equity markets returning from holidays to kick off their trading week. Futures on the Nikkei 225 Stock Average climbed after US shares rose, pushing the Nasdaq Composite Index to an all-time high. 

a
 ANZ's profit result missed the median estimate of five analysts surveyed by Bloomberg. Photo: Shutterstock

The yield on the 10-year Treasury note jumped as the US Treasury secretary said his department was considering debt longer than 30 years. Oil dropped to a one-month low. The Australian dollar held gains ahead of the Reserve Bank of Australia’s decision on policy.

Markets were whipsawed during the US session after President Donald Trump suggested raising the gas tax to fund infrastructure, and reintroduce rules that keep commercial and investment banking operations separate. Earnings remain in focus with companies including BP Plc and Apple Inc. among those due to report results on Tuesday. Data on Monday contributed to a mixed picture of the American economy ahead of Friday’s key monthly government report on the jobs market.

A climb in technology shares buoyed US stocks, boosting the Nasdaq Composite to a fresh record. The gains lifted Apple, Google parent Alphabet, Microsoft, Amazon and Facebook to records, the first time those companies — the five largest by market capitalisation — all reached highs on the same day, according to WSJ Market Data Group.

Technology stocks have led gains over the past four months as investors moderated bets on companies expected to benefit from policy shifts such as tax cuts and pivoted to those that have provided reliable returns during the eight-year bull market.

The Nasdaq Composite rose 44.00 points, or 0.7%, to 6091.60. The S&P 500 climbed 4.13 points, or 0.2%, to 2388.33. The Dow Jones Industrial Average slipped 27.05 points, or 0.1%, to 20913.46. The CBOE Volatility Index (VIX) traded near 10.1 after hitting its lowest level since 2007.

Technology stocks in the S&P 500 rose 0.8%, increasing the sector’s gain for the year so far to 16%. Apple added $2.93, or 2%, to $146.58, while Alphabet Class A shares rose 8.30, or 0.9%, to 932.82. Facebook climbed 2.21, or 1.5%, to 152.46. Microsoft rose 95 cents, or 1.4%, to 69.41. Amazon gained 23.24, or 2.5%, to 948.23. Apple is scheduled to report earnings late on Tuesday, while Facebook’s results are expected late Wednesday.

The gains in the tech heavyweights came as investors are analysing signs of lethargic domestic growth. US factory activity expanded at a slower pace in April, the Institute for Supply Management said on Monday, while Americans’ spending was flat in March for the second consecutive month, according to the Commerce Department.

The yield on the benchmark 10-year US Treasury note was 2.327%, up from 2.282% on Friday. Yields rise as prices fall.

US crude oil lost 1% to $48.84 a barrel.

Source: Bloomberg, TradingFloor.com

International earnings:
Tuesday: Apple, Aetna, Archer-Daniels Midland, Merck, Pfizer, CVS Health, BP, MasterCard, Altria, ConocoPhillips, WebMD, Weight Watchers, FireEye , Devon Energy, Etsy, Gilead Sciences, Newfield Exploration, Anadarko Petroleum, Cummins, Coach, Mosaic, Allstate, Becton Dickinson, Eaton, Lumber Liquidators
Wednesday: Facebook, Time Warner, Volkswagen, AIG, Kraft Heinz, MetLife, Tesla Motors, Avis Budget, Tableau Software, Pioneer Natural Resources, Yamana Gold, Estee Lauder, Southern Co, Garmin, Sprint, Wellcare Health, Molson Coors Brewing, Humana, Cheesecake Factory, Fitbit, MetLife, Groupon
Thursday: A-B InBev, Occidental Petroleum, Royal Dutch Shell, Adidas, Kellogg, Viacom, Beazer Homes, AMC Networks, Siemens, Dunkin Brands, Chesapeake Energy, Marathon Oil, Allscripts Healthcare, El Pollo Loco, Shake Shack, PerkinElmer, Zynga, Zillow, Wageworks, DeVry Education, CBS, Activision Blizzard, Herbalife
Friday: TransCanada, Cognizant Tech, Moody's, Cigna, CenterPoint

Local markets

  • The ASX200 was down 0.3% in early trade, on disappointing results from ANZ.

  • Bank of New York Australia ADR Index up 1%, BHP Billiton ADR up 0.7% to A$23.81 equivalent, 0.3% discount to last Sydney close, Rio Tinto ADR up 0.6% to A$53.26 equivalent, 11% discount to last Sydney close

  • In an interim report, ANZ’s first-half profit rose 23% on strong performance from its domestic banking units. Unaudited cash profit, which excludes one-time items, rose to A$3.41 bn ($2.57 bn) in the six months ended March 31, the Melbourne-based lender said in a statement to the stock exchange on Tuesday. That missed the median A$3.49 bn estimate of five analysts surveyed by Bloomberg. Since taking over in January 2016, Chief Executive Officer Shayne Elliott has shifted the bank’s focus to its main domestic businesses and put its Asia retail assets up for sale. Already this year ANZ has sold its UDC Finance business to China’s HNA Group Co. and offloaded its stake in Shanghai Rural Commercial Bank Co. It has also invited bids for its domestic wealth unit. ANZ’s net interest margin shrunk to 2% from a 2.07% in the first half of 2016. The bank will pay a first-half dividend of 80 Australian cents. 

  • ANZ is the first of Australia’s big banks to release earnings this month. National Australia Bank Ltd. reports on Thursday, followed by Westpac Banking Corp. next week. Commonwealth Bank of Australia, which reports on a different schedule, in February posted an eighth straight record first- half profit on the back of its domestic retail operations

  • Gold fell overnight as a tentative deal by the US Congress to avert a government shutdown curbed haven demand. US congressional negotiators hammered out a bipartisan agreement on a spending package to keep the federal government funded through Sept. 30, averting a government shutdown and dampening demand for non-interest paying bullion. Spot gold was down 0.97% to $1,255.39. US gold futures for June delivery edged down $12.80 to settle at $1,255.50 after falling more than 1% earlier in the session. Spot silver also fell, touching its lowest level since March 15. 

  • Meanwhile the world’s biggest biggest gold miner ETF, the SPDR Gold Shares ETF (GLD) at $34.8 bn market cap, suffered its largest withdrawals last week. Investors yanked $778 m from the VanEck Vectors fund and $217 m from the SPDR Gold Shares ETF, according to data compiled by Bloomberg. The outflows coincided with the outcome of the first round of the French presidential election, in which centrist Emmanuel Macron and far-right candidate Marine Le Pen accumulated the most votes. This result was in line with investors’ expectations as well as public opinion polls. The need for protection against monetary discord lessened as Macron is seen as heavily favoured to defeat Le Pen in the second round of voting. Goldies in Toronto overnight fell 2.55%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR

  • Oil closed at the lowest in more than a month as Libyan output surged, more rigs were added in the US and Saudi Arabia cut prices to Asian customers. West Texas Intermediate for June delivery dropped 49 cents to $48.84 a barrel on the New York Mercantile Exchange. It was the lowest close since March 28. Total volume traded was about 37% below the 100-day average. Brent for July settlement fell 53 cents, or 1%, to $51.52 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.36 premium to July WTI. Trading was less active than usual because of the May 1 holiday celebrated in much of the world. Oil has fallen the past two weeks amid concern growing US output will offset efforts by the Organization of Petroleum Exporting Countries and its allies to trim a global glut. American production increased to the most since August 2015, and Saudi Arabia’s Energy Minister Khalid Al-Falih has acknowledged that Opec-led curbs failed in the first quarter. Money managers reduced wagers that oil futures would rise on both sides of the Atlantic in the week to April 25. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • Spot iron ore and coking coal prices were unchanged on a public holiday in Singapore. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper prices closed near a one-month high Monday on continuing concerns over supply disruptions. Copper for July delivery settled up 2% at $2.6605 a pound on the Comex division of the New York Mercantile Exchange, closing at the highest level since April 6. Reports that workers at Freeport-McMoRan Inc’s Grasberg mine in Indonesia were planning to strike have boosted copper prices, as investors worry that continuing labour disputes would affect copper supply in a year that has already seen several disruptions due to mine strikes and slowed operations. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • Asaleo Care (AHY): Annual meeting scheduled; NOTE: Company in Feb. forecast low single-digit profit growth in FY17
  • BHP Billiton (BHP): Elliott said to meet BHP investors as fund urges overhaul
  • Costa Group (CGC): New underweight at JPMorgan, PT A$3.79
  • Crown Resorts (CWN): Macau casino revenue gains for ninth month with high-stakes bets
  • Greencross (GXL): Raises in-store clinics target, now adding 22 in FY
  • Macquarie Group (MQG): Macquarie, Hastings said to bid for Australia’s Endeavour Energy; Cut to hold at Bell Potter
  • Mayne Pharma (MYX), Sigma Pharmaceuticals (SIP), Australian Pharmaceutial Industries (API): Changes to drug prescription software could increase use of generic drugs, saving govt A$1.8b over 5 years: ABC

Broker upgrades and downgrades

  • Alumina (AWC): Cut to underperform at BofAML
  • Cimic (CIM): Cut to sell at Morningstar
  • GUD Holdings (GUD) Cut to sell vs hold at Wilsons
  • Independence Group (IGO): Raised to buy at Hartleys, PT A$3.70
  • Qantas (QAN): Cut to neutral at JPMorgan, PT A$4.05
  • QBE Insurance (QBE): Cut to hold at Morningstar
  • RCG (RCG): Raised to buy at APP Securities, PT A$1.20

AUS200 & AUDUSD

AUS200 is maintaining upside momentum and made a new 2017 high last night as positive sentiments exist and volatilities hit below 10 at one stage. It seems as though AUS200 is looking to test the major resistance level of 6000 that corresponds to the 2015 high. This level caused a 1300 points selloff, thus we expect 6000 to act as a genuine resistance level in the near term.

 AUS200 chart
1
 
AUDUSD seems to have strengthened as copper (HG) shot up more than 2.5% and the US dollar weakened on the back of the weaker than expected ISM manufacturing PMI last night. However, we see the overnight rally as a retracement as the previous uptrend could act as a resistance. Furthermore, the 200-day moving average is lurking near 0.7550 where we would look to sell. The key event for today would be the Chinese Caixin manufacturing PMI (1145 local time) and the RBA rate decision at 1430.
 
AUDUSD chart
 Source all charts: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more.

– Edited by Susan McDonald

Watch this Week’s Macro Monday Call.

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets.
Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

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