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Article / Monday at 23:42 GMT

Today's Trade: Aussie hits fresh high ahead of RBA minutes

Trading Desk / Saxo Capital Markets
Australia

  • Financial stocks dragged US indices lower
  • Investors digested G20 summit dominated by protectionist US stance on trade
  • AUDUSD made a fresh high for 2017, trading up to 0.7747
  • Crude oil prices drifted lower amid concerns over rising output


By Saxo Capital Markets (Australia)

Overnight and early trade

Blue-chip selling pulled the ASX 200 down 13 points at the open, to 5766, after a subdued Wall St and a fall in oil prices. The Australian dollar traded as high as 0.7747 in European trade.

Financial stocks fell overnight, which dragged the S&P 500 lower: Shares of financial companies in the S&P 500 slipped 0.9% as Treasury yields fell, with investors anticipating a gradual pace of interest rate increases from the US Federal Reserve.

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Stock moves were otherwise muted, with roughly 5.8bn shares changing hands, the fewest this year. Some investors said they were analyzing developments from a meeting of the Group of 20 industrialised and developing nations over the weekend, where world leaders struggled to find common ground on trade as US Treasury Secretary Steven Mnuchin got finance officials to drop a disavowal of protectionism from a closely watched policy statement.

Many investors have been concerned in recent months that changes to US trade policy under the new administration could hamper growth and hurt major US trading partners. Still, stock markets globally showed limited reactions to the developments on Monday.

The Dow Jones Industrial Average lost 8.76 points, or less than 0.1%, to 20905.86. The S&P 500 fell 4.78 points, or 0.2%, to 2373.47 and the Nasdaq Composite gained 0.53 point, or less than 0.1%, to 5901.53.

US government bond yields fell to their lowest level in more than two weeks on Monday, continuing a slide that began last week after the Fed signaled a gradual pace to rate rises. The yield on the benchmark 10-year US Treasury note fell to 2.472% from 2.500% on Friday. Yields move inversely to prices.

As bond yields fell, the KBW Nasdaq Bank Index of large US commercial lenders lost 1.2%. Goldman Sachs Group fell $1.80, or 0.7%, to $242.14 and J.P. Morgan Chase declined 65 cents, or 0.7%, to 90.03 in the Dow industrials.

Caterpillar gained the most in the Dow industrials, rising 2.49, or 2.7%, to 95.40. Investors have closely watched the US administration’s plans for trade, taxes and regulation, hoping for policies that boost corporate profits.

Source: Bloomberg, TradingFloor.com

Local markets

  • Bank of New York Australia ADR Index up 0.5%, BHP Billiton ADR up 0.7% to A$24.86 equivalent, little changed from last Sydney close, Rio Tinto ADR up 0.5% to A$55.95 equivalent, ~10% discount to last Sydney close
  • Gold prices scaled a two-week peak on Monday as the dollar slumped to a six-week low after a G20 weekend summit that was dominated by the US administration's protectionist stance on global trade. Spot gold rose 0.41% to $1,233.38 an ounce, having earlier touched $1,235.50, its highest since March 6. US gold futures for April delivery settled up $3.80 to $1,234. Holdings of SPDR Gold, the world's largest gold-backed exchange-traded fund, fell 0.35% to 834.10 tons on Friday. Gold stocks in Toronto were up 1.42%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil fell as a Libyan port is set to resume shipments and the US drilling revival undermines the potential for Opec output curbs to rebalance the market. Futures dropped 1.2% in New York. Saudi Arabian Energy Minister Khalid Al-Falih said on March 16 that the kingdom may extend its cuts if supplies stay above the five-year average. A day later, though, data showed the US rig count growing for a ninth week, and a Libya official said on Sunday that the Es Sider and Ras Lanuf ports are preparing to restart oil exports. West Texas Intermediate for April delivery, which expires Tuesday, fell 56 cents to settle at $48.22 a barrel on the New York Mercantile Exchange. The more-actively traded May contract dropped 40 cents to $48.91. Total volume traded was about 4% below the 100-day average. Brent for May settlement slipped 14c to $51.62 a barrel on the London-based ICE Futures Europe exchange. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore spot prices fell slightly by 0.85% to $91.49 after supply concerns returned. China’s stockpiles of ore held at ports rose to 131m tonnes last week, according to SteelHome data. However, this was counteracted by a fall in steel inventories. Stocks of rebar fell for the fourth straight week to 7.2m tonnes. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • BHP Billiton will sit down with union leaders from its giant Chilean copper mine for the first time in a month, offering a glimmer of hope for ending a strike that has helped push up prices of the metal. Escondida Union Number 1 accepted the company’s proposal to meet on Monday in the city of Antofagasta, although it said the agenda would be limited to three essential points: keeping benefits intact, not increasing hours, and not differentiating between existing and new workers. Benchmark copper on the London Metal Exchange ended down 0.9% at $US5880 a tonne, having last week touched $US5948.50, its highest since March 6. Aluminium closed up 0.4% to $US1922 a tonne, zinc slipped 0.6% to $US2864, tin added 0.4% to $US20,350 and nickel lost 0.9% to $US10,165. Lead was untraded at the close, but bid down 0.7% to $US2274. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • Commonwealth Bank of Australia (CBA), ANZ Bank,Westpac (WBC), National Australia Bank (NAB): ‘Bubbly’ Australia housing market may lead to more lending curbs - report
  • Crown Resorts (CWN): Macau casino March revenue could exceed estimate, Bernstein says
  • Downer EDI (DOW), Spotless Group Holdings Ltd (SPO): Said to get 19.9% Spotless stake ahead of takeover offer
  • Fairfax Media (FXJ): TPG Capital may be among those interested in Domain: AFR
  • Mantra Group (MTR): May be a potential takeover target via an Asian party or InterContinental: Australian
  • Premier Investments (PMV): 1H results expected; NOTE: Co. in February forecast 1H underlying retail Ebit A$92m-A$93m; 1H unaudited sales ~A$588.6m
  • Rio Tinto (RIO): China’s iron ore outlook is ‘music to my ears’, CEO says
  • Seven Group (SVW): Caterpillar February Asia/Pacific machine sales up 39% vs +26% in Jan.; NOTE: Is authorised dealer in West Australia, NSW, North China
  • TPG Telecom (TPM): 1H results expected; NOTE: Rev. est. A$1.24bn (3 analysts)
  • Virgin Australia (VAH): Welcomes ACCC interim approval of HNA alliance

Companies going ex-dividend this week

Tuesday: KME, PBP, WEB,
Wednesday: BBL, CGR, FLT, NCM, NST, ODY, OVR, PPC, SFL
Thursday: AVJ, AGG, AWN, BPS, BEL, BYI, FBU, FRE, IPE, MXI, SDI, WPP, CAR
Friday: MYR, SND, ABC, IMF, JHC, MAI, SEK

Broker upgrades and downgrades

  • APN News (APN): Rated new buy at Canaccord, PT A$3.25
  • Aurizon (AZJ): Cut to sell at UBS, PT A$4.80
  • Bionmoics (BNO): Rated new buy at Rodman & Renshaw, PT A$2
  • Fletcher Building (FBU): Raised to outperform at RBC; Raised to outperform at First NZ Capital
  • Virtus Health (VRT): Cut to hold at Morningstar
  • Ramsay Health (RHC): Raised to outperform at Credit Suisse; PT A$74.50
  • REA Group (REA): Cut to neutral at UBS; PT Raised to A$58

AUDUSD & EURCAD

AUDUSD has made a fresh high for 2017 as it broke above the recent February high of 0.7740. Furthermore, the downtrend (from 2016's high of 0.7834) has been breached, hence upward momentum is building nicely for further gains if US Treasury bonds continue to rally, causing yield and US dollar to fall. Copper (HG) declined after finding strong resistance at 270, and this has somewhat restricted further upside on AUDUSD.
 
AUDUSD daily chart
1
 
Since the huge rally from the end of February, EURCAD has been going through a consolidation phase as it seems to be forming a bullish pennant, but at the same time the recent resistance zone corresponds to both the 200 weekly moving average and the 200-day moving average. Further converging price actions are likely to signal an upside break-out in the near term, while two overlapping moving averages remain as solid resistance.

EURCAD daily chart
 
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

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Follow the team on Twitter at: twitter.com/SaxoAustralia.

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