Article / 20 April 2017 at 0:42 GMT

Today's Trade: Banks and telcos give ASX200 an early lift

Trading Desk / Saxo Capital Markets
Australia
  • The ASX200 opened slightly up despite Wall St falls
  • Gold fell 1% on Wednesday as the dollar and stocks gained
  • Iron ore rebounded amid a more positive tone in metal markets
  • The energy sector fell 1.4% as oil settled 3.76% lower at $50.44/barrel

By Saxo Capital Markets (Australia)

Overnight 

  • US equities closed mostly lower on Wednesday, with IBM and oil prices pushing down the Dow Jones Industrial Average.
  • The Dow closed about 120 points lower with IBM accounting for 57 of those points, while Goldman Sachs added 10 points to the downside. IBM posted mixed quarterly results; sales fell for the 20th straight quarter on a year-on-year basis. The stock fell about 5%. The blue-chips index also notched a two-day drop of more than 200 points and has closed lower in five of the past six sessions.
  • The S&P 500 fell about 0.2%, with energy stocks leading decliners. The energy sector fell 1.4% as US oil settled 3.76% lower at $50.44/barrel. The Nasdaq gained 13.56 points, or 0.23%, to close at 5,863.03. The CBOE Volatility Index (VIX) traded near 14.98.
  • Financials traded higher earlier in the session after Morgan Stanley posted a strong first-quarter as its fixed-income trading revenue doubled year on year. The investment bank's results easily topped Wall Street expectations, in stark contrast to Dow component Goldman Sachs, which shocked investors with disappointing earnings and revenue.
  • Investors also kept an eye on France, as the country's presidential election drew closer. Four candidates are within striking distance of the presidency, including far-leftist Jean-Luc Melenchon and conservative Marine Le Pen.
  • France's CAC 40 index posted its worst one-day performance since September 26 on Tuesday as jitters over the election led investors to sell ahead of the contest.
  • In economic news, the Federal Reserve's Beige Book showed economic activity increased across all 12 districts. Market expectations for a rate hike in June have slipped recently, amid disappointing inflation and retail sales data.

Source: Bloomberg, TradingFloor.com

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Oil dropped the most in six weeks after a report showed US gasoline supplies increased
for the first time since February. Photo: Shutterstock 

Local markets and commodities

  • The S&P/ASX 200 Index futures contract falls 0.7%; futures relative to estimated fair value suggest an early decline of 0.4%
  • Bank of New York Australia ADR Index -1.7%, BHP Billiton ADR -1.9% to A$23.53 equivalent, 1.7% discount to last Sydney close, Rio Tinto ADR -1% to A$51.10 equivalent, ~12% discount to last Sydney close
  • Gold fell 1% on Wednesday as the dollar and stocks gained, though tensions over North Korea and upcoming French and UK elections underpinned demand in the safe-haven asset. Spot gold was down 0.68% to $1,280.50/ounce. US gold futures for June delivery were $10.70 lower to settle at $1,283.40. 
  • The Fed released the Beige Book on Wednesday, noting that economic activity increased at a modest pace. A run of disappointing US economic data and doubts the Trump administration will progress with tax cuts have quelled expectations of faster inflation. Gold's losses were capped by uncertainties over elections and geopolitical tensions. 
  • US Vice President Mike Pence said Washington would work with its allies and China to put economic and diplomatic pressure on North Korea but added America would defeat any attack with an "overwhelming response." Gold stocks in Toronto shed 2.45% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil dropped the most in six weeks after a report showed US gasoline supplies increased for the first time since February, while crude output keeps rising. Gasoline stockpiles climbed 1.54 million barrels last week, surprising analysts surveyed by Bloomberg who projected the Energy Information Administration data would show a 2-million-barrel decrease. 
  • Crude inventories fell 1.03 million barrels to 532.3 million, the agency reported Wednesday. Crude production rose to the highest since August 2015. Price drops accelerated as the dollar strengthened against its peers, curbing the appeal of commodities. 
  • West Texas Intermediate for May delivery dropped $1.97, or 3.8%, to settle at $50.44/barrel on the New York Mercantile Exchange. It was the biggest decline since March 8 and the lowest close since April 3. Total volume traded was about 30% above the 100-day average. WTI settled below the 50-day and 100-day moving averages for the first time in two weeks.
  • Brent for June settlement fell $1.96, or 3.6%, to $52.93/barrel on the London-based ICE Futures Europe exchange. It was the lowest close since March 31. The global benchmark crude ended the session at a $2.08 premium to June WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • Iron ore rebounded amid a more positive tone in metal markets. Spot iron ore rose 2.2% to $64.20. Steel and iron ore futures gained, leading to spot physical buyers to re-enter the market after prices fell over 30% over the past three weeks. However traders are likely to remain cautious ahead of Vale’s production report later this week. While expectations are for another strong increase in production, they will be examining the outlook for growth in supply over coming quarters. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Most of the six major contracts on the London Metal Exchange advanced, led by a 2.9% gain in lead to settle at $2,161/tonne at 1750 local time. 
  • Zinc increased 0.9% and tin added 1.7%, while nickel gained 0.3%. Copper dropped 0.3% to $5,556/ton after climbing as much as 1.9%. Copper and zinc were the only base metals with a recorded surplus in January to February 2017, according to metal balances released by the World Bureau of Metal Statistics. 
  • Following a surplus of 215,000 tonnes in the whole of 2016, the copper market recorded a surplus of 335,000 tonnes. Stocks rose during February and closed 72,000 tonnes higher than at the end of December 2016. Global consumption was down 3.52 million tonnes, compared with 3.70 million tonnes for the same months of 2016. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • Bank of Qld (BOQ): Trades ex-dividend
  • APN Outdoor (APO): Annual meeting scheduled; Note: Co. in Feb forecast rev., earnings growth in 2017
  • Australian Pharmaceutical Industries (API): 1H results expected; Note: Co. in Jan. forecast 1H NPAT A$29mln
  • Crown Resorts (CWN): Macau gaming rev. seen growing 12% in 2017: Fitch
  • CSL (CSL): Therapeutic Goods Administration okays Afstyla
  • Evolution Mining (EVN): Q3 output expected; Note: Co. in Jan. forecast FY17 output 800k-860k ozs gold; AISC A$900-A$960/oz
  • Fortescue (FMG): Puts among the most active in Asia options trading
  • Harvey Norman (HVN), JB Hi-Fi (JBH): Amazon plans to roll out full retail offering in Australia next few years: AFR
  • Iluka Resources (ILU): Q1 output expected
  • Origin Energy (ORG): Australian gas producers face probe into pricing, contracts
  • Rio Tinto (RIO): Q1 output expected; Note: Q1 Pilbara iron ore shipments 100% basis est. 78mt (3 analysts)
  • Santos (STO): Q1 output expected; Note: Co. in Jan. forecast 2017 output 55-60mmboe, sales 73-80mmboe
  • St. Barbara (SBM): Q3 output expected; Note: Co. April 4 reported output 95,346 ozs gold
  • Sydney Airport (SYD): Scheduled to release March traffic results
  • TPG Telecom (TPM): Shorts at record on new mobile network plan: Chart
  • Woodside (WPL): Q1 output expected; Note: Co. in January forecast 2017 output 84-90mmboe

Earnings this week

Thursday
  • Travelers, Verizon, Blackstone, Philip Morris, ABB, Bank of NY Mellon, Alliance Data, PPG Industries, Imax, MGIC Investment, KeyCorp, Nucor, Janus, Visa, Sonoco Products, Sherwin-Williams, Mattel, NCR, Danaher
Friday
  • General Electric, Honeywell, NextEra Energy, Kansas City Southern, Schlumberger, Rockwell Collins, Stanley Black and Decker, SunTrust, Morningstar, Steve Madden

AUDNZD and GDX

On the back of the falling base metal prices, the AUD continued to underperform the NZD since it has broken the major support level 1.0754 where the previous double top coincides with 38.2% retracement between the 2017 low of 1.0325 and 2017 high of 1.1019. 

AUDNZD also has breached the 50% retracement 1.0672 but failed to test the major support level 1.0590 where 61.8% crosses 200DMA. 1.0754 is now expected to act as a resistance level and further selling pressure should exist.

AUDNZD monthly
1
Source: SaxoTrader 
 
Spot gold (XAUUSD) declined as both the US treasury yield and US dollar rose. Goldminer ETF (GDX) has been showing signs of weakness since it found resistance at 200DMA and yesterday it plunged down to the previous downtrend (from Aug 17), which is expected to serve as an interim support but further downside momentum is not unlikely towards the next support level at 22.50.
 
XAUUSD monthly


























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 Gayle Bryant

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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