Today's Trade: Banks hit, but ASX floats on oil
- The S&P/ASX 200 index added 5.9 points, or 0.11% to 5,513.7
- Steady selling in the banks after Moody’s downgraded its ratings outlook
- US stocks rose as weekly jobless claims fell 4,000 to 262,000
Overnight and early trading
The early losses were coming from the big four banks - all down around about 1%, except for CBA which was down 0.4% after Moody's put the credit ratings on negative outlook. AMP was down another 2% following yesterday's disappointing earnings outlook.
US stocks rose Thursday as oil prices rallied. Crude oil has risen more than 20% since dipping below $40/barrel early this month, boosted by falling stockpiles and hopes that the world’s largest exporters will cap output.
It is the latest in a series of big swings for the oil market. Prices still are down by more than half from when they traded above $100/b in 2014, but they also are up more than 80% from just six months ago, when they tumbled below $30/b.
The S&P 500 added 4.80 points, or 0.2%, to 2187.02. The Dow Jones Industrial Average rose 23.76 points, or 0.1%, to 18597.70 and the Nasdaq Composite gained 11.49 points, or 0.2%, to 5240.15. US stocks have notched all-time highs in recent weeks, while European stocks have staged a steep recovery from their post-Brexit lows.
Miners led the increase in the Stoxx Europe 600 Index as commodities advanced amid a weaker dollar. The Stoxx 600 added 0.7%, the most in a week, as all of its industry groups advanced.
Almost every western European market rose, while the yield on 10-year German bonds, already negative, slipped for a second day. Germany’s Dax, which came close to erasing its annual drop on Monday, rose 0.6%, with steelmaker Thyssenkrupp AG helping lead the gains.
The UK’s FTSE 100 Index added 0.1%, paring an advance of as much as 0.5%, as the pound strengthened after a report showed that retail sales unexpectedly surged in July.
US: Deere, Estee Lauder, Foot Locker, Madison Square Garden, The Buckle
Local markets and commodities
- The S&P/ASX 200 Index futures +0.3%; futures relative to estimated fair value suggest an early gain of 0.4%.
- Bank of New York Australia ADR Index +0.7%, BHP Billiton ADR +1.9% to A$21.15 equivalent, 1.4% premium to last Sydney close, Rio Tinto ADR +1.3% to A$42.46 equivalent, 14% discount to last Sydney close.
- Gold for December delivery settled higher up 0.7% at $1357.80/oz on the Comex division of the New York Mercantile Exchange. Gold has traded between $1,340/oz and $1,360/oz an ounce in the past six sessions. Brief spikes above $1,360/oz on August 10, 12 and 14 weren’t sustained, prompting quick reversals that analysts attributed to profit-taking by investors. Goldies were pretty much flat in Toronto overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
- Oil climbed into bull market Thursday, completing the turnaround from a bear market dive in just three weeks as falling stockpiles and talk of an Opec output cap keep fueling gains. Light, sweet crude for September delivery settled up $1.43, or 3.1%, to $48.22/barrel on the New York Mercantile Exchange.
- It is up for six-straight sessions, up 16% in that span, the longest and biggest winning-streak by percentage since April. Brent, the global benchmark, rose $1.04, or 2.1%, to $50.89/b on ICE Futures Europe. It is also up 16% over a six-session winning streak.
- Crude is now up 22% since it settled for just one day below $40/b on August 2, the latest in a series of violent swings that have now characterised the oil market for more than two years. Prices are still down by more than half from when they traded above $100/b in 2014, but they are also up more than 80% from just six months ago, when they crashed to a decade low below $30/b. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
- Iron ore is at $US60.71/tonne against $60.87 yesterday – not much of a change. In a recent interview, Michael Zhu, former global sales director at Vale, stated that iron ore will probably face a tough year in 2017 as supply keeps on expanding while China’s steelmakers struggle to sustain output at current levels. “I’m not optimistic that the iron ore price will keep going up,” said Zhu, predicting that prices will probably trade between $50/t and $60/t for the rest of 2016. Next year will be challenging “because Chinese steel production, even if they try to keep at current levels, iron ore supply will be increasing,” he said. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL/
- Benchmark copper on the London Metal Exchange ended up 0.7% at $4,810/t. Three-month aluminium closed down 0.6% at $1,683. Earlier it touched $1,709, its highest since July last year, after the World Bureau of Metal Statistics said the primary aluminium market in the first half of the year saw a deficit of 479,000 tonnes, traders said.
- Aluminium prices are also up because Chinese smelters are selling liquid or molten metal to consumers. This means less metal is being turned into ingots for delivery against exchange contracts. Zinc was untraded at the close, but bid up 1% to $2,295. Lead gained 0.8% at the close to $1,894, tin added 0.2% to $18,390 and nickel rose 1.3% to $10,355.
- In other news: Abacus Property (ABP): Scheduled to release FY results; NOTE: FFO/shr est. A$0.223 (4 analysts); ANZ Bank (ANZ), Commonwealth Bank (CBA), National Australia Bank (NAB): Australian banks’ outlooks revised to negative by Moody’s; Automotive Holdings (AHG): Scheduled to release FY results; NOTE: Adj. net income est. A$96.8m (9 analysts); Bellamy’s Australia (BAL): Scheduled to released FY results; NOTE: Adj. net income est. A$34.6m (6 analysts); Cleanaway (CWY): Scheduled to release FY results; NOTE: Adj. net income est. A$54.6m (9 analysts)
- Cover-More (CVO): Scheduled to release FY results; NOTE: Adj. net income est. A$25.7m (5 analysts); Ansell (ANN), CSG (CSV) & Fairfax Media (FXJ): Trades ex-div; Duet Group (DUE): Scheduled to release FY results; NOTE: Adj. net income est. A$205.9m (10 analysts);Fonterra (FSF): Milk slump ‘kick in the guts’ for Kiwi farmers just starting out; Insurance Australia (IAG): Scheduled to release FY results; NOTE: Adj. net income est. A$886.3m (6 analysts); Integrated Research (IRI): FY total sales up 20%;Lend Lease (LLC): Scheduled to release FY results; NOTE: Adj. net income est. A$696.4m (9 analysts); Mantra (MTR): Scheduled to release FY results; NOTE: Adj. net income est. A$56.4m (9 analysts)
- Mayne Pharma (MYX): Buys rights to dermatology foam products from Glaxo; Medibank Private (MPL): Scheduled to release FY results; NOTE: Adj. net income est. A$411.2m (13 analysts); Mineral Resources (MIN): In talks to sell Mt Marion stake: AFR; Origin Energy (ORG): Markets A$2.9b-equiv. loan to syndication; QBE Insurance (QBE): Ratings unaffected by results: S&P; Rio Tinto (RIO): Reins back cash outlays amid decline in metals prices: Bloomberg Intelligence; Seven Group (SVW): Caterpillar July machine sales fall 19% vs June 12% decline; NOTE: Is an authorised Caterpillar dealer in West Australia, NSW and North-East China; Tassal (TGR): Scheduled to release FY results; NOTE: Adj. net income est. A$39.4m (5 analysts).
- Treasury Wine (TWE): Raised to neutral vs underperform at Credit Suisse
Stock to watch
We are keeping a close eye on St Barbara Ltd (SBM.xasx) as it currently consolidated at its multi year highs.
We also note that there is a head and shoulder development currently underway which is a reversal signal. Short positions would be opened upon a break of the neckline:
St Barbara monthly chart
We target $4.05 as first profit target and final target comes in at 3.37 – its 100% head and shoulder extension.
Northern Star monthly chart
We are seeing continuous resilience in US500 and the daily price actions look to push higher towards the all time high 2,194 which should be a key resistance level.
Despite the current strength, we are not convinced that this rally would last long as the upside momentum seems to be fading.
US500 can break above 2,194 to test the psychological level 2,200 but we would treat this as a false break and rather sell at these levels.
US 500 monthly chart
Although this week’s price actions have been choppy, the trading range is narrowing and we are anticipating a breakout to the upside in the near term. The resistance levels would be 1,358–1,360/oz and the support level should be the lower line of the triangle.
XAUUSD monthly chart