Article / 15 April 2015 at 1:20 GMT

Today's Trade: Commodity price jumps benefit energy sector, top miners

Trading Desk / Saxo Capital Markets
Australia
  • The jump in the iron ore spot price gave BHP and Rio Tinto an early boost
  • But falls for other blue chip shares prompted an early dip in the S&P/ASX200
  • The AUDUSD looks likely to fall below 0.7600 again

By Saxo Capital Markets Australia

Overnight markets / early trading

Mining and energy stocks rose in early trading on the ASX, on the back of higher prices for crude oil and iron ore. However, other blue chip stocks, including the big banks, traded lower and held the overall market back. At 10:51 am, the S&P/ASX 200 had edged down slightly to 5,938.2.

US stocks ended higher, buoyed by a rebound in oil prices and a handful of positive first-quarter earnings reports.


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Higher commodity prices are a welcome sign for the struggling resources sector, and gave leading miners an early boost on the ASX today. Photo: iStock

 

Energy stocks pulled ahead of the broader market, as crude prices rose for the fourth straight session. But trading volumes remained relatively muted, as investors awaited additional quarterly updates from companies in the weeks ahead. The Dow Jones Industrial Average gained 59.66 points, or 0.3%, to 18036.70. The S&P 500 gained 3.41 points, or 0.2%, to 2095.84. The Nasdaq Composite Index slipped 10.96, or 0.2%, to 4977.29.

Energy stocks in the S&P 500 rose 1.8%, benefiting from the recent rebound in oil prices. U.S. crude futures gained 2.7% to $53.29 a barrel, their third-highest settlement price of this year. Oil prices have risen 12% this month, though they are still down 48% from a year ago following a month long tumble.

Wall Street staged a comeback in the first quarter, as trading and investment-banking businesses shone as bright spots in the earnings of the country’s two most valuable banks.
Those businesses drove J.P. Morgan Chase & Co. to rising profit, while they weren’t enough to prevent rival Wells Fargo & Co. from posting its first profit decline in more than four years. Still, the San Francisco firm saw strong growth in its investment banking, an area Wells Fargo has been ramping up in recent years. Shares in Wells Fargo & Co. fell 0.7% & JPMorgan Chase traded higher briefly gaining more than 2% to trade above 15-year highs.

European stocks were mostly lower. France’s CAC 40 fell 0.7%, Germany’s DAX declined 0.9% however the UKs FTSE rose 0.16%.

Local markets

  • The S&P/ASX 200 Index futures contract rose 0.2% to 5,949; futures relative to estimated fair value suggest an early gain of 0.3%.
  • Bank of New York Australia ADR Index +2.1%; BHP Billiton ADR +3.9%, Rio Tinto ADR +4.5%, up most since February 13
  • Spot gold fell 0.6% to US$1,192 as it continues to trade within a shallow range, although it is at a two week low. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Oil rose on both fronts with WTI the biggest mover, up 2.4% to US$53.63. Inventories grew less than expected last week, up just 2.6 million barrels (market: 4.1 million barrels). Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore spot price jumped with force last night, up a strong 4.0% to US$50.78 to clear the psychological level of US$50 a tonne. Reports from within China have stated that 10% of iron ore production closed down last month as weaker prices took their toll. It seems the subsidiaries available to the industry are being needed although not intended to keep everyone afloat. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were mixed last night with copper continuing its fall, down 0.7% to US$5,945 Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
  • PNA released earlier this morning rejecting take over offer at $1.71
  • Companies trading Ex-dividend: Hunter Hall Global Value Limited (HHV), Rural Funds Group (RFF), Vealls (VEL)

Data points

Wednesday
  • AUS: Westpac Consumer Sentiment (10:30am)
  • CNY: GDP q/y, Industrial Production y/y, Fixed Asset Investment ytd/y, NBS Press Conference, Retail Sales y/y
  • JPN: Revised Industrial Production m/m
  • EUR: German Final CPI m/m, French CPI m/m, EUR Trade Balance, German 10-y Bond Auction, EUR Minimum Bid Rate, ECB Press Conference
  • US: Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production m/m, NAHB Housing Market Index, Crude Oil Inventories, Beige Book, TIC Long-Term Purchases
  • CAD: BOC Monetary Policy Report, BOC Rate Statement, Overnight Rate, BOC Press Conference - US Earnings: Bank of America, US Bancorp, Burberry, Charles Schwab, PNC Financial, Netflix, SanDisk, Universal Forest Products, Progressive, ASML Holdings

Thursday
  • AUS: MI Inflation Expectations (11am), Employment Change, Unemployment Rate & New Motor Vehicle Sales m/m (11:30am)
  • CNY: Foreign Direct Investment ytd/y (Thurs – Sund)
  • EUR: Italian Trade Balance, Spanish 10-y Bond Auction
  • G20 Meetings
  • US: Building Permits, Unemployment Claims, Housing Starts, Philly Fed Manufacturing Index, Natural Gas Storage
  • FOMC Member Dennis Lockhart speaks on the US economic outlook and monetary policy at the Palm Beach County Convention Center.
  • FOMC Member Stanley Fischer speaks: Due to participate in a panel discussion titled "The Elusive Pursuit of Inflation" at the IMF Spring Meetings, in Washington DC
  • US Earnings: BlackRock, Citigroup, Goldman Sachs, Blackstone, American Express, Schlumberger, Celanese, Crown Holdings, UnitedHealth, Taiwan Semiconductor, Philip Morris, First Republic Bank, KeyCorp, Mattel, Sherwin-Williams, Sonoco Products, PPG Industries, WW Grainger
Friday
  • EUR: Current Account, Final CPI y/y, Final Core CPI y/y
  • GBP Average Earnings Index 3m/y, Claimant Count Change, Unemployment Rate
  • G20 Meetings
  • CAD: Core CPI m/m, Core Retail Sales m/m, CPI m/m, Foreign Securities Purchases, Retail Sales m/m
  • US CPI m/m, Core CPI m/m, Prelim UoM Consumer Sentiment
  • US Earnings: GE, Honeywell, Synchrony Financial, Comerica

Current ASX trades

  • AMP Limited (Ticker: AMP:xasx): Entered long position on February 6 at $6.10. First profit target was reached on February 18 at $6.49 (C +6.4%) and second profit target at $7.12 (C +16.7%) and third and final profit target at $8.00 (C +31%) remains in place. Stop loss trailed to entry price of $6.10

  • Flightcentre (Ticker: FLT:xasx): Entered short position on March 9 at $43.05. Stop loss has been trailed now to our open price of $43.05 (-0.0%). First profit target was reached on Mar 11 at $40.56 (+5.8%), second profit target is $39.74 (+7.6%) and final profit target is $38.40 (+10.8%).

Broker upgrade

  • Suncorp (SUN): Raised to neutral vs underweight at JPMorgan

Broker downgrades 
   
  • Computershare (CPU): Cut to neutral vs buy at UBS
  • Fortescue (FMG): Cut to underperform vs buy at BBY
  • Fortescue (FMG): Cut to underweight vs neutral at JPMorgan


ASXSP200.I momentum

As iron ore jumped 4% trading above $US50 per tonne overnight, we expect the S&P/ASX200 to regain some positive momentum from the big miners: BHP and RIO.

Energy stocks should also perform well as WTI oil made some solid rally (up 2.4%). The level 5,925 held up again and remains to be a key support level, while bullish ascending triangle is still intact.

We are currently long the ASXSP200.I at 5,929. Please see our original trade idea (Today's Trade: Ore price lifts, oil stocks in the spotlight, AUD fragile).


ASXSP200.I edges close to 6,000 points

SP200 DO



















 

AUDUSD to resume downtrend

US Treasuries rallied aggressively and the curve flattened following worse than expected US data. The US dollar weakened against the major currencies. However the retail sales and PPI figures were better than past couple of months. Therefore, we believe the overnight weakening of the US dollar will not last too long and AUDUSD may come back down below 0.7600.

There are some key economic data releases to watch out for today – Westpac consumer sentiment (10:30am), Chinese GDP and industrial production (midday) and ECB press conference (10:30pm).

AUDUSD trend
AUDUSD DO

 

Source: AFR, SMH, CNBC, BBG, WSJ

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– Edited by Robert Ryan

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets.

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