Article / 04 May 2017 at 0:28 GMT

Today's Trade: Copper's slide, Wall St weakness drag down S&P/ASX200

Trading Desk / Saxo Capital Markets
Australia
  • Copper led a plunge in industrial metals amid rising inventories
  • The Aussie dollar took a dive on the tumbling copper price
  • Crude prices fell after US inventories declined by less than analysts had projected
  • Concern that higher US output will offset Opec efforts is weighing on crude prices
By Saxo Capital Markets Australia

Overnight and early trading
  • The S&P/ASX200 lost ground at the open; it was down 0.26% to 5,876.70 at 1019 AEST (0019 GMT). 
  • The Dow Jones Industrial Average, the US dollar and government bond yields edged higher Wednesday after the Federal Reserve held interest rates unchanged. Major indexes pared early losses after the Fed’s announcement, which some investors and analysts said signaled the central bank is looking past recent signs of tepid economic growth and holding course toward raising interest rates in June.
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 Copper has taken a plunge, dragging other industrial metals with it, and driving the commodity-driven Australian dollar lower as well. Photo: Shutterstock.

  • The Dow Jones Industrial Average rose 8.01 points or 0.04% to 20957.90. The S&P 500 slipped 3.04 points or 0.13% to 2388.13 and the Nasdaq Composite lost 22.82 points or 0.37% today to 6072.55. The VIX currently still sits below 11 at 10.68.
  • The yield on the benchmark 10-year U.S. Treasury note rose to 2.309%, from 2.296% on Tuesday. The US Dollar Index rose 0.5% to 90.11.
  • Materials shares in the S&P 500 fell 1%, weighed down by a decline in copper prices that came as growing inventories coincided with fears about slowing demand from China. Copper for May delivery dropped 3.5% to $2.5330 a pound in its biggest one-day percentage decline since September 2015.
  • Freeport-McMoRan lost 70 cents, or 5.5%, to $12.02. DuPont fell 94 cents, or 1.2%, to $79.00, among the biggest percentage declines in the Dow industrials.
  • A decline in Apple shares also dragged on major indexes after the iPhone maker late Tuesday reported an increase in profit but tepid demand for its flagship product.
  • Apple trimmed early declines Wednesday and closed down 45 cents, or 0.3%, at $147.06. Shares of the index-heavyweight had soared to records in recent sessions and tech stocks have been the best performer in the S&P 500 in 2017, rising 16%.
  • Shares of Akamai Technologies fell 9.70, or 16%, to 52.80 after the cloud services company on Tuesday gave a negative outlook for the second quarter.
  • Shares of Mondelez International rose 1.29, or 2.9%, to 45.03 after the company said it continued to improve profitability through cost-cutting, while Delphi Automotive shares added 8.56, or 11%, to 87.01 after the company unveiled a plan to spin off its powertrain systems segment.
  • The Fed’s signals came as the Institute for Supply Management on Wednesday said economic activity across the U.S. service sector increased in April. A gauge of private-sector hiring came in slightly above expectations, according to payroll processor Automatic Data Processing and Moody’s Analytics, two days ahead of the monthly jobs report.
  • The Stoxx Europe 600 fell less than 0.1%, weighed down by a 2.5% drop in the basic-resources sector. The index’s auto sector also pulled back 1% following downbeat U.S. auto sales figures on Tuesday.
  • Sources: Bloomberg, TradingFloor.com
International earnings
  • Thurday: 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
  • Bank of New York Australia ADR Index -3.1%, down most since Sept. 13, BHP Billiton ADR -3.4% to A$23.02 equivalent, lowest since Nov. 4; 0.8% discount to last Sydney close, Rio Tinto ADR -3.7% to $A51.69 equivalent, lowest since January 9; ~13% discount to last Sydney close.
  • National Australia Bank Ltd.’s first-half cash earnings rose as an increase in interest and trading income offset higher costs. Unaudited cash profit, which excludes one-time items, rose 2.3% to $A3.29 billion ($A2.44 bn) in the six months ended March 31. That was broadly in line with the median $A3.24 bn estimate of four analysts surveyed by Bloomberg. Over the past two years NAB has focused on its domestic retail and corporate business while selling off overseas assets.
  • NAB is the second of Australia’s big banks to report. ANZ on Tuesday reported first-half profit that missed analyst estimates as revenue growth flat-lined and the lender’s net interest margin shrank to the lowest level since the global financial crisis.
  • Gold futures for June delivery dropped 0.7% on Comex. Silver futures extended the longest losing streak since 2001 as concern mounted that a spate of disappointing economic data points to lower demand. Futures fell for a 12th day Wednesday as part of a broad sell-off in precious and base metals. The gold-silver cross rate climbed, with an ounce of gold buying about 75 ounces of silver, the most since June. In the past month, silver has dropped through key technical levels. Gold stocks in Toronto lost 0.16% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Crude closed near a six-week low in New York after US inventories declined by less than analysts projected. Crude stockpiles fell 930,000 barrels to 527.8 million, the Energy Information Administration reported Wednesday -- less than a third of the 3 mln barrel decline forecast by analysts surveyed by Bloomberg. Production advanced to 9.29 mln barrels a day last week, the highest since August 2015.
  • Oil has fallen the past two weeks on concern that increasing US output will offset efforts by Opec and its allies to eliminate a global glut. Opec will meet again May 25 in Vienna to decide whether to extend the cuts through the second half of the year. Russia believes in prolonging the curbs, a Russian government official said. WTI for June delivery rose 16 cents to close at $47.82/barrel on the New York Mercantile Exchange. Futures tumbled 2.4% to $47.66/b on Tuesday, the lowest close since March 21. Total volume traded was about 4% above the 100-day average. Brent for July settlement increased 33 cents, or 0.7%, to $50.79/b on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.61 premium to July WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • Spot iron ore prices were again unchanged settling at $68.68, although falls in the Chinese futures market suggest the market remain susceptible to further falls this week. Iron ore futures on the Dalian fell as much as 2.2% after China’s April steel PMI fell to 49.1. Sentiment was weaker on reports that major Chinese banks had raised interest rates on housing loans. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper led a plunge in industrial metals amid rising inventories and concern miners in the Philippines will ramp up nickel production after a key legal victory. Copper dropped as much as 3.6% after stockpiles tracked by the London Metal Exchange jumped by the most in almost two months. Nickel sank as much as 3.2% after Philippine lawmakers rejected the appointment of Gina Lopez as environment secretary, the activist-turned-regulator who initiated an unprecedented crackdown on the mining industry. The decline in prices helped push a gauge of mining stocks to the lowest level since January. Metals have also come under pressure after data this week signalled a slowdown in China’s manufacturing sector. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • Australia Pharma Industries (API): Trades ex-div.
  • ANZ Bank (ANZ): Dai-Ichi Life’s TAL mulling bid for ANZ’s wealth unit: AFR.
  • APN News & Media (APN): Annual meeting scheduled.
  • Arrium (ARI): Said to supply Adani with 56,000 tonnes of steel: AFR.
  • ASX (ASX): Nine-month NPAT up 3.2% to $A327.5mln.
  • Austal (ASB): U.S. Navy will delay award of new frigate construction by a year.
  • BHP Billiton (BHP): Australia’s Treasurer would oppose move of BHP listing: Herald Sun
  • Caltex (CTX): Annual meeting scheduled; NOTE: Co. in Feb. said it would consider Asia investments.
  • Crown Resorts (CWN): Detained China staff get case handed to prosecutor: AFR
  • Independence Group (IGO): Lopez decision a short-term negative for nickel, Argonaut says.
  • Iress (IRE): Annual meeting scheduled; NOTE: Co. in Feb. forecast strong rev., segment growth in 2017.
  • Mt Gibson (MGX): Iron ore’s bellwether crocodile eviction good news for bulls.
  • National Australia Bank (NAB): 1H results expected; NOTE: 1H cash profit est. A$3.24b (5 analysts).
  • Qantas (QAN): Scheduled to release 3Q trading update; NOTE: Co. in Feb. forecast 2H capacity growth 1%-2%; 2H unit revenue higher and 2H capex ~A$500mln.
  • Rio Tinto (RIO): Annual meeting scheduled for Sydney; NOTE: Co. hosted AGM in London last month.
  • Santos (STO): Annual meeting scheduled; Hony Partners seeks to buy up to 48m shares of Santos: Terms.
  • Transurban (TCL): Scheduled to host investor day; NOTE: Co. in Feb. forecast 2017 distribution $A0.155/share.
Broker upgrades, downgrades
  • Genworth Australia (GMA): Cut to sell at UBS, PT A$2.60.
  • Mineral Resources (MIN): Raised to hold at Morningstar.
  • Vocus (VOC): KKR, private equity considering bid for Vocus Group: Australian; Said to be in talks to sell data center business: AFR; Cut to neutral at Macquarie, PT A$3.
  • Nine Entertainment (NEC): Cut to hold at Morningstar.
  • Pact Group (PGH): Cut to neutral at Macquarie, PT A$6.80; Raised to hold at Morningstar; Cut to neutral at JPMorgan.
  • Primary Health (PRY): Cut to hold at Morningstar.
Nikkei 225 may test resistance

Since gapping up on the back of the result of the first round of the French election last Monday, JP225 has been soaring and looks to retest the major resistance level 19,700 that could form a potential triple top.

There is little doubt about the current momentum that is moving to the topside but we would look for shorting opportunity near 19,700 in the anticipation of some profit taking.
 
Nikkei 225 chart1

























 
Copper fall hurts AUD

Copper (HG) had its the worst plunge since 2015, and AUDUSD was a major casualty causing one of the biggest selloffs since Trump won the election last November.

The 0.7550 level limited the decline last week, but this time AUDUSD appears to have clearly broken this support level. The downward momentum remains strong as US dollar is rising and the next support level would be 0.7380.
 
Copper slide hits AUDUSD


























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Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

– Edited by Robert Ryan

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

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