Article / 02 August 2017 at 0:44 GMT

Today's Trade: Crude oil slide weighs on S&P/ASX200

Trading Desk / Saxo Capital Markets
Australia
  • Gold has hit a seven-week high, while copper has held near two-year highs
  • Oil slid lower on an industry report showing a surprise jump in US inventories
  • The DJIA saw its sixth consecutive session of gains
  • The Shanghai Composite looks set break the key resistance level at 3,300
  • Iron ore futures in China held near the highest level since March
By Saxo Capital Markets Australia

Overnight and early trading
  • The S&P/ASX200 was down 0.31% to 5,754.40 at 1038 AEST (0038 GMT).
  • Stocks in Japan pointed to a higher start and U.S. equity-index futures climbed after results from Apple Inc. to Mitsubishi UFJ Financial Group Inc. buoyed sentiment.
  • Nasdaq futures advanced after Apple projected revenue in the current quarter that topped analysts’ estimates, while shares of Mitsubishi UFJ and Honda Motor Co. posted gains in New York trading following their results. Treasuries climbed with the dollar as data gave mixed signals on the strength of American economic growth.
  • Apple Inc. delivered strong revenue in the June quarter, typically its weakest period, by re-energizing iPad and Mac sales and keeping purchases of iPhones steady as consumers anticipate a new phone this fall. The company’s revenue jumped 7.2% from a year earlier, its best growth in seven quarters, as shipments of Apple’s flagship product rose 1.6% to 41.03 million iPhones. Profit for the period rose 12% to $8.72 billion—the company’s second consecutive quarterly increase in earnings after a yearlong downturn.
  • The Dow Jones Industrial Average logged its sixth consecutive session of gains Tuesday, climbing within striking distance of 22,000.


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Iron ore has stormed higher recently as mills in China benefit from rising product prices, which in turn boosts miners including Rio Tinto, BHP Billiton and Vale SA. Photo: Shutterstock

  • The blue-chip index surged at the market’s opening and got within 10 points of the milestone around midday, before paring gains toward the close. The Dow industrials notched their fifth closing record in a row while the S&P 500 and Nasdaq Composite ended three-session losing streaks.
  • In a sign that U.S. stocks could be poised for further advances, index heavyweight Apple reported quarterly results that topped analysts’ expectations after the market closed. Its shares rose 6.1% in after-hours trading.
  • U.S. stocks have hit fresh records this summer, buoyed by strong corporate earnings and signs of resurgent global growth.
  • That should help major indexes continue to climb, investors say, even as many have doubts over the timing and scale of potential policy changes from the Trump administration, such as tax cuts and infrastructure spending.
  • The Dow industrials advanced 72.80 points, or 0.3%, to 21963.92. The S&P 500 rose 6.05 points, or 0.2%, to 2476.35, and the Nasdaq Composite added 14.82 points, or 0.2%, to 6362.94.
  • Bank shares lifted U.S. stock indexes, with the KBW Nasdaq Bank Index adding 0.8%. Shares of Goldman Sachs Group rose $1.67, or 0.7%, to $227.00 and J.P. Morgan Chase climbed 1.23, or 1.3%, to 93.03, giving a boost to the Dow industrials.
  • Boeing , which has helped propel the blue-chip index this year, was one of the stocks standing in the way of the index reaching its latest thousand-point milestone Tuesday. Boeing shares dropped 3.02, or 1.3%, to 239.44, shaving roughly 21 points off the index.
  • Although corporate earnings generally have been solid, soft U.S. economic data Tuesday weighed on some corners of the market.
  • Shares of car companies fell, with General Motors down 1.22, or 3.4%, to 34.76 and Ford Motor losing 27 cents, or 2.4%, to 10.95 after major U.S. auto makers said sales dropped sharply in July. The two companies’ stocks were among the S&P 500’s worst performers.
  • Government-bond prices climbed after data showed U.S. factory activity decelerated in July from the prior month, and the Federal Reserve’s preferred measure of inflation, the price index for personal-consumption expenditures, was flat in June from the prior month. The yield on the 10-year U.S. Treasury note fell to 2.253% from 2.292% Monday. Yields fall as prices rise.
  • Elsewhere, the Stoxx 600 Europe rose 0.6%, lifted by a raft of upbeat earnings reports. Data also showed that Eurozone growth gathered steam in the second quarter.
  • Source: Bloomberg, TradingFloor.com, WSJ.com

US earnings
  • Wednesday: Vornado Realty Trust, Eaton Corp PLC, Xerox Corp, Cummins Inc, Incyte Corp, Pfizer Inc, Air Products & Chemicals Inc, Simon Property Group Inc, Invesco Ltd, Abercrombie & Fitch Co, American Eagle Outfitters Inc, Carter's Inc, Chico's FAS Inc, Express Inc, Callaway Golf Co, ClubCorp Holdings Inc, Foot Locker Inc, Under Armour Inc, Gap Inc/The, Children's Place Inc/The, Francesca's Holdings Corp, Finish Line Inc/The, NIKE Inc, Turning Point Brands Inc, Urban Outfitters Inc, Columbia Sportswear Co, Lululemon Athletica Inc, L Brands Inc, Ascena Retail Group Inc, Hanesbrands Inc, Republic Services Inc, Martin Marietta Materials Inc, Phillips 66, HCP Inc, Ecolab Inc, Emerson Electric Co, Alexandria Real Estate Equities Inc, ResMed Inc, Newfield Exploration Co, Pioneer Natural Resources Co, Assurant Inc, Allstate Corp/The, Devon Energy Corp, EOG Resources Inc, Illumina Inc, Hanesbrands Inc, Apple, , DaVita Inc, Fiserv Inc, Time Warner Inc, Entergy Corp, NiSource Inc, Garmin Ltd, Vulcan Materials Co, Dominion Energy Inc, Exelon Corp, AutoNation Inc, AMETEK Inc, Cardinal Health Inc, Fidelity National Information Services Inc, GGP Inc, Hologic Inc, MetLife Inc, Cincinnati Financial Corp, Federal Realty Investment Trust, American Water Works Co Inc, Equinix Inc, CA Inc, Citrix Systems Inc, CF Industries Holdings Inc, Prudential Financial Inc, CenturyLink Inc, Lincoln National Corp, Occidental Petroleum Corp, Concho Resources Inc, Marathon Oil Corp, Macerich Co/The, AvalonBay Communities Inc, Fortune Brands Home & Security Inc, ANSYS Inc, Williams Cos, Humana Inc, Delphi Automotive PLC, Mondelez International Inc, Southern Co/The, Cardinal Health Inc
  • Thursday: Boston Properties Inc, Entergy Corp, Kroger Co/The, Akamai Technologies Inc, Republic Services Inc, Accenture PLC, Abaxis Inc, Alere Inc, Exact Sciences Corp, GenMark Diagnostics Inc, T2 Biosystems Inc, Quest Diagnostics Inc, Meridian Bioscience Inc, Quidel Corp, Vermillion Inc, IDEXX Laboratories Inc, Natera Inc, Laboratory Corp of America Holdings, Illumina Inc, OraSure Technologies Inc, HTG Molecular Diagnostics Inc, Hologic Inc, Genomic Health Inc, Genel Energy Plc, Cisco Systems Inc, Silver Spring Networks Inc, Itron Inc, ABB India Ltd, Agnico Eagle Mines Ltd, Skyworks Solutions Inc, Garmin Ltd, Vulcan Materials Co, Exelon Corp, AutoNation Inc, ONEOK Inc, Molson Coors Brewing Co, Devon Energy Corp, Extra Space Storage Inc, Newfield Exploration Co, Southern Co/The, Qorvo Inc, Symantec Corp, American International Group Inc, CenturyLink Inc, Fortune Brands Home & Security Inc, Hologic Inc, Citrix Systems Inc, Symantec Corp,Qorvo Inc, CA Inc, Level 3 Communications Inc, Equinix Inc, Cognizant Technology Solutions Corp, WestRock Co, Willis Towers Watson PLC, Pinnacle West Capital Corp, Regeneron Pharmaceuticals Inc, Chesapeake Energy Corp, AmerisourceBergen Corp, Allergan PLC, CenterPoint Energy Inc, Noble Energy Inc, Ball Corp, Global Payments Inc, Costco Wholesale Corp, DISH Network Corp, L Brands Inc, PPL Corp, Michael Kors Holdings Ltd, Monster Beverage Corp, Quanta Services Inc, Aetna Inc, Becton Dickinson and Co, Motorola Solutions Inc, Microchip Technology Inc, Alliant Energy Corp, Consolidated Edison Inc, Fluor Corp, PerkinElmer Inc, Kraft Heinz Co/The, Activision Blizzard Inc, Stericycle Inc, Viacom Inc, Regency Centers Corp, Clorox Co/The, Wyndham Worldwide Corp, NRG Energy Inc, Apache Corp, Yum! Brands Inc, Church & Dwight Co Inc, Duke Energy Corp, SCANA Corp, Intercontinental Exchange Inc, Parker-Hannifin Corp, L Brands Inc, Cognizant Technology Solutions Corp, MetLife Inc, Principal Financial Group Inc, NRG Energy Inc, Kellogg Co, Becton Dickinson and Co, Global Payments Inc, Yum! Brands Inc, WestRock Co, Wyndham Worldwide Corp, Aetna Inc, Intercontinental Exchange Inc, PPL Corp, ANSYS Inc, Regeneron Pharmaceuticals Inc, AmerisourceBergen Corp, Allergan PLC, Concho Resources Inc, Chesapeake Energy Corp, Willis Towers Watson PLC, CF Industries Holdings Inc, American International Group Inc, American Water Works Co Inc, Union Pacific Corp, Williams Cos Inc
  • Friday: Lincoln National Corp, Duke Energy Corp, CenterPoint Energy Inc, Marathon Oil Corp, Church & Dwight Co Inc, Progressive Corp/The, Molson Coors Brewing Co, Abaxis Inc, Alere Inc, Exact Sciences Corp, GenMark Diagnostics Inc, T2 Biosystems Inc, Quest Diagnostics Inc, Meridian Bioscience Inc, Quidel Corp, Vermillion Inc, IDEXX Laboratories Inc, Natera Inc, Laboratory Corp of America Holdings, Illumina Inc, OraSure Technologies Inc, HTG Molecular Diagnostics Inc, Hologic Inc, Genomic Health Inc, Synchrony Financial, SAP SE, Paychex Inc, Oracle Corp, Workday Inc, NetSuite Inc, Ultimate Software Group Inc/The, Baxter International Inc, DaVita Inc, Fresenius SE & Co KGaA, Cincinnati Financial Corp, Federal Realty Investment Trust, Parker-Hannifin Corp, Occidental Petroleum Corp, Prudential Financial Inc, Ball Corp, Norfolk Southern Corp, DISH Network Corp, Hasbro Inc, Pinnacle West Capital Corp, Macerich Co/The, Noble Energy Inc, AvalonBay Communities Inc, Clorox Co/The, Apache Corp, SCANA Corp, Western Union Co/The, Viacom Inc, Activision Blizzard Inc, Western Union Co/The, Microsoft Corp, Microchip Technology Inc, Motorola Solutions Inc, Electronic Arts Inc, PerkinElmer Inc, Kraft Heinz Co/The, Stericycle Inc, Fluor Corp, , Newell Brands Inc, CBOE Holdings Inc, Ameren Corp, Berkshire Hathaway Inc, DENTSPLY SIRONA Inc, Cigna Corp, Aon PLC, Fastenal Co, Cigna Corp, CBOE Holdings Inc, Newell Brands Inc, Aon PLC, Sempra Energy
Local markets
  • Bank of New York Australia ADR Index -0.2%, BHP Billiton ADR -0.7% to A$25.97 equivalent, 0.7% discount to last Sydney close, Rio Tinto ADR -0.5% to A$59.15 equivalent, ~10% discount to last Sydney close
  • Gold prices rose to a seven-week high on Tuesday, after U.S. economic data showed lukewarm inflation and nearly flat consumer spending, raising the question of whether the Federal Reserve will raise interest rates in the coming months. Spot gold was up 0.19% to $1,271.51/oz. It rose 2.2% last month, its biggest monthly gain since February. U.S. gold futures for December settled at $1,279.40/oz. The dollar edged higher as investors consolidated positions, after the falling to a 15-month low on US political uncertainty and lacklustre data, which kept the Fed's policy outlook uncertain. A firmer dollar makes commodities such as gold that are priced in the greenback more expensive to buyers outside of the US. A measure of US factory activity fell from a near three-year high in July, consumer spending barely rose, and there was little sign of inflation. Gold stocks in Toronto added 0.68% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil extended its slide below $50/barrel after an industry report was said to show U.S. crude inventories unexpectedly jumped. Crude stockpiles climbed by 1.78 million barrels last week in an American Petroleum Institute report released Tuesday, according to people familiar with the data. That would be the first crude build since the end of June when compared with EIA data. Yet, a Bloomberg survey showed nationwide crude inventories probably fell last week. The EIA will release its inventory data Wednesday.
  • Oil settled above $50/barrel for the first time since May on Monday. While Opec and its allies work to rebalance the market and trim global inventories, doubts remain that supplies will increase from elsewhere, with the US oil rig count at the highest level since April 2015. WTI for September delivery was at $48.68/b on the New York Mercantile Exchange in aftermarket trading. Prices closed at $49.16/b Tuesday. Total volume traded was about 41% above the 100-day average. Brent for October settlement dropped 94 cents to end the session at $51.78/b on the ICE Futures Europe exchange, and traded at a $2.49 premium to WTI for the same month. The September contract expired Monday. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • Iron ore futures in China held near the highest level since March, with investors on the Dalian Commodity Exchange shuffling positions amid a contract rollover as the commodity’s most-active price shifts forward by four months to January. The raw material for September delivery ended 0.7% lower at 566.5 yuan a tonne after earlier gaining to 582 yuan, a four-month high on an intraday basis. Meanwhile, the January contract was little changed at 546.5 yuan. Spot iron ore was little changed dropping 0.2% or $0.14 to close at $73.56. Last Friday, the September contract was busiest by open interest and volume; on Monday it ceded the lead in open interest; and on Tuesday it was behind on both measures, according to data compiled by Bloomberg. Iron ore has stormed higher in recent weeks as mills in the top steel producer nation benefit from rising product prices and strong profit margins, aiding miners including Rio Tinto, BHP Billiton Ltd. and Vale SA. The price on the Dalian exchange, which trades the benchmark yuan-denominated contract, surged 7.6% on Monday after the steel industry’s purchasing managers’ index hit a 15-month high in July, adding to signs of buoyant demand. Last week, the Dalian exchange halved intraday trading fees for iron ore. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper prices held near two-year highs, supported by expectations of stronger demand from China. Benchmark copper on the London Metal Exchange closed down 0.4% at $6,345 a tonne. The metal widely used in power and construction hit $6,430 on Monday, its highest since May 2015. Copper stocks: OZL, SFR.
  • Nickel rose for an eighth straight session amid speculation supply may tighten as producers struggle to survive at current prices. LME nickel finished 0.8% higher at $US10,290 a tonne. Prices need to rise ~10% before Indonesian nickel smelters that were shut this year could restart work, according to Jonatan Handojo, vice chairman of the Indonesian processing and Refining Industry Association. In June, he said ~13 smelters, some still under construction, stopped operating because prices fell below costs. Three-month tin closed down 0.6% at $US20,525 a tonne, but close to the $US20,905 a tonne hit last week, its highest since the middle of January on worries about supplies from China. Aluminium ended down 0.6% at $1,907, zinc closed down 0.5% at $2,780 and lead finished 0.2% higher at $2,338 a tonne. Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • Activist investors find targets in U.K., Australia.
  • Housing crisis lands homeless Sydneysiders on RBA doorstep.
  • Aristocrat Leisure (ALL): Peer International Game FY adj. Ebitda view midpoint tops est.
  • Astro Japan (AJA): To sell property interests to funds managed by Blackstone
  • BHP Billiton (BHP): Is said to plan auction for Gregory Crinum coal asset: AFR
  • BWP Trust (BWP): FY results expected; NOTE: FY17 adj. net income est. A$111.7m (7 analysts).
  • Fonterra (FSF): Whole milk powder avg price rises to $3,155/t.
  • Fortescue (FMG): TransAlta responds to Fortescue on South Hedland Power Station.
  • Genworth Australia (GMA): 1H results expected; NOTE: Co. in Feb. forecast 2017 GWP, net earned premium both down 10%-15% vs 2016.
  • James Hardie (JHX): Home buidling products peer Louisiana- Pacific reports 2Q adj EPS cont ops beats est.
  • Macquarie (MQG): Is said to hire Jones, Blanchard for cash equities.
  • National Australia Bank (NAB): No plans to exit own wealth product manufacturing: AFR
  • ResMed (RMD): 4Q adj. EPS, revenue top estimates.
  • Rio Tinto (RIO): 1H results expected after market close; NOTE: 1H adj. net income est. $4.27b (5 analysts).
  • Wesfarmers (WES): Said to hire Ed Bostock as Head of Business Devt: AFR.
  • Woolworths (WOW): ACCC decision on BP’s buy of Woolworths gas stations due August 10.
Broker upgrades, downgrades
  • Carsales.com (CAR): New neutral at JPMorgan, price target $A12.50.
  • CYBG (CYB): Raised to outperform at Credit Suisse, PT $A5.25.
  • Isentia (ISD): Cut to hold at Morningstar.
  • LendLease (LLC): Cut to underweight at Morgan Stanley, PT $A16.45.
  • Seek (SEK): New overweight at JPMorgan, PT $A20.
  • Stockland (SGP): Raised to overweight at Morgan Stanley, PT $A4.50.
  • Sundance Energy Australia (SEA): Cut to speculative buy at Canaccord, PT $A0.19.
  • OZ Minerals (OZL): Cut to sell at Morningstar.
  • REA Group (REA): New neutral at JPMorgan, PT $A70.

Earnings
  • Wednesday: ResMed Inc, Genworth Mortgage Insurance Australia Ltd, BWP Trust, Rio Tinto Ltd, Resolute Mining Ltd, Seven West Media Ltd
  • Thursday: Seven Group Holdings Ltd, Suncorp Group Ltd, Downer EDI Ltd
  • Friday: Crown Resorts Ltd, Tabcorp Holdings Ltd

XAGUSD falls short

Silver (XAGUSD) fell short of $17/oz handle and seems to have reversed off $16.90 which corresponds to 50% retracement (from the 2017 high of $18.63 and the 2017 low of $15.17). This overnight price action was quite surprising as 10 year treasury yields declined.

The downtrend has been breached three times already, but daily close is yet to be seen above it. A potential reversal could be in the making if silver fails to stay above $16.90.
 
XAGUSD chart
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Shanghai Composite rallies
 
Yesterday Shanghai composite index (SHCOMP) rallied, reaching the high point that preceded the downtrend that started in November last year. Since May, SHCOMP has gained 10% and it is looking to break the key resistance level at 3,300.

Similarly CNQ7 (FTSE China A50 index) and CHINA50AUG17 are also showing strong price actions.

Shanghai Composite edges near 3,300
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Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

For more on forex, click here.

– Edited by Robert Ryan

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


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