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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 05 April 2018 at 1:11 GMT

Today's Trade: Early advances mirror Wall St gains

Trading Desk / Saxo Capital Markets
Australia


  • Shares have pushed higher in early trade amid broad buying
  • The ASX 200 index is up 16 points or 0.3% at 5778
  • Most sectors are up and banks and consumer staples are doing well

By Saxo Capital Markets

Overnight and early trading

Wall Street rebounded as officials sounded hopeful that a trade war can be avoided by negotiation.

In repsonse, most sectors in the ASX/S&P 200 are up with banks and consumer staples are doing well, along with Scentre, Medibank Private, Treasury Wine, Boral, James Hardie, Caltex and Qantas doing well.

Stocks across Asia were also set for a higher start after a reassessment of the Trump administration’s trade restrictions triggered an about-turn in US equities. Treasuries and the dollar fell.

Futures signaled gains for equities in Japan and Australia after the US equities recovered from deep losses.

Major stock indices recovered early losses and closed sharply higher overnight, as investors bet the recent trade disruptions between the US and China are negotiating tactics and the countries will ultimately reach a compromise.

Shares of manufacturers and machinery companies initially came under pressure after China unveiled plans for a series of retaliatory tariffs on American goods.

But stocks erased those declines in afternoon trading, as some analysts said knee-jerk selling on worries that protectionist trade policies could slow global economic growth might have been overdone.


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 It's up to people here: The Aussie market played to its Wall St script. Photo: Shutterstock

Trading was volatile again, with the Dow Jones Industrial Average swinging in a 741-point range. The S&P 500 logged a move of at least 1% for the eighth time in the past nine sessions, posting consecutive gains for the first time in nearly a month. Ten of the index’s 11 sectors closed higher.

Despite initial unease that trade policies could result in higher costs for manufacturers of everything from computer chips to smartphones, some investors said the tariff announcements seem more like negotiating tactics.

The Dow industrials added 230.94 points, or 1%, to 24,264.30, after dropping as much as 510 points in the opening minutes of trading.

The S&P 500 climbed 30.24 points, or 1.2%, to 2,644.69. Both indexes remain more than 7.5% below their January records and in negative territory for 2018. The Nasdaq Composite gained 100.83 points, or 1.5%, to 7,042.11.

China’s tariffs would place 25% duties on major US exports to China including airplanes, autos and soybeans, covering 106 categories of products and affecting $50 billion of goods.

The announcement came shortly after the Trump administration unveiled plans to impose tariffs of 25% on Chinese products worth $50 billion in addition to the levies introduced on steel and aluminum last month. Retaliatory Chinese levies on US pork and fruit went into effect earlier this week.

Aerospace giant Boeing was among the biggest decliners Wednesday, falling $3.38, or 1%, to $327.44. Tractor seller Deere dropped $4.47, or 2.9%, to $148.57.

Recent trade worries have come as unease over stricter regulation and data privacy have dragged down high-flying technology and internet stocks that led the market higher in recent months.

Facebook shares fell $1.01, or 0.7%, to $155.10 after lawmakers said founder and chief Executive Mark Zuckerberg will appear at a House Committee hearing to answer questions on the firm’s handling of user data on April 11.

The social media firm also said the Facebook information of up to 87 million people, more than initially reported, may have been improperly shared with an analytics firm tied to President Donald Trump’s 2016 campaign.

Widespread selling of big technology and internet stocks moderated Wednesday, with the S&P 500 information technology sector adding 1.4%.

Some investors are looking ahead to the first-quarter earnings season, which begins in earnest next week. Some think robust profit growth can give stocks a boost moving forward.

Home builder Lennar and auto retailer CarMax were among the best performers in the S&P 500 Wednesday after reporting earnings.

The threat of higher interest rates around the world has also hung over global markets during the recent bout of volatility.

Investors are awaiting Friday’s jobs report for the latest reading on the US economy and clues about whether the Federal Reserve will raise short-term borrowing costs two or three more times this year.

The yield on the benchmark 10-year U.S. Treasury note edged up to 2.788% from 2.784% Tuesday. Yields rise as bond prices fall.

Elsewhere, the Stoxx Europe 600 fell 0.5%.

Information sources: Bloomberg, TradingFloor.com, WSJ.com, CNBC
                                                                                  
Local markets and commodities

  • S&P/ASX 200 Index futures rose 0.4% to 5,767.. Futures relative to fair value suggest an early gain of 0.4%.
  • Bank of New York Australia ADR Index is up 1.0% to 265.9, BHP Billiton ADRs are up 0.5% to A$28.75 equivalent, a 0.1% premium to last Sydney close, Rio Tinto ADRs are down 0.6% to A$66.07 equivalent, a ~11% discount to last Sydney close.
  • Gold prices reversed from a one-week high, to finish the session flat, as the USD dipped versus the yen and share markets faltered after China retaliated against a US move to slap tariffs on $50 billion worth of its imports. Retaliation from China, the worlds largest gold consumer, earlier propelled spot gold prices to a one-week high at $1,348.06/oz as the USD tumbled against the yen and equities dipped. As Wall Street and European stocks pulled back from declines of more than 1% and as the dollar pared losses, gold shed some of its gains. The market now looks ahead to US nonfarm payrolls on Friday, with stronger-than-expected data a risk for gold as it will likely support the dollar and calm fears over growth. Goldies lost close to 1% in Toronto. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil erased most of its losses during the session after a larger-than-expected drop in crude stockpiles. West Texas Intermediate for May delivery fell 14 cents or 0.2% to settle at $63.37/barrel after shedding as much as 2.3% in losses at its trough. Total volume traded was about 14% above the 100-day average.
  • Brent for June settlement slid 10 cents to end the session at $68.02 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $4.69 premium to June WTI. The profitability of making diesel dropped as much as 5.9 percent to $19.09 a barrel during the session. US gasoline inventories fell for a fifth week, while distillate stockpiles rose, according to the government report. Supplies at the sprawling pipeline and storage complex in Cushing, Oklahoma, jumped by 3.67 million barrels to a level last seen in early February. On top of that, output from American oil wells climbed for a sixth straight week to 10.46 million barrels a day. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • The bulk commodity markets couldn’t escape the lingering concerns over the trade conflict, with iron ore prices remaining under pressure. Steel and futures in China fell heavily, with rebar down 1.1% as investors worried about  the impact of tighter credit conditions in China and a softening real estate market. However, iron ore futures were down even further as traders brushed over concerns about supply disruptions in Brazil. With the market outlook remaining cloudy, traders are reluctant to restock ahead of the normal seasonally upturn in demand in coming months. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Copper prices retreated as investors reacted to the potential fallout of an escalating trade conflict between the US and China. Copper for May delivery closed down 1.7% at $3.0105 a pound on Comex. China stepped up its trade fight with the US by targeting high-value American exports, from airplanes to soybeans. The move came after the Trump administration unveiled plans to impose tariffs of 25% on Chinese products worth $50 billion. Nickel dropped 1.6%, leading most metals lower, however LME aluminum bucked the trend as the only metal to rise, gaining 1.1% to $1,999/t.
  • In other news: Ex-Dividend: ARB Corp., AUB Group, Harvey Norman, Melbourne IT, Macquarie Atlas, Nufarm, Sigma Healthcare, Silver Chef, Sealink Travel; Varde, Nomura Are Said to Back $2.2b Rio Tinto Mine Deal: AFR; AWE (AWE AU): Mitsui Declares AWE Offer Unconditional After Stake Passes 50%; AGL Energy (AGL AU): Suitors Emerge for 50-Year-Old Coal Plant Owner Wants to Shut; BHP (BHP AU): Dalrymple Bay Is Said to Declare Force Majeure on Coal Loadings; BHP (BHP AU): Miners Seen Preparing to Expand Copper Projects in North Chile; BHP (BHP AU): BHP Union Leader Sees Good Prospects for Wage Deal at Giant Mine.


Broker re-gradings 


- BHP (BHP AU): BHP Upgraded to Buy at Citi
- Perseus (PRU AU): Perseus Upgraded to Buy at UBS; PT Set to A$0.55
- South32 (S32 AU): South32 Upgraded to Neutral at Citi
- ResMed (RMD): ResMed Falls as Citi Cuts ADRs to Neutral on Valuation


GBPJPY

GBPJPY extended gains to break the recent downtrend (from Feb 18 high 156.61) but 150.40 should remain as a valid resistance level as GBPJPY failed to show a daily close above it for more than two months. 

VIX declined overnight as the sentiments improved thus we look to add more bullish exposure on GBPJPY if we see witness a daily close above 150.40.

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


-- Edited by Adam Courtenay


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


1y
Anatoly Vyacheslav Anatoly Vyacheslav
This comment has been redacted
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Jadira F. Norton Jadira F. Norton
AUD strong gains overnight:: Trading Desk great deal::

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