Article / 27 April 2016 at 1:18 GMT

Today's Trade: Energy stocks give S&P/ASX200 an opening boost

Trading Desk / Saxo Capital Markets
  • AUDUSD has shown surprising resilience above the 0.77 handle
  • If CPI data beats expectations (0.2%), AUDUSD should rise above 0.78
  • Iron ore fell 5% after its impressive run came to an end
  • Base metals failed to rise on the weaker USD, with profit taking impacting prices

Saxo Capital Markets Australia

Overnight and early trading

  • The S&P/ASX200 headed into the green at the start of trading; the benchmark index was up 0.27% to 5,234.80 at 1102 AEST ( 0102 GMT).
  • Volume was light again in the US markets overnight with 6.39 billion shares changing hands which was well below the daily average for 2016.
  • The Dow Jones Industrial Average added 13.08 points, or 0.1%, to 17990.32. The S&P 500 rose 3.91 points, or 0.2%, to 2091.70. The Nasdaq Composite fell for a fourth session—its longest losing streak since January—dropping 7.50 points, or 0.2%, to 4888.28.
Gold prices have edged higher, while base metals have taken a hammering on profit taking. Photo: iStock

  • After the market close, Apple shares fell 8.2% in after-hours trading. The iPhone maker reported its first drop in revenue since 2003 and iPhone sales fell for the first time ever in the latest quarter.
  • Twitter shares were also down 14% in post-market trading after the social-media company reported revenue below analysts’ expectations and issued a downbeat outlook for second-quarter revenue.
  • In other earnings, the biggest laggard in the Dow was Procter & Gamble, dropping $1.86, or 2.3%, to just $79.55, shaving nearly 13 points off the index. The maker of household products such as Bounty paper towels reported higher profit but issued a downbeat earnings outlook.
  • Hershey fell 1.77, or 1.9%, to $89.60 after the candy maker said its profit and revenue declined in the last quarter.
  • Whirlpool fell 6.61, or 3.6%, to 179.43 after the appliance company posted lower profit
  • Health-care shares in the S&P 500 slipped 0.4%. Eli Lilly fell 1.67, or 2.1%, to 76.27 after the drugmaker cut its profit forecast for the year.
  • Energy shares rose as U.S. oil prices settled at a new 2016 high: Light, sweet crude for June delivery rose $1.40, or 3.3%, to $44.04 a barrel on the New York Mercantile Exchange, the highest settlement since November 10. Energy shares in the S&P 500 rose 1.4%, the most of any sector in the index
  • The CBOE Volatility Index (VIX) held near 14.
  • Over in Europe the Stoxx Europe 600 edged up 0.2%, with banks and energy companies leading gains. The Dax dropped 0.34%, the FTSE gained 0.38% and the CAC lost 0.28%.
  • Grabbing headlines was Standard Chartered Plc which jumped 9.8% to a four-month high, after reporting a surprise decline in loan impairments. BP Plc advanced 4.3% after unexpectedly posting a profit, despite falling oil prices. Swedbank AB rose 3% as net income beat analyst estimates.
  • Among other shares moving on corporate news, Volkswagen AG advanced 1.6% as deliveries rose in the first quarter, taking over Toyota Motor Corp.’s lead for global sales
  • ThyssenKrupp AG fell 2.5%, the most in the Dax, as France won a $A50 billion ($39bn) contract to build 12 Australian submarines, beating German and Japanese rivals.
  • Aircraft-parts maker Cobham Plc tumbled 17% after cutting its annual earnings forecast and announcing a rights issue.
  • Chipmaker Ams AG sank 16% after reporting a sales slide. Air Liquide SA fell 4.8 percent after posting revenue that missed projections.

Local markets
  • Bank of New York Australia ADR Index +1.5%. BHP Billiton ADR +1.7%. Rio Tinto ADR +1%.
  • Spot gold after being sold off in the European markets and was bought back up in the US market following weaker than expected Durables Data. Closing the session up 0.5% to $1,244 gold continues its formation of a pennant ahead of the Federal Open Market Committee meeting. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR
  • Crude oil had another strong run last night with WTI and Brent up 4.2% and 3.6% respectively to $44.50/barrel and $46.17/b. Stronger investor sentiment on fundamental and a weaker US dollar drove oil higher. BP has suggested the markets may rebalance by year's end. Along with a rise in the oil price also came with support of petrol futures also rising well. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore has fallen 5% to $62.78/tonne after its impressive run this month. Steel capacity looks to be facing restrictions in China at present. Officials in Hebei province announced that mills that had previously closed would not be allowed to reopen. This is part of an effort for the government to commit to its policy change by moving in to more technological value-added industries instead of relying on manufacturing. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals failed to rise with a weaker USD, instead seeing profit taking from last week’s strong run. Aluminium and copper fell 0.4% and 0.5% to $1,645 and $4,964. Aluminium has seen its greatest number of futures contracts turned over on the Shanghai Exchange as a steel futures surged. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC.
  • ANZ Bank (ANZ), Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac (WBC): Fosun might consider 2%-5% stake in Australian lender: AFR.
  • APN Outdoor (APO): Annual meeting scheduled.
  • BlueScope Steel (BSL): To sell USD 5NC2 bonds.
  • Broadspectrum (BRS): Australia says PNG legal decision won’t change border policies
  • CSL (CSL): Baxter 1Q EPS beats ests; raises 2016 view.
  • Rio Tinto (RIO): Rio Tinto Rossing 2015 loss after tax N$385m vs 2014 N$91m loss
  • Woolworths (WOW): NSW state govt investigating potential breach of retail trading laws: AFR.
  • E*TRADE Australia joins ANZ Banking Group's auction list: AFR.
Earnings results due out this week

  • Wednesday: Facebook, Boeing, GlaxoSmithKline, United Technologies, Total, Mondelez, General Dynamics, Dr Pepper Snapple, Boston Scientific, Comcast, Baker Hughes, Anthem, Nasdaq OMX, Hess, International Paper, Southern Company, Northrop Grumman, Goodyear Tire, Marriott.
  • Thursday:, Viacom, Amgen, Gilead, ConocoPhillips, Deutsche Bank, Colgate-Palmolive, Bristol-Myers Squibb, MasterCard, Altria, Ford, Dow Chemical, Celgene, Air Products, Aetna, UPS, Eaton, Beazer Homes, Marathon Petroleum, Potash
  • Friday: ExxonMobil, Chevron, AstraZeneca, Eaton, VF Corp, Cabot Oil, Calpine, Moody's, American Tower, Tyco, Phillips 66

Stock to watch: Flight Centre (FLT)

The travel booking company Flight Centre has been in an upward trend following an aggressive selloff in June last year. We anticipate FLT is ready to break this recent trend as sentiment on the stock goes against the general market sentiment. Since February when the market has rallied, FLT has only been sold down.

On the daily chart FLT has broken its 100 day moving average and is now on its upward floor of support. Breaking through the 200DMA will set anticipation for a further step down. As the RSI is still not in oversold territory, the selloff will not be as sharp but instead would be a gradual move down.

Looking at the weekly chart, we too are at a crucial point in time as the 100DMA is crossing over the 200DMA. We expect the step down will lead to a sell off towards $36, which is the 61.8% Fibonacci extension on a daily chart and the 38.20% Fibonacci retracement on the weekly chart.

Flight Centre (FLT) share price trend
New trade: Qantas

The stock price of Qantas (QAN) has been plunging since 18-April 18, when the airline announced that its low-cost spinoff, Jetstar, was cutting back planned flights on domestic routes. The price has now fallen more than 20% since last Monday and QAN is now approaching the key psychological level of $3.17, which has been a major support/resistance levels in the past.

We believe this level $3.17 would provide a good reward/risk buy opportunity with a stop below $3 in anticipation of a retracement towards the first profit target of $3.50 and potential longer term target of $4. The risk is further strengthening of the oil price.

Buy: QAN:xasx (CFD)

Entry: Market

Target 1: $3.50

Target 2: $4.00

Stop loss: $2.88

Qantas Airways' share price trend
Broker upgrades, downgrades

  • Icar Asia (ICQ): Cut to speculative hold vs speculative buy at Bell Potter.
  • Myer Holdings (MYR): Raised to buy vs hold at Morningstar.
  • Select Harvests (SHV): Cut to neutral vs buy at Goldman Sachs.

Open positions

AUDUSD shows resilience

The AUDUSD maintained resilience strength above the 0.77 handle and the short term uptrend line remained intact ahead of this morning’s CPI figures, due out at 1130 AEST (0130 GMT).

The quarterly CPI data has been declining in the past three occasions, so we would not be surprised to see yet another weak print. But if the data beats expectations (0.2%), the AUDUSD should climb back above the 0.78 handle. The resistance levels remain as 0.7834-0.7850

Big banks give S&P/ASX200 a lift

Yesterday S&P/ASX200 (AUS200.I) found solid support above 5,200 as the big four banks continued to show strength. Volatility is expected to rise in the next 24 hours as we wait for the Australian CPI number, as well as the Federal Open Market Committee interest rate decisions (tomorrow morning 4am).

It is also interesting to notice that the Nasdaq seems to be under heavy selling pressure on the back of the recent earnings, which have been disappointing, but the e-mini S&P500 remains bid up even though the three of the biggest US stocks in market cap terms (AAPL, GOOGL and MSFT) have announced the soft quarterly results. Unless we see a clear breakout and daily close below 5,200, the upside momentum for the S&P/ASX200 is expected to persist.

S&P/ASX200 finds support
Charts: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more.

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. Watch our daily morning call on Periscope at 0945 AEST: #SaxoAPAC


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