Article / 21 March 2018 at 0:15 GMT

Today's Trade: Equities rise but AUD in spotlight

Trading Desk / Saxo Capital Markets
Australia

  • The S&P/ASX 200 Index opened 0.4% higher, up 25.6 points
  • James Packer has resigned from Crown Resorts for personal reasons
  • AUDUSD makes a fresh low and made a daily close below the 0.77 handle


Overnight and early trading  

US stocks edged higher, led by energy- related companies, as equity markets shrugged off weakness in technology and threats of global trade barriers. Government bond yields increased as investors braced for higher US borrowing rates.

The Dow Jones Industrial Average climbed 116.36 points, or 0.5%, to 24,727.27. The S&P 500 rose 0.1%, or 4.02 points, to 2,716.94, and the technology-heavy Nasdaq Composite rose 0.3%, or 20.06 points, to 7,364.30 after the indexes on Monday logged their biggest daily losses since Feb. 8 as tech stocks led a broad downturn.

The S&P 500’s tech sector ended Tuesday’s session in the black, rising less than 0.1%, even as shares of Facebook continued falling, shedding $4.41, or 2.6%, to $168.15. Its 9.2% drop this week marks the company’s worst two-day stretch since February 2016.

The Federal Trade Commission is investigating the company over the use of personal data by an analytics firm tied to President Donald Trump’s campaign, according to people familiar with the matter.

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 US crosses such as the AUD are likely to fall as the next Fed hike is in play. Photo: Shutterstock

Other social media stocks like Twitter, which dropped $3.63, or 10%, to $31.35, remained under pressure, while shares of Oracle fell 4.90, or 9.4%, to $47.05, after the company late Monday released guidance that didn’t impress investors.

Some other tech-oriented companies staged a rebound. Square added $3.11, or 5.7%, to $57.69, and Amazon rose $41.58, or 2.7%, to $1,586.51. Amazon on Tuesday overtook Alphabet as the US company with the second-largest market cap. Shares of Alphabet fell $4.27, or 0.4%, to $1,095.80.

The energy sector helped drive the S&P 500, rising 0.8% as crude oil prices added 2.2% to $63.40/barrel.

But shares of utility companies, which are seen as bond-like by investors because of their hefty dividends, fell 0.5%. Shares of telecom companies and real estate firms fell 1% and 0.1%, respectively, while the yield on the benchmark 10-year Treasury note rose to 2.881% from 2.844% the previous day.

Meanwhile, the Dow’s gains were buoyed by shares of Boeing, which rose 5.87, or 1.8%, to 337.63. Caterpillar climbed $1.91, or 1.3%, to $154.06. Both stocks had been beaten down in recent sessions by worries about the Trump administration’s plans to roll out tariffs on steel and aluminum imports.

Sources: Bloomberg, TradingFloor.com, WSJ.com, CNBC

Local markets and commodities

  • S&P/ASX 200 Index futures are up 0.1% to 5930 as of 6:59 a.m. Futures relative to fair value seen rising 0.1%.
  • Bank of New York Australia ADR Index is up 0.6% to 269.6, BHP Billiton ADRs are up 1.1% to A$29.08 equivalent, a 1.4% premium to last Sydney close, Rio Tinto ADRs are up 0.2% to A$67.31 equivalent, a 10.5% discount to last Sydney close.
  • Gold prices slid Tuesday with the dollar and Treasury yields rising before Jerome Powell’s first Federal Reserve policy meeting as chairman, with investors looking for clues on how policy might change under his tenure. Front-month gold for March delivery shed 0.4% to $1,311.10/oz on the Comex division of the New York Mercantile Exchange - its fourth decline in the last five sessions. Prices have stayed between about $1,305 and $1,360 this year, moving within that range based on swings in the dollar and investors’ focus on higher interest rates. 
  • Holdings in exchange-traded funds backed by gold jumped to 2,266.6 tonnes as of Monday which is its highest since May 2013 and silver holdings rose a third day to 20,374.9 tons, its highest since January 5. Gold has tended to fall before Fed rate increases over the past few years before rebounding and the central bank is widely expected to boost borrowing costs for the first time this year. Gold stock sank 1% in Toronto . Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil prices climbed more than 2% to three-week highs Tuesday as Crown Prince Mohammed bin Salman’s visit to Washington raised the prospect of a more aggressive stance toward Iran. US crude futures rose $1.34, or 2.16%, to $63.40/b on the New York Mercantile Exchange. Brent, the global benchmark, rose $1.37, or 2.07%, to $67.42/b on ICE Futures Europe. Both benchmarks settled at their highest level since February 26. A closely watched meeting between President Donald Trump and the Saudi crown prince helped shift the oil market’s focus to Middle East tensions on Tuesday. See also: Refiners get boost from Barclays note saying now is time to buy Brent for May settlement surged $1.37 to settle at $67.42/b on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $3.88 premium to WTI for the same month. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • Chinese iron ore prices fell further on Tuesday, with spot price of iron ore down 0.8% to $66.94/tonne, a day after posting their biggest daily drop in almost 10 months as high inventories and a weak domestic steel market pressure prices. The current month swap future on the Singapore Exchange remains above USD70/t, despite ongoing concerns about high stockpiles and weaker demand. 
  • However, intra-day trading was volatile with prices under pressure in Asian trading. Steel inventories stood at 19.5 million tonnes last week, slightly lower than the previous week, but remain at the highest level since 2014, Argonaut noted. Meanwhile, stockpiles of imported iron ore at ports stayed at 159.18 mln tonnes, in line with last week's record. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Among base metals, front-month copper for March delivery fell for a fourth straight session and closed down 1.4% at $3.0255 a pound - its lowest settle since February 9. Prices are down 7.7% in 2018 after hitting a nearly four-year high in late December, as weak economic data out of China, the world’s largest consumer of the metal, and worries that protectionist trade policies will slow global growth have weakened sentiment. 
  • Three-month LME copper closed 1.4% down at $6,755 a tonne, marking a fourth session of losses. It had dipped as low as $6,730, its weakest level since December 14. Zinc fell 1.8% to finish at $3,203/t. LME zinc stocks have shot up by 60% this month, climbing by another 5350 tonnes on Tuesday to 211,400 tonnes. LME aluminium fell by 0.6% to close at $2,076/t , with losses moderating after Japanese buyers agreed to pay producers premiums during the second quarter that are 25% higher than the previous quarter, reflecting rising spot premiums in the United States. Lead dropped 0.7% to close at $2,351 a tonne, nickel lost 0.2% to $13,450/t and tin was down 0.5% at $20,675/t. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • In other news: Ex-Dividend: Newcrest, Xenith IP; AGL Energy (AGL AU): Among APAC Stocks That Are Forming Major Technical Chart Patterns; Fonterra (FSF AU): Posts First-Half Loss After Writedown on Beingmate; New Hope (NHC AU): Non-Deal Roadshow Scheduled By Morgans for Mar. 21; Oil Search (OSH AU): Sees Gobe Oil Pipeline Running This Week After Quake; Rio Tinto (RIO AU): Glencore and Rio Diverge on Coal With $1.7 Billion Mine Deal
Broker re-gradings 

  • BHP (BHP): Upgraded to Neutral at Exane.
  • Bluescope (BSL): Reinstated at Morgan Stanley With Overweight; price target $A20.
  • Elixinol Global (EXL): Rated New Speculative Buy at Bell Potter.
  • Sundance Energy (SEA): ADRs Rated New Buy at Johnson Rice; PT $8.


AUDUSD hits fresh low          

AUDUSD made a fresh low and made a daily close below 0.77 handle for the first time since December last year.  

Ahead of tomorrow’s anticipated rate hike from Fed, US treasury yield rallied causing the yield spread (AU 10 year – US 10 year) to break below -17 basis point which would be the lowest level since 2000.  

Furthermore we currently see additional factors that could continue to suppress AUDUSD as the USD looks to reverse the recent decent and both copper (HG) and iron ore (SCO) remains under selling pressure.  

The key support level would be 0.76 handle where the long term uptrend (from 2016 low) should cross.


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AUDUSD quarterly chart

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Source: Bloomberg, Saxo Bank 


--  Edited by Adam Courtenay


Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Follow the team on Twitter at: twitter.com/SaxoAustralia. Saxo Capital Markets (Australia). 

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