Article / 23 March 2017 at 23:57 GMT

Today's Trade: Higher commodity prices boost ASX

Trading Desk / Saxo Capital Markets
Australia
  • The ASX200 was up 0.5% at the start helped by the overnight rally in commodities
  • Investors are likely to remain cautious around the vote to repeal Obamacare
  • Westpac announced it is lifting rates on most of its interest-only mortgages 
  • US government bonds weakened Thursday, after four sessions of gains
  • Crude oil fell 0.7% to $47.70/barrel, extending a recent selloff
  • Iron ore prices rebounded, rallying 1.6% to $86.36/tonne

By Saxo Capital Markets (Australia)

The ASX200 was up at the start helped by an overnight rally in commodity prices and CSL continuing its rally. At the start, the ASX200 was 0.5% higher at 5734.

Overnight

  • Stocks slipped overnight as prospects dimmed for a healthcare bill that many investors said could test the viability of US President Donald Trump's administration’s agenda. Major indices rose through most of the session, then turned lower in afternoon trading after House Republicans postponed Thursday’s planned vote on a bill designed to dismantle the Affordable Care Act. 
  • Many investors and analysts have said the vote will be a key indicator of whether Trump will be able to push through potential policy changes like tax cuts, fiscal stimulus and deregulation. Hopes for such policies have helped propel stocks since the election.
  • The Dow Jones Industrial Average fell 4.72 points, or less than 0.1%, to 20,656.58, posting its sixth consecutive session of declines – its longest losing streak since before the election. The S&P 500 fell 2.49 points, or 0.1%, to 2345.96 and Nasdaq Composite fell 3.95 points, or less than 0.1%, to 5817.69.
  • Shares of energy companies fell with oil prices Thursday, putting pressure on major indices. Energy stocks in the S&P 500 lost 0.4%, notching their sixth consecutive session of declines. 
  • US crude oil for May delivery fell 0.7% to $47.70/barrel, extending a recent selloff, as investors expressed concerns about rising US inventories. Shares of industrial companies, which investors have bet would benefit from Trump’s plans to boost infrastructure spending, fell 0.1% Thursday. Financial stocks, another popular post-election trade, pared gains to add 0.2% after rallying earlier in the session.
  • Healthcare stocks in the S&P 500 fell 0.4%, among the worst performers in the broad index. Shares of Dow component UnitedHealth Group fell 1%, or $1.74, to $165.29, chipping away 12 points from the blue-chip index. Some analysts and investors cautioned that the risks of a downturn over the next few weeks are heightened. Stock valuations are at historically high levels and major indices remain close to records.
  • Government bonds weakened Thursday, after four sessions of gains, with the yield on the 10-year US Treasury note rising to 2.418% from 2.398% Wednesday. The dollar stabilised after falling to its lowest level since November on Wednesday. 
  • Elsewhere, European stocks rallied, with the Stoxx Europe 600 index up 0.8% as shares of healthcare and construction companies rallied.

Source: Bloomberg, TradingFloor.com

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 Westpac is lifting rates on most of its interest-only mortgages. Photo: Shutterstock

Local markets and commodities

  • Bank of New York Australia ADR Index -0.9%, BHP Billiton ADR -0.7% to A$24.14 equivalent, 0.2% discount to last Sydney close, Rio Tinto ADR -0.6% to A$54.19 equivalent, 9.7% discount to last Sydney close
  • Gold prices moved lower Thursday after a week-long rally, as the dollar clawed back some of its recent losses and investors awaited news on a closely watched healthcare bill. Gold for April delivery was down 0.2% at $1,247.20/troy ounce on Comex, snapping a five-day winning streak. 
  • Gold investors are awaiting the vote in the US House of Representatives on healthcare reform. Gold stocks in Toronto shed 0.72%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil dropped as US crude supplies rose to a record high while investors await a meeting between Opec and its allies that may signal whether they’ll extend output curbs. Futures fell on both sides of the Atlantic, sending Brent to its lowest close since November. 
  • American crude output continued to rise along with inventories last week, an Energy Information Administration report showed on Wednesday. While Opec won’t formally decide until May whether to prolong production cuts, officials will meet this weekend in Kuwait to discuss their deal’s progress. 
  • West Texas Intermediate and Brent crudes dipped below $50/barrel this month for the first time in 2017 as rising US inventories weighed on output cuts by Opec and other producers. Saudi Energy Minister Khalid Al-Falih has said the group would extend the deal if oil stockpiles remain high. The Russian cuts are “slower than what I’d like,” Al-Falih said in an interview with CNBC March 7. 
  • WTI for May delivery dropped 34 cents to close at $47.70/barrel on the New York Mercantile Exchange. Total volume traded was about 20% below the 100-day average. Prices are up 20% from a year ago. 
  • Brent for May settlement fell 8 cents to $50.56/barrel on the London-based ICE Futures Europe exchange. Its the the lowest close since November 30. The global benchmark ended the session at a $2.86 premium to WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore prices rebounded, rallying 1.6% to $86.36/tonne as trading activity picked up, particularly with Chinese ports seeing a round of restocking by mills in China, but there were still few takers for seaborne cargoes, according to Metal Bulletin. China's ferrous futures regained some stability during the day, after experiencing big losses in the preceding two days. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper on Comex climbed 0.5% at $2.6445/pound. Copper has experienced sharp moves in recent weeks amid an uncertain supply outlook. On Thursday, a union leader said workers will end an ongoing strike at the BHP Billiton majority-owned Escondida mine, and operations will resume this weekend. 
  • In other metals, zinc fell to a one-week low, down 1.5% at $2814/tonne despite a spate of mine disruptions. Lead was unchanged at $2367/tonne. Nickel added 0.1% to $10,030/tonne, while aluminium firmed 0.6% to $1933. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • Auscann (AC8), MMJ PhytoTech (MMJ), Stemcell United (SCU): Pot stocks high in Australia on bets rules will be relaxed
  • Downer EDI (DOW): Raises $A757mln from institutional offer at 66% take-up
  • BHP Billiton (BHP): Samarco says water-approval delays jeopardising 2H restart goal; Escondida miners to end strike using old contract as talks fail
  • Evolution Mining (EVN): Block of 5.2% stake crosses at 6.1% discount to close
  • Paladin Energy (PDN): Plans to start arbitration against CNNC
  • Vicinity Centres (VCX): Plans bond investor meetings from April 3
  • Westfield (WFD): Prices 800m pounds of debt in 2 parts

Companies going ex-dividend today
  • Friday: MYR, SND, ABC, IMF, JHC, MAI, SEK

Broker upgrade
  • Ausdrill (ASL): Outlook to positive from stable at S&P

XAUUSD and AUDUSD

Gold (XAUUSD) finally showed signs of weakness as it ended the six consecutive days of positive daily closes that began last Wednesday. The overnight high happened to be at the downtrend from July 16 and 200DMA acted as a valid resistance last month, therefore the resistance area is expected to be 1,250-1,264.

XAUUSD monthly  
1
Source: SaxoTrader 

Despite an overnight recovery from copper (HG) and iron ore, AUDUSD extended losses to break the uptrend (from the March low of 0.7491) although it found an interim support level at 0.7620 (50% retracement of the March high and low). This week AUDUSD has massively underperformed other major pairs despite the weakness of the US dollar. The next support level should be 0.7590 and the interim resistance level is at 0.7650.
 
AUDUSD monthly
2
Source: SaxoTrader. Create your own charts with SaxoTrader; click here to learn more 
 
Today's data sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

– Edited by Gayle Bryant

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

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