Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.
Article / 16 August 2016 at 0:32 GMT

Today's Trade: Higher oil price gives ASX early lift

Trading Desk / Saxo Capital Markets
  • Local shares opened higher on overseas leads and a rise in oil prices
  • US stocks rose to record highs and the dollar fell
  • Gold prices edged higher on poor economic news and a weakening USD

By Saxo Capital Markets (Australia)

Overnight and early trading

Local markets opened slightly higher on overseas leads buoyed by energy stocks following a rise in oil prices. The ASX200 was up about 0.1%, with most sectors in the red, apart from energy, financials and materials.

Early earnings reports had Challenger's profit up by 10% and Domino's Pizza surging by nearly 28%.

 The overnight rise in oil prices helped lift the ASX slightly at the start of trading. Photo: iStock

  • US stocks rose to a record and the dollar fell as traders pushed back bets on higher interest rates amid uneven growth in the world’s largest economy. All three American equity benchmarks climbed amid deal activity and as crude oil extended gains to boost commodity producers. 
  • Emerging-market stocks advanced for an eighth straight day as Russian shares rallied to a record high. The dollar declined against most of its major peers, while the British pound fell to the lowest level on a closing basis since 1985 on speculation data will show the UK’s decision to leave the European Union has negatively affected the economy.
  • The S&P 500 advanced 0.3%, after US equities slipped from their highs on Friday following disappointing retail sales and consumer confidence data. A report Monday showed manufacturing activity in the New York region unexpectedly contracted this month, while a gauge on homebuilder sentiment climbed. 
  • Copper miner Freeport-McMoRan paced gains in raw-material shares. Post Properties jumped after Mid-America Apartment Communities agreed to buy the company for about $3.9 billion. Xylem also climbed after agreeing to acquire Sensus for about $1.7 billion to enhance technology offerings in water distribution and treatment.
  • The MSCI Emerging Markets Index rose to the highest level since July 2015. Russia’s Micex Index climbed as rebounding oil prices lured investors to the cheapest stocks among developing nations. A gauge of Chinese real-estate companies jumped after stake purchases by China Evergrande Group fuelled optimism of more mergers.
  • European shares were little changed as investors assessed recent gains in light of the outlook for earnings and economic growth. Rebounding automakers posted the best performance of the Stoxx Europe 600 Index’s 19 industry groups. Volkswagen AG’s advance buoyed Germany’s Dax Index, which entered a bull market last week, to within 0.1% of recouping its 2016 losses.
  • BP Plc led oil stocks higher.
  • The dollar extended last week’s slide as investors became less confident about a 2016 interest-rate increase before the release of the minutes of the Federal Reserve’s July meeting on Wednesday. The greenback slumped almost 5% this year in the absence of signs that US policymakers are set to further diverge from the Bank of Japan and European Central Bank, which are boosting monetary stimulus. Sterling dropped before reports on inflation, retail sales and unemployment benefit claims for July, which will provide more detail on how the economy is faring after the June 23 Brexit referendum.
  • The Treasury 10-year note yield increased four basis points, or 0.04 percentage point, to 1.56%, according to Bloomberg Bond Trader data.
  • Oil climbed amid speculation that crude producers will revive talks to stabilise prices. West Texas Intermediate for September delivery advanced 2.8% to settle at $45.74 on the New York Mercantile Exchange. Crude has rallied more than 10% since closing below $40/barrel and tumbling into a bear market earlier this month. Saudi Arabian Energy Minister Khalid Al-Falih said in a statement last week that talks with members of the Organisation of Petroleum Exporting Countries and other producers may result in action to stabilise the market, according to the state-run Saudi Press Agency.
  • Nickel rebounded from the lowest closing price in a month as UBS Group said the full impact of mine shutdowns in the Philippines is still to come. Gold, silver and copper also advanced.

Source: Bloomberg,

Key earnings

  • AUS: BHP Billiton, Shopping Centres Australasia Property Group, SG Fleet Group Ltd, MNF Group Ltd, Bradken Ltd, Mirvac Group, Shopping Centres Australasia Property Group, Argent Minerals Ltd, Elixir Petroleum Ltd, Excelsior Gold Ltd, InvoCare Ltd
  • US: Home Depot, Dick's Sporting Goods, TJX, Urban Outfitters, Momo, Popeyes Louisiana Kitchen, Advance Auto Parts, Cree
  • AUS: CSL Ltd, Primary Health Care Ltd, Dexus Property Group, Crown Resorts Ltd, Charter Hall Retail REIT, Mesoblast Ltd, FlexiGroup Ltd/Australia, CSG Ltd, Hunter Hall International Ltd, Cue Energy Resources Ltd, Datetix Group Ltd, Euroz Ltd, Sonic Healthcare Ltd, Challenger Ltd/Australia, Arrium Ltd, Stockland, Vicinity Centres, Schaffer Corp Ltd, BlackWall Property Trust, Dexus Property Group, Sonic Healthcare Ltd, Aveo Group, QBE Insurance Group Ltd
  • US: Target, Staples, Lowes, Cisco, L Brands, NetApp, Eaton Vance, American Eagle Outfitters, Performance Food, CACI
  • AUS: Whitehaven Coal Ltd, Energy Action Ltd, Asciano Ltd, MMA Offshore Ltd, ASG Group Ltd, 1300 Smiles Ltd, RXP Services Ltd, Paragon Care Ltd, IDT Australia Ltd, Mastermyne Group Ltd, Ainsworth Game Technology Ltd, ITL Ltd, JCurve Solutions Ltd, AJ Lucas Group Ltd, MGC Pharmaceuticals Ltd, Treasury Wine Estates Ltd, Konekt Ltd, SAI Global Ltd, Brambles Ltd, ASX Ltd, Investa Office Fund, Tatts Group Ltd, Bapcor Ltd, Lifestyle Communities Ltd, Collection House Ltd, Konekt Ltd, Investa Office Fund, Origin Energy Ltd, Beacon Lighting Group Ltd, Lifestyle Communities Ltd, Brambles Ltd, Charter Hall Retail REIT, Core Exploration Ltd, Brand New Vintage Ltd, Sydney Airport, AMP Ltd, IRESS Ltd
  • US: Wal-Mart, Applied Materials, Gap, Ross Stores, Hormel Foods, Mentor Graphics, Nestle
  • AUS: Automotive Holdings Group Ltd, NetComm Wireless Ltd, Mount Gibson Iron Ltd, Villa World Ltd, Aveo Group, ARB Corp Ltd, Seven West Media Ltd, SEEK Ltd, Ardent Leisure Group, Mortgage Choice Ltd, SeaLink Travel Group Ltd, Reject Shop Ltd, Ashley Services Group Ltd, Opthea Ltd, Blackwall Ltd, Cogstate Ltd, Living Cell Technologies Ltd, 360 Capital Office Fund, 360 Capital Industrial Fund, Wellcom Group Ltd, Austock Group Ltd, HiTech Group Australia Ltd, Pharmaxis Ltd, Supply Network Ltd, Minotaur Exploration Ltd, Otherlevels Holdings Ltd, IMF Bentham Ltd, Matrix Composites & Engineering Ltd, Tassal Group Ltd, Civmec Ltd, Insurance Australia Group Ltd, Medibank Pvt Ltd, Amaysim Australia Ltd, Cover-More Group Ltd, MaxiTRANS Industries Ltd, LendLease Group, Evolution Mining Ltd, Medibank Pvt Ltd, Amaysim Australia Ltd, LendLease Group, Aphrodite Gold Ltd, Elysium Resources Ltd, Woodside Petroleum Ltd, Ausenco Ltd, Reef Casino Trust, Tempo Australia Ltd, Multistack International Ltd, iCar Asia Ltd, Santos Ltd, Simavita Ltd, Champion Iron Ltd
  • US: Deere, Estee Lauder, Foot Locker, Madison Square Garden, The Buckle

Local markets and commodities

  • Bank of New York Australia ADR Index +1.2%, BHP Billiton ADR +0.7% to A$20.33 equivalent, 0.8% premium to last Sydney close, Rio Tinto ADR +2.1% to A$41.35 equivalent, 14% discount to last Sydney close
  • Gold prices edged higher on Monday, as bad economic news from Asia and a weakening US dollar helped reverse early losses. Gold for December delivery settled up 0.3% at $1,347.50/troy ounce on Comex, but traded as low as $1,340.90 earlier in the session. Goldies in Toronto dropped 0.79%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR
  • Crude hit a one-month high Monday on talk that the prolonged oil-price rout may drive major producers to reconsider a collective production cap. Light, sweet crude for September delivery settled up $1.25, or 2.8%, at $45.74/barrel on the New York Mercantile Exchange, its highest settlement since July 15. 
  • Brent, the global benchmark, settled up $1.38, or 2.9%, at $48.35/barrel. Both have gained nearly 10% over a three-session winning streak, the best three-session rally for US oil in four months. Prices have gained since Saudi Arabia Energy Minister Khalid al-Falih last week signaled his country was open to measures to stabilise the market, which has been beleaguered by oversupply for two years. Saudi Arabia, the biggest producer among members of Opec, is historically seen as the defacto leader of the oil cartel. 
  • The rally kept going Monday after Russian Energy Minister Alexander Novak said his country is consulting with Saudi Arabia and other producers to achieve oil-market stability. Russia and Saudi Arabia are the world’s largest oil exporters, and previous talk of collaboration that started in February had oil nearly doubling in four months. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore lost 0.25% to $60.22/tonne. In iron ore specific news, the share of Chinese iron ore imports held by Australia and Brazil has fallen to its lowest level in almost two years, as smaller producers including India, Iran, Peru, Mongolia, Russia, Indonesia and Malaysia ramp up their export to the world's most important steel market. 
  • Figures from Adiran Lunt, head of commodities research at SGX, show Australia and Brazil collectively accounted for 81.5% of Chinese imports in the June quarter of 2016, down from 84.3% in the March quarter. It was the lowest quarterly level since the December quarter of 2014. 
  • During the second quarter, Australia iron-ore exports to China rose 7.3 million tonnes, while Brazilian supply fell 3.5 million tonnes. But exports from "other" regions jumped 8.8 million tonnes. This included some big rises from individual countries. For example India's iron ore exports to China in the first half of 2016 were three-and-a-half times higher than in the whole of 2015. While the iron ore price was as low as $39/tonne in January, a surge in Chinese steel demand prompted by government stimulus helped take the price to $70/tonne in April. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Benchmark copper on the London Metal Exchange ended up 0.1% at $4767/tonne. Three-month aluminium ended up 1.2% at $1676/tonne, having earlier hit a month high of $1678. The metal is expected to come under pressure from Chinese exports and an oversupplied market. 
  • Zinc closed up 1.3% at $2266, lead rose 1.6% to end at $1867, tin rose 0.3% to close at $18,240 and nickel added 1.8% to end at $10,490. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • ANZ Banking Group (ANZ): Said set to launch $A1bn hybrid: AFR
  • Aurizon (AZJ): Profit falls in line with expectations: Moody’s; Cut to equal weight vs overweight at Morgan Stanley
  • BHP Billiton (BHP): Scheduled to release FY results after market closes today; Note: Adj. net income est. $1.04bn (19 analysts), GAAP net income loss est. $5.7bn (12 analysts)
  • Challenger (CGF): Scheduled to release FY results; Note: FY adj. net income est. $A366.4mln (12 analysts)
  • Commonwealth Bank (CBA), Westpac (WBC): Banks raise most in bond sales since 2012
  • Crown Resorts (CWN): S&P says Studio City faces ‘substantial refinancing risk’
  • Domino’s Pizza Enterprises (DMP): Scheduled to release FY results; NOTE: Adj. net income est. $A91.1mln (10 analysts)
  • Trades ex-div: Computershare (CPU):, Genworth Australia (GMA), Reckon (RKN)
  • Invocare (IVC): Scheduled to release 1H results
  • MG Unit Trust (MGC): PM Malcolm Turnbull to meet board, mgmt of Murray Goulburn: AFR
  • Mirvac (MGR): Scheduled to release FY results; Note: FFO/shr est. $A0.13 (7 analysts)
  • SCA Property (SCP): Scheduled to release FY results; Note: FFO/shr est. $A0.149 (6 analysts)

Broker upgrades and dowgrades

  • G8 Education (GEM): Raised to buy vs hold at Wilsons
  • Fletcher Building (FBU): Cut to neutral vs outperform at First NZ Capital
  • JB Hi-Fi (JBH): Cut to equalweight vs overweight at Morgan Stanley; Cut to underperform vs outperform at Credit Suisse
  • National Australia Bank (NAB): Cut to hold vs add at Morgans

US500.i and XAUUSD

Crude oil (CL) extended its gains for three consecutive sessions and now has retraced more than 50% (Jun high 51.67 – Aug low 39.26). US500 made a fresh record high although the upper line of the rising wedge seems to be acting as a resistance level. A breakout above this resistance line would trigger further rally but the RSI is showing the upside momentum looks to be fading, while the trading volume remains thin.

Source: Saxo Trader 

There are number of key data releases tonight including CPI from the UK and US. The forecast for US monthly CPI is 0% therefore the actual figures are likely to be lower than the previous number 0.2%. We expect both EURUSD and gold (XAUUSD) to strengthen in anticipation of US dollar weakness. Gold is maintaining the short-term uptrend and we also witnessed a decent rebound from palladium (XPDUSD), therefore we see a buy opportunity with a stop below the recent Friday low 1,333.
 Source: Saxo Trader. Create your own charts with SaxoTrader; click here to learn more 

Today's information 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. Watch the recording of this Week’s Macro Monday Call here.


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