- The ASX200 opened lower ahead of Trump's speech and Telstra trading ex-dividend
- Oil closed near $54/barrel, while iron ore prices also took a breather
- The major focus for AUDUSD is on Australia's GDP numbers and Trump's speech
- AUDUSD broke two interim support levels at 0.7670 as the USD regains strength
By Saxo Capital Markets (Australia)
The ASX200 opened lower, weighed down by Telstra, which was trading ex-dividend this morning. Investors are also cautious ahead of US President Donald Trump's speech later today. At the start, the ASX200 was 0.4% lower at 5688.
- US stocks were mixed, while Treasuries edged higher with the dollar as a tone of caution spread through financial markets before US President Donald Trump’s address to Congress today at 1300 AEDT.
- The S&P 500 slipped Tuesday but notched up its best month since March with small caps sliding the most in a month while the Dow Jones Industrial Average narrowly missed extending its run of record closes.
- The Dow Jones Industrial Average logged its best month since November, with a gain of 4.8%. The blue-chip index fell 25 points, or 0.1%, to 20812 Tuesday after reaching a 12th-consecutive record a day earlier. The S&P 500 lost 0.3% but rose 3.7% in February. The Nasdaq Composite fell 0.6% Tuesday but booked a 3.8% monthly gain.
- Investors sold retail shares Tuesday after Target gave a downbeat forecast for earnings this year and said sales and profit declined in the fourth quarter. Target shares fell 12%, and consumer discretionary stocks were among the biggest decliners in the S&P 500, losing 0.7%. Wal-Mart Stores fell 1.1% to lead declines in the Dow industrials.
- Earlier, global defence shares rallied ahead of President Donald Trump’s first formal address to the nation since Inauguration Day. In a speech to Congress after US markets close, Trump is expected to outline his policy priorities, including a call for a $20 billion increase in current military spending.
- UK-listed defence and energy engineering firm Meggitt added 13%, while Japan’s Tokyo Keiki, which makes electronics for jet fighters, rose 3.9% and weapons maker Ishikawa Seisakusho added 14%. The iShares US Aerospace & Defence exchange-traded fund was up earlier in the session, but slipped 0.3% later in the day.
- Some investors were being cautious ahead of Trump’s address, where he is expected to clarify some of his fiscal-policy plans, some analysts said.
- The yield on the benchmark 10-year US Treasury note fell to 2.358% from 2.367% Monday. Yields fell in February, posting their first monthly decline since July.
- The Stoxx Europe 600 added 0.2% to finish February with a 2.8% gain and Tokyo’s Nikkei Stock Average added 0.1% and notched a 0.4% monthly climb.
- The US Dollar Index, which measures the US currency against 16 others, was recently down 0.3%.
Source: Bloomberg, TradingFloor.com
Telstra weighed on the ASX200 this morning after trading ex-dividend. Photo: Shutterstock
Local markets and commodities
- Bank of New York Australia ADR Index -1%, BHP Billiton ADR -2.2% to A$24.60 equivalent, 1.6% discount to last Sydney close, Rio Tinto ADR -1% to A$53.95 equivalent, 13% discount to last Sydney close
- The price of gold fell on Tuesday as financial markets wait to hear what US President Donald Trump has to say about his policies on tax reforms and government spending when he delivers a key speech to Congress today.
- Spot gold fell 0.23% at $1,249.76/ounce. The metal hit its highest since November 11 at $1,263.80 on Monday. US gold futures fell $4.90 to settle at $1,253.90. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
- Oil closed near $54/barrel in New York as declines eased after a White House spokeswoman said there are no immediate plans to change the renewable fuel standard compliance structure.
- Futures fell earlier on speculation that billionaire investor Carl Icahn and the leading US biofuel trade group had presented a plan to the Trump administration to revamp a law requiring refiners to either blend petroleum-based fuels with ethanol and biodiesel, or buy blending credits called RINs. No ethanol rule is in the works, White House spokeswoman Kelly Love said.
- West Texas Intermediate for April delivery fell 4 cents to $54.01/barrel on the New York Mercantile Exchange. Prices advanced 0.5% this month. WTI futures have bounced between $51.22 and $54.94/barrel in February, the tightest range since August 2003.
- Brent for April settlement, which expired Tuesday, declined 34 cents to $55.59/barrel on the London-based ICE Futures Europe exchange. The more-active May contract rose 9 cents to $56.51. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore prices fell slightly as traders paused for breath. Futures prices in China fell over 3%, driven by profit taking after the strong gains recently. However, the losses look like remaining relatively short lived, with the market expecting China’s NPC to announce this weekend further capacity closure targets for 2017. Spot iron ore dropped around 1% closing at $91.27. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
- Benchmark zinc on the London Metal Exchange climbed 0.7% to close at $2825/tonne while copper also ended 0.7% higher at $5973.
- Aluminium gained 1.3% to close at $1924, the highest since May 2015. Deutsche Bank raised its aluminium price forecasts for this year and next by an average of 7.5%, it said in a note, though it warned of near-term downside. Nickel, the only LME metal in the red, fell 0.6% to finish at $10,980.
- Lead rose 0.1% to close at $2257 and tin gained 1.4% to $19,225. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- Ex-dividend: Alumina, Crown Resorts, Perpetual, Platinum Asset, Telstra
- Afterpay (AFY): Wilson, Bell Potter launch Afterpay block trade, AFR Reports
- AUB Group (AUB): Block trade of 5.65mln shares crosses at 4.9% discount
- Cooper Energy (COE): Subsea 7 awarded ‘sizeable’ contract offshore Australia
- Clean TeQ (CLQ): Pengxin invests A$81mln, to help finance Syerston
- Crown Resorts (CWN): To sell golf courses, cut sport links: Australian
- Qantas (QAN): In talks with Citi about starting new credit card: AFR
- Sky Network TV (SKT): Not terminating merger deal with Vodafone yet
- Wesfarmers (WES): Briscoe Group may be among bidders for Officeworks unit: Australian
Broker upgrades and downgrades
- AWE (AWE): Raised to neutral at Credit Suisse, PT A$0.50
- Bank Of Queensland (BOQ): Cut to hold at Bell Potter, PT A$12.50; raised to buy at Shaw and Partners
- Harvey Norman (HVN): Raised to buy at APP Securities, PT A$5.76; Cut to underweight at JPMorgan, PT A$4.60
- Resolute Mining (RSG): Cut to hold at Baillieu Holst, PT A$1.72
- WorleyParsons (WOR): Raised to neutral at Macquarie, PT A$10.50
- Spotless (SPO): Cut to sell at Canaccord, PT A$0.73
AUS200.i and AUDUSD
Late last month, AUS200
found solid support level at the previous resistance level of 5,600 then it made another attempt to test the January 17 high of 5,825 but failed to form a double top. The line of least resistance seems to be still to the downside while the momentum can shift to the topside if we see positive reactions from this morning’s GDP figures at 1130 AEDT.
finally broke two interim support levels at 0.7670 as the US dollar continues to regain strength. The major focus today is on Australia's GDP numbers and Trump's speech at 1300 AEDT. The GDP forecast is relatively high at 0.7% but the previous GDP was negative therefore another negative print would translate into recession and it is expected to cause a sharp selloff in AUDUSD down to the key support levels at 0.76 and 0.7520.
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Today's data sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
– Edited by Gayle Bryant
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