Today's Trade: China rate cut fires up ASX momentum
- ASX trading higher in early trade - up 50 points (or 0.9%) at 5684.7
- Improved global markets and the China rate cut has boosted the market
- Since AUDUSD failed to break 0.8032, it has been showing signs of weakness.
By Saxo Capital Markets
Overnight and early trading
At 10.30am AEDT, the ASX/S&P 200 was up 50 points, or by 0.9% with BHP leading the market higher, up 2.1%. Iron ore has made up some ground and China announced further monetary policy easing. Rio rose 1.4%, while Woodside has advanced 1.6%.
The banks are also up early, Westpac gained 1%, CBA was up 0.8% and ANZ, 0.7%. NAB remains in a trading halt as it undergoes a AUD5.5 billion capital raising.
Overseas markets capped the weak with strong gains: The Dow Jones Industrial Average jumped 267.05 points, or 1.5%, to 18191.11, the S&P 500 rose 28.10 points, or 1.3%, to 2116.10 and the Nasdaq Composite climbed 58 points, or 1.2%, to 5003.55.
Over in Europe, the Stoxx Europe 600 climbed 2.9%, Germany’s DAX rose 2.7% and France’s CAC 2.5%. London’s FTSE 100 also surged, lifting 2.3% on the results of the UK election and as calm returned to bond markets.
- The S&P/ASX 200 Index futures contract rose 0.8% to 5,645 with futures relative to estimated fair value suggest an early gain of 0.4%.
- Bank of New York Australia ADR Index rose 1.6% on Friday with BHP Billiton ADR up 1.1% and Rio Tinto ADR matching the same 1.1% gain.
- Spot gold rose a mild 0.3% to US$1,188 as US nonfarm payrolls missed expectations leading to a weaker USD. Independence group (IGO) a mid-tier gold miner, is believed to be targeting a deal in Western Australia with companies speculated being: SIR, SFR, TGZ and EVN. Activity in this space has been increasing after PanAust accepted a AUD1.2 billion deal from Guangdong Rising Asset Management last week and Canadian heavy-weight Barrick Gold auctioning in NSW and PNG. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
- West Texas Intermediate rose 1.3% to $59.39 as optimism that oil demand would increase. China’s Brent oil import for April was 30.3m tonnes up almost 9% from the same time last year although speculation is that this is not from increased user demand, rather buying up at these lower prices as the price has stabilised.
- Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY. WPL had a sharp move south considering their lower volatility in comparison to the market. WPL closed at a key level of $38.80. Excluding the dire days in January when the sky was falling on the crude oil price, WPL has now touched its floor for the sixth time since November but with far better sentiment.
- Iron ore has closed up 1.7% to $61.40 on sentiment. Chinese port stock piles were reported to have dropped and this could be supported by Port Hedland’s lower shipments last month. However, it is the sentiment of expected falls in inventory, led by BHP and Vale’s reduced supply, that is giving investors’ confidence in the red commodity's price. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
- Base metals were up excluding zinc which was off 0.6% after rising inventories at Shanghai Futures Exchange rose. Base metals as a whole are expected to perform well in the next few days as the market digests another reserve rate cut from China and the stimulus this will bring to development. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC Watch SFR as a combination of a potential take-over matched with China’s added stimulus will see speculators jumping in.
- Bank of Queensland (BOQ): To raise AUD200m in hybrid issue.
- Corporate Travel (CTD): Sees EBITDA slightly above previous forecast of AUD46-48 million. Note: FY EBITDA es imate at AUD48.2 m.
- Independence Group (IGO): Targeting buy of ASX-listed company which would involve significant scrip component; potential targets include Sirius (SIR), Sandfire (SFR), Teranga Gold (TGZ), Evolution (EVN): AFR
- PanAust (PNA): Recommends GRAM’s raised bid of AUD1.85/share cash against March offer AUD1.71/share. Shares resume trading at 10am
- Rio Tinto (RIO): Coal chief sees prolonged period of weak prices: AFR
- - Eurogroup Meetings All Day
- - GBP Official Bank Rate, Asset Purchase Facility & MPC Rate Statement
- AUS Home Loans m/m (11:30am)
- Annual Budget Release (7:30pm)
- CNY: New Loans, M2 Money Supply y/y (Tues – Sat)
- GBP Manufacturing Production m/m, Industrial Production m/m
- ECOFIN Meetings ALL DAY
- US: NFIB Small Business Index, JOLTS Job Openings, Federal Budget Balance
- FOMC Member Williams Speaks: Due to speak at the Association for Business Economics, in New York
- JPN: Current Account, Bank Lending y/y
- AUS: Wage Price Index q/q (11:30am)
- CNY: Industrial Production y/y, Fixed Asset Investment ytd/y, Retail Sales y/y (3:30pm)
- French/German/Italian Prelim GDP q/q
- French/German Final CPI m/m
- GBP Average Earnings Index 3m/y, Claimant Count Change, Unemployment Rate
- Flash GDP q/q, Industrial Production m/m
- BOE Gov Carney Speaks, BOE Inflation Report
- EUR ECB Monetary Policy Meeting Accounts
- US: Core Retail Sales m/m, Retail Sales m/m, Import Prices m/m, Business Inventories m/m, Crude Oil Inventories
- EUR: French & German markets closed
- US: PPI m/m, Unemployment Claims
- US: Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production m/m, Prelim UoM Consumer Sentiment
Current ASX Trades
AMP Limited: Entered long position February 6 at AUD6.10. First profit target was reached on the February 18 at AUD6.49 (+6.4%) and second profit target at AUD7.12 (+16.7%). Third and final profit target is at AUD8.00 (+31%) which remains in place. Stop loss trailed to entry price of AUD6.10
ASXSP200.I monthly chart
While the influence of today’s NAB business confidence should be minimal, we expect AUDUSD to extend the decline below the support level 0.7900.
Entry: Market (currently trading at 0.7920)
Stop loss: 0.7954
AUDUSD monthly chart
-- Edited by Adam Courtenay
Australian Market Wrap is compiled by the Sydney trading desk at Saxo Capital Markets