Article / 11 April 2017 at 0:38 GMT

Today's Trade: Iron ore now in bear-market territory

Trading Desk / Saxo Capital Markets
Australia
  • US stocks are little changed as investors look ahead to earnings season
  • Geopolitical tensions rise over North Korea and Syria
  • Crude prices add to last week's 3.2% gain after the US military strike on Syria
  • Iron ore prices continue their decline, falling 1% overnight, and weighing on AUD
  • AUS200 is now looking to test its 2015 high of 6,000



By Saxo Capital Markets (Australia)

Overnight and early trade

The ASX200 index dipped 0.08% at the open, after it printed a close above 5,900 yesterday. The Australian dollar traded slightly higher, at 0.7504 against the US dollar.

Shares of energy companies and industrials rose overnight, but US stocks were little changed overall as investors looked ahead to the corporate-earnings season. The Dow Jones Industrial Average ticked up 1.9 points, or less than 0.1%, to 20658, with Caterpillar contributing the most gains. The S&P 500 gained 0.1% after the index ended last week slightly lower, while the Nasdaq Composite climbed 0.1%. The VIX continues is cautious rise, up 9.17% to 14.05.

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 Iron ore is in retreat after a procession of negative outlooks. Photo: Shutterstock

Oil producer Hess was among the biggest gainers in the S&P 500, rising 4%, while construction-equipment maker Caterpillar led the Dow with a gain of 1.7%. US oil futures rose 1.6% at $53.08 a barrel, the latest in a string of gains tied to last week’s US airstrike in Syria and ongoing civil conflict in the oil-rich nation of Libya.

Investors are also contending with a number of crosscurrents as they consider whether US stocks can push back towards the record highs reached in early March. Since then, however, the Dow has fallen by about 2%. The main focus this week is likely to be the US corporate earnings season, with investors looking for solid company results to propel stocks higher. S&P 500 companies are forecast to report earnings growth of around 9% from the first quarter last year, according to FactSet.

Citigroup , Delta Air Lines and JP Morgan Chase & Co are among the firms scheduled to report their first-quarter results this week, which is shorter than usual due to the Good Friday holiday. 

The yield on the 10-year Treasury note fell to 2.361% on Monday, according to Tradeweb, after rising during choppy trade to 2.375% on Friday. Bond prices rise as yields fall. In foreign-exchange markets, the US Dollar index was recently down 0.1%. Gold prices fell 0.3% to $1251.10 an ounce.

The Stoxx Europe 600 was little changed. French stocks declined amid signs of renewed investor jitters ahead of the country’s presidential elections. Asian markets were mixed.
Source: Bloomberg, TradingFloor.com

Local markets


  • Bank of New York Australia ADR Index up 1.5%, BHP Billiton ADR up 3.5% to A$25.50 equivalent, 0.9% discount to last Sydney close, Rio Tinto ADR up 0.6% to A$54.48 equivalent, ~10% discount to last Sydney close
  • Gold slipped further on Monday from the previous session's five-months high, as expectations that the US Federal Reserve would press ahead with interest rate hikes counterweighed concerns over political tensions in North Korea and the Middle East. Spot gold fell 0.10% to $1,252.32 an ounce, little changed from late on Friday, while US gold futures for June delivery were down $3.40 to settle at $1,253.90. This was the first decline in three sessions. Gold stocks in Toronto edged 0.53% higher overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Crude capped its longest run of gains this year as Libya’s biggest oilfield suffered another outage, while Russia signaled it’s weighing an extension of Opec-led production cuts. Futures rose for a fifth day in New York, adding to the 3.2% gain last week that followed a US military strike on Syria. Libya’s Sharara field halted output just a week after reopening, with the National Oil Corp. declaring force majeure on exports, according to a copy of its decree obtained by Bloomberg. Russia’s Energy Minister Alexander Novak said on Friday his ministry had been in talks with oil companies regarding the need to prolong the six-month deal with Opec. West Texas Intermediate for May delivery climbed 84 cents, or 1.6%, to settle at $53.08 a barrel at on the New York Mercantile Exchange. It was the highest close since March 7. Total volume traded was about 5% below the 100-day average. Brent for June settlement rose 74 cents, or 1.3%, to $55.98 a barrel on the London-based ICE Futures Europe exchange. It’s the highest close since March 6. The global benchmark oil ended the session at a $2.50 premium to June WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • Iron ore prices continued their decline, falling 1% to $74.71, well down from the $94.86 high reached in February. Iron ore is in retreat after a procession of negative outlooks, Barclays among banks saying that gains are unsustainable, along with Australia’s central bank and even some mining companies. There’s concern that curbs in China may hurt steel consumption in the top user, as well as forecasts that a further expansion in mine supplies from Brazil, Australia and China will undermine prices. Steel in China has also sagged.
  • Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper bears are on the back foot. Combined stockpiles in warehouses tracked by exchanges in Shanghai, London and New York have fallen 9.6% from a three-year high in mid-March, while money managers boosted their bullish bets on copper traded on the London Metal Exchange for a fourth straight week. LME copper dropped 1.5% to end at $US5747 a tonne, adding to small losses in the previous session, having broken support at its 100-day moving average at $US5800 a tonne. Zinc posted its worst three-day slump since December, leading losses in industrial metals as supply concerns subsided. The metal fell 2.7% to settle at $2,618 a metric ton on the LME, capping the biggest three-day loss since Dec. 20. LME aluminium shed 1.8% to close at $US1926.50 a tonne, lead added 0.3% to finish at $US2258 and tin rose 0.2% to $US20,275. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • ANZ Bank (ANZ): May be best positioned vs peers to handle new capital rules: BI
  • Aurizon (AZJ): Coal pacts poised to stay above $200 as rain swamps supply
  • BHP Billiton (BHP): Billionaire hedge fund’s proposal gets cautious reaction
  • Challenger (CGF): Starts absolute return global bond strategies fund
  • Fortescue (FMG): Iron slumps into bear market as Barclays sees further losses
  • Macquarie (MQG): To buy Hindustan Powerprojects assets for $600m: Mint
  • Mesoblast (MSB): ADRs jump as Maxim says Phase 3 data superior to others
  • Rio Tinto (RIO): Warns Australia at risk of being ‘left behind’ on tax: BNA
  • Seven Group (SVW): Caterpillar forecast may rise as demand strengthens: Street Wrap (Note: is authorised dealer in West Australia, NSW, North China)
  • Sirtex (SRX): Delays share buyback until clinical data released in June

Broker upgrades and downgrades

  • Ardent Leisure (AAD): Cut to sell at UBS, PT A$1.75
  • Asaleo Care (AHY): Cut to neutral at Credit Suisse, PT A$1.75
  • Downer EDI (DOW): Raised to neutral at Credit Suisse

AUS200 & AUDUSD

Yesterday AUS200 printed a daily close above 5,900 as the banks and big mining stocks strengthened.  The previous double top of 5,830 has become a clear support level during this month and AUS200 is now looking to test its 2015 high of 6,000, which is a huge psychological resistance level. We are not expecting a sharp rally but AUS200 should remain resilient.
 
AUS200 chart
1
 
A downtrend (from the March 30 high of 0.7679) has remained valid for almost two weeks as AUDUSD weakened, mainly due to falling iron ore prices. Furthermore, AUDUSD has broken the March low of 0.7492, hence downside momentum seems to exist although breaching the downtrend could signal further retracements up to 0.7550.

AUDUSD chart
Source:  Saxo Bank. Create your own charts with SaxoTrader; click here to learn more. 

– Edited by Susan McDonald

For more on forex, click here.

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets.

Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters


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2y
sairam sairam
intarday call :- buy crudeoil@3410/313 sl 3380 target 3445/3480....whatsapp 08106292758..........
2y
fxtime fxtime
@sairam.....can I suggest you post the reasonings for your trade recommendations....there are a lot of posts of yours today and none give a reason/chart to justify all these opinions. Please let us see what you want us to consider and the supportive reasoning as we are all keen to learn from other traders.
2y
romeoicq romeoicq
This comment has been redacted

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