- Eyes will be on US employment figures as a guide to the Fed lifting rates
- Commodity currencies overnight continued further selling pressure
- AUDUSD made fresh multi-year lows and has temporarily stopped at the low 0.77s
By Saxo Capital Markets (Australia)
All prices in Australian dollars unless otherwise indicated
The US market performed nicely overnight with a strong uplift towards the end of trading. Europe was mostly up as well with the exception being the FTSE.
Eyes will be on the US employment fourth-quarter employment cost index released tonight. The current unemployment rate is 5.6% and jobless claims are at 15-year lows. An uplift in wages has lagged. Should these figures print well an expectation of inflation is reasonable and the flow-on effect for the Fed lifting rates sooner rather than later.
All eyes will be on the US employment index as a guide to
when the Fed may lift rates. Photo: iStock
In Europe, Denmark’s central bank has cut its benchmark rate for the third time in two weeks to maintain its peg against the EUR. Deposits are now earning -0.5%. The German labour market remains solid, meeting expectations of 6.5% unemployment. Energy prices dragged on their preliminary inflation rate which was at -1.3% year-on-year (market: -1.0%).
The Dow Jones, S&P 500 and Nasdaq were all up last night at 1.31%, 0.95% and 0.98% respectfully. The EuroStoxx and DAX were also up 0.4% and 0.3% where the FTSE was down -0.2%.
Commodity currencies overnight continued further selling pressure. The AUD took a double hit with a built-up expectation of a Reserve Bank of Australia rate cut now becoming more likely in February.
- S&P/ASX 200 Index futures contract rose 0.9% to 5553; futures relative to estimated fair value suggest an early gain of 0.8%.
- Bank of New York Australia ADR Index -0.3%; BHP Billiton ADR +0.5%, Rio Tinto ADR +1.8%.
- Gold futures fell the most in 13 months: Gold futures for April delivery dropped 2.4% to settle at $1255.90 an ounce in New York. Gold Stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR.
- Import iron ore benchmark snapped a six-day fall to rise 0.3% to $63.27 a ton. Iron ore stocks: AGO, FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
- Three-month copper on the LME closes 1.6% lower at USD 5390 a tonne, having earlier fallen to a session low of USD 5346 – not far from Monday's 5-1/2 year trough of USD 5339.50 a tonne: Copper stocks: BHP, CDU, DML, IVA, IAU, OZL, PAN, PNA, RIO, IGO
- Oil prices have closed higher by USD 0.08 at USD 44.53 a barrel after a volatile session that saw the New York price drop below USD 44 a barrel for the first time since March 2009. Oil stocks: STO, WPL, ORG, OSH
- Atlas Iron (AGO): 2Q output expected
- BC Iron (BCI): 2Q output expected
- Newcrest (NCM): 2Q output expected
- Origin (ORG): 2Q output expected
- Paladin (PDN): 2Q output expected
- Sundance Energy (SEA): 4Q output expected
- Whitehaven (WHC): 2Q output expected
- Steadfast (SDF): Reports 9% gain in 1H cash NPAT
- Beach Energy (BPT): Block trade of 20m shares crosses at 4.4% premium to last close; NOTE: Seven Group (SVW) bought a 3.5% stake in Beach Energy after-market yesterday: AFR
- PPI quarter-on-quarter (11:30am): 0.3% forecast vs 0.2% previous
JB Hi-FI (Ticker: JBH:xasx) has been forming a bullish wedge leading into its reporting this coming Monday, February 2 where its half-year results are expected to beat analyst expectations.
Today's trade would be to buy at market with the first profit target at $17.47 (C +4.4%) and second profit target $17.90 (C +6.9%). Stop loss should be set at $16.38 (C -2%)
- (January 22) Bluescope Steel: BSL is heading back up to its resistance level of $5.37 where there has been quite a lot of noise since January 14. Should it fail to push higher above this level, a head and shoulders pattern will be completed where a quick and swift sell-off is expected. Sell limit: $5.33 – $5.37 with a stop loss above $5.62 (Loss: 5.4%). First profit target: $4.70 [December 14 low] (Profit: 11.8%); second profit final target: $4.04 (Profit: 24%).
- (January 21) Accumulation of the big four banks. Buying is coming back in the past couple of days and it appears as if our dividend-yielding banks are back on investor radars: ANZ, CBA, NAB, WBC
- (January 19) Harvey Norman: created the early stages of a Head and Shoulders pattern, leading us to a short on HVN. With last Wednesday’s (January 14) positive news, failure to break its recent closing high of $3.91 will likely see a retracement to $3.40. We are calling a short here ($3.64) with a stop above the recent high: $3.88. First profit target: $3.30. (Stopped out as of yesterday)
Broker downgrades and upgrades
- Credit Corp (CCP): Cut to neutral vs overweight at JPMorgan with PT A$11.05
- Orora (ORA): Cut to neutral vs buy at Goldman Sachs
- National Australia Bank (NAB): Cut to hold from buy at Morningstar
Our Aussie has managed to make fresh multi-year lows once again and has temporarily stopped at the low 0.77s where, on a weekly chart, displays some minor noise in the past. The desk would want to see a break below this overnight low before entering any new or added short positions.
Following market strength overnight, the ASXSP200.I has rocketed close to the highs seen in November last year. The desk is a little cautious with entering any new long positions considering we have had an outstandingly strong week and the move already seen in the overnight session.
Trade of the day would be to sell limit anywhere between: 5570 – 5575 with a 10 point stop.
Source: AFR, SMH, CNBC, BBG, WSJ
– Edited by Gayle Bryant
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