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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 18 March 2018 at 23:46 GMT

Today's Trade: Jump for Woodside, gains for banks give AUS200 a lift

Trading Desk / Saxo Capital Markets
Australia
  • Gold prices dipped on Friday on pressure from a stronger US dollar
  • Losses were limited by political turmoil in the US that fuelled safe-haven demand
  • Copper hit a one-week low on Friday as the US dollar recovered
  • US investors have dumped shares of materials and industrial companies
  • They fear some US companies will suffer if tariffs drive up manufacturing costs
By Saxo Capital Markets Australia

Overnight and early trading
  • The S&P/ASX 200 headed higher at the open, thanks to minor gains for the big four banks, and hefty gains for Woodside Petroleum driven by a rally in oil prices. The index was up 0.18% to 5,960.20 at 1042 AEDT (2342 GMT, on Sunday evening).
  • Traders in Asia faced a mixed start for the region’s equities amid subdued currency markets as a week likely to be dominated by the Federal Reserve’s policy meeting gets underway.
  • Futures pointed to small declines for Japanese stocks, while indexes in Australia and Hong Kong signaled gains.


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Trade friction will be on the agenda at the G20 summit in Buenos Aires this week; investors are worried that US tariffs and retaliatory duties will drive up costs and hit exports. Photo: Shutterstock

  • U.S. stocks bounced Friday but notched weekly losses, after a shaky stretch of trading renewed many investors’ fears over the course of trade policy.
  • Stocks struggled for traction throughout the week as investors weighed fresh rebukes to the Trump administration’s protectionist trade agenda. Investors dumped shares of materials and industrial companies, which some fear could suffer if U.S. tariffs drive up costs for manufacturers. Bank shares also slid earlier in the week, hurt by a strengthening of U.S. government bonds that drove yields lower.
  • With investors facing a relatively quiet period in between earnings seasons, many say it isn’t surprising that trade jitters and reshuffling in the White House appear to be weighing on the market.
  • The Dow Jones Industrial Average rose 72.85 points, or 0.3%, to 24946.51, but fell 1.5% for the week. The S&P 500 advanced 4.68 points, or 0.2%, to 2752.01 and posted a 1.2% weekly decline, while the Nasdaq Composite edged up 0.25 point, or less than 0.1%, to 7481.99 and fell 1% for the week.
  • Stock gains were broad on Friday, helping some of the worst-performing sectors of the week recoup their losses from earlier in the week.
  • Shares of financial companies rose alongside bond yields, with Brighthouse Financial adding $2.22, or 4.2%, to $54.73 and Navient rising 30 cents, or 2.3%, to 13.51.
  • Government bonds strengthened for the week, but weakened Friday, with the yield on the benchmark 10-year U.S. Treasury note settling at 2.848%, up from 2.824% Thursday. Yields rise as bond prices fall.
  • The S&P 500 industrial sector added 0.5%, chipping away at its weekly loss. Aerospace giant Boeing—the worst-performing stock in the Dow industrials this week—rose 49 cents, or 0.1%, to 330.47 after four consecutive daily declines.
  • Elsewhere, the Stoxx Europe 600 index rose 0.2%
  • Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC

Local markets

  • Bank of New York Australia ADR Index is down 0.5% to 271.9, BHP Billiton ADRs are up 0.5% to $A29.44 equivalent, a 1.0% premium to last Sydney close, Rio Tinto ADRs are unchanged at $A68.14 equivalent, a 11.1% discount to last Sydney close
  • Gold prices dipped on Friday and were set for their biggest weekly fall in three weeks on pressure from a stronger US dollar and expectations that the Federal Reserve will raise interest rates next week for the first time this year. Losses were limited by political tumult in the US which fueled safe-haven demand for bullion. A Fed rate hike generally lifts bond yields, making non-yielding bullion less attractive. Higher US interest rates also tend to strengthen the dollar, making gold more expensive for users of other currencies. Front-month gold for March delivery declined 0.4% to $1,311.30/oz on the Comex division of the New York Mercantile Exchange. Prices have stayed between about $1,305 and $1,360 in 2018, moving within that range on swings in the dollar and worries about the impact of higher interest rates. The Fed is widely expected to raise rates at its meeting this week, and investors will be watching for clues about whether the central bank might raise them four times this year instead of the three it had previously projected. Goldies gained 0.54%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil futures rose sharply Friday to end the week higher as investors focused on escalating geopolitical risk as President Donald Trump reshuffled his cabinet. U.S. crude futures turned higher during the day to rise $1.15, or 1.88%, to $62.34/barrel on the New York Mercantile Exchange Friday. Brent, the global benchmark, rose $1.09, or 1.67%, to $66.21/b on ICE Futures Europe. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • Iron ore futures for May fell nearly 1.3% in Dalian, on reports that recent environmental inspections are affecting steel output and pushing inventories to relatively high levels. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Copper hit a one-week low on Friday as the dollar recovered, and concerns lingered that US tariffs could provoke a trade war, though hopes for strong growth in China kept losses in check. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • Ex-Dividend: Chorus, Cochlear.
  • Australian Mortgage Broker Lendi Considers Listing On ASX: AFR.
  • CSL (CSL): FDA Approves Hizentra for Treatment of Patients With CIDP.
  • Cimic (CIM): Among APAC Stocks That Are Forming Major Technical Chart Patterns.
  • Macquarie Group (MQG): South Africa Unit Creates Black-owned Brokerage.
  • New Hope (NHC AU): H1 Results Expected.
  • Nine Entertainment (NEC): Might Make Joint Bid With Ten Network for Cricket Broadcast Rights: AFR.
  • Origin Energy (ORG): Indonesia, Australia to Revisit 1997 Boundary: Jakarta Post.
  • Rio Tinto (RIO LN): Rio Is Said to Hire UBS for Possible Pacific Aluminium IPO: Reuters.
  • Stockland (SGP): Downgraded to Hold at Morningstar.
  • Wesfarmers (WES): KKR Said to Have ‘Active Interest’ in Coles: AFR.

Signs of US dollar index strength

We saw another week of strength for the US Dollar index taking its winning streak to four straight weeks as it enjoyed a higher weekly low which validates the improving technical picture. The target this week remains at the 2017 downtrend as an achievable target given the catalyst that could be lent from Federal Open Market Committee.

You can argue that the Dollar index is trading in an ascending triangle formation, another reason to be bullish unless the index breaks below the small uptrend this week.
Immediate mild resistance would be 90.38 or last week’s high with buy stops to be placed above here, again, targeting the 2017 downtrend as profit target.

A break and subsequent two settlements above the downtrend would be an enormous game changer for the USD dollar and would have us targeting much higher territory should we see this development ahead.

USD index

















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

For more on forex, click here.

– Edited by Robert Ryan

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

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