Article / 08 May 2015 at 1:38 GMT

Today's Trade: Market calmer, banks back in the mix

Trading Desk / Saxo Capital Markets
  • ASX trading cautiously in early trade, up 0.3% or 17 points to 5663
  • Macquarie Group shares surging on the back of bumper annual profits
  • AUDUSD may have lost some bullish momentum, with resistance at 0.8000

By Saxo Capital Markets Australia

Overnight and early trading

Buyers have stepped in and helped stabilise bank share prices which have suffered heavily this week, while the stockmarket has some good news in the form of Macquarie Group's bumper annual profit.

The ASX 200 was up 0.3% or 17 points to 5663.1 at 10.30am (AEST). Macquarie led the recovery, up 5.3%. Macquarie Group said its full-year net profit rose 27% to AUD1.6 billion from a year ago, beating analysts' expectations, and reflecting the company's second-highest ever profit.

Commonwealth Bank of Australia  and Westpac are 1% higher, while BHP is 0.8% lower and Rio broadly flat, after iron ore retreated overnight. Energy shares are lower as oil declined. Woodside is down by 1.3%, Oil Search by 1.4% and Santos by 2.4%.

Meanwhile, European Stocks stabilised last night with the Stoxx Europe 600 recovering heavy losses to close 0.05% lower and with US shares rising, a day after they fell in the wake of the Federal Reserve chair’s warning over high equity valuations. The Dow Jones Industrial Average climbed 82.08 points, or 0.5%, to 17,924.06. The S&P 500 added 7.85 points, or 0.4%, to 2088 and the Nasdaq Composite gained 25.90 points, or 0.5%, to 4945.54.

The US stockmarket bounced around the flatline in early trading before drifting higher through the afternoon. Traders said many investors were on the sidelines, looking ahead to Friday’s employment report.

Thursday’s rebound followed losses on Tuesday and Wednesday, which were spurred by comments from Federal Reserve Chairwoman Janet Yellen, who suggested the multi-year rally in stocks may have driven prices too high and raised concerns that debt investors were taking excessive risks. A drop in oil and metal prices sent commodity shares tumbling last night.

 Janet Yellen raised concerns that investing using debt may be too great a risk. Photo: Flickr

Germany’s DAX Index climbed 0.5%, erasing losses of as much as 1.6% as SAP SE and Volkswagen AG added more than 1.6%. The FTSE 100 lost 0.7% as Britons voted in the country’s most uncertain election since World War II. The first indication of the results will come in an exit poll for broadcasters that will be released at 10 pm local time. France’s CAC Index lost 0.67%.

The yield on the German 10-year bond, or Bund, rose to a more than five-month high of 0.78%, having hit an all-time low of 0.05% less than three weeks ago. Later in the session it retraced to around 0.6%.

Many strategists and investors had last week dismissed the reversal in markets as a passing blip, and were caught off guard by the scope of this week’s moves.

Elsewhere, the GBP fell around 0.2% to a three-month low against the EUR as polls opened for one of the most closely fought elections in recent British history. Sterling also edged lower against a weak USD.

Crude oil prices slipped 3.3% to $58.94 a barrel on Thursday but have gained about 36% from their 2015 low of $43.46. Gold futures slipped 0.7% to $1182.40 an ounce.

Local Markets

  • The S&P/ASX 200 Index futures contract fell 0.1% to 5,609; futures relative to estimated fair value suggest an early decline of 0.4%.
  • Bank of New York Australia ADR Index -1.7% with BHP Billiton ADR -2.2% and Rio Tinto ADR -0.1%
  • Spot gold fell 0.6% to $1,185 Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR. NCM is again at its key level of $13.75, which if broken can see it retrace to $12.50 floor.
  • Crude oil fell with WTI and Brent both down 2.7% to $58.99 and $65.59. A stronger USD and profit taking took its toll last night however it was also US producers who said they’d begin to produce more if the prices began to rise further. This creates a cap on the current oil price until further global macroeconomics change. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY. WPL continues it consolidation and trading with low volatility in a highly volatile market. When this moves, it will move quickly.
  • Iron ore slipped back 0.9% to $60.36 as steel demand in China impacted investor sentiment. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were mixed with copper losing 0.5% to $6,385. Aluminium was hit hardest, down 2.2% to $1,880 as a back log of Chinese surplus begins to flow out the gates to global markets. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
  • South32 (S32): To be added to S&P/ASX 200 Index
  • TPG Telecom (TPM): May boost acquisition loan size for higher bid
  • Ex-Dividend: ANZ (ANZ)

Current ASX Trades

  • AMP Limited (T: AMP: xasx): Entered long position on 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%). The third and final profit target at AUD8.00 (+31%) remains in place. Stop loss trailed to entry price of 6.10

Broker Upgrades
- Asaleo Care (AHY): Raised to buy vs hold at Morningstar
- Ardent Leisure (AAD): Rated as Buy at Baillieu Holst at AUD$2.75
- BHP Billiton (BHP): Raised to Buy vs Hold at Morningstar
- Genworth Australia (GMA): Raised to Buy vs Hold at Morningstar
- Fortescue (FMG): Raised to Buy vs Underperform at BBY
- Metcash (MTS): Raised to buy vs hold at Morningstar
- Scentre (SCG): Raised to outperform vs neutral at Credit Suisse
- Woolworths (WOW): Rated as Hold at Deutsche Bank at AUD30.00
- Tabcorp (TAH): Raised to hold vs sell at Morningstar

Broker Downgrades
- No broker downgrades today


Since Tuesday’s intraday high 5,900 following our rate cut, the ASX/S&P200 lost more than 300 points and we seem to have found some strong support level at 5,579. Today’s RBA monetary policy would be a key influence to see any further rebound as ASX is still trading in heavily oversold area this week. We witnessed some signs of recovery yesterday, and if the RBA comes up with some easing biased comments, then the ASX would be trading above resistance level 5,658. Support level remains at the double bottom level 5,579.

Buy ASXSP200

Entry: Limit 5,595


Stop loss:

ASXSP200.I - monthly chart

SP200 DO

Source: Saxo Bank

Australian 10-year bonds made a big reversal as there are growing speculations that the Reserve Bank of Australia may come up with more clear direction of the future guidance towards easing bias and German 10 year Bunds also had a massive turnaround overnight.

AUDUSD looks to have lost some bullish momentum as it found some resistance at 0.8000 then sold off to break 0.7900. Today is a big day as this morning’s monetary policy statement (11:30am) and nonfarm payroll (10:30pm) are expected to add some volatility and large swings to price actions.

As AUDUSD failed to trade above the resistance level 0.8032, we do not believe AUDUSD has bottomed out yet, therefore if AUDUSD squeezes up to 0.7975, then there would be some good shorting opportunities and 0.7850 is the next support level below 0.7900.

AUDUSD monthly chart

Source: Saxo Bank - Create your own charts with SaxoTrader. Click here to learn more 

-- Edited by Adam Courtenay

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


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