Today's Trade: Macquarie disappoints, energy in a tailspin
- Aussie shares decline 0.5%, breaking the 50 Day Moving Average at 5618
- Transurban earnings on the rise, but Macquarie's update spurs heavy selling
- AUD steady at around 76.6 US cents ahead of RBA interest rate decision
By Saxo Capital Markets
Overnight and early trading
Australia’s S&P/ASX 200 fell 0.5% to a seven week low just after the start of trading this morning - much lower than expected via the overnight futures. Macquarie (MQG) was the biggest loser, down 2.8% to $A81.60, it's biggest fall in three months.
Overnight, haven assets from US Treasuries to the yen and gold advanced overnight, while US equities slipped as a cautious tone spread through financial markets, with investors still awaiting clarification on the timing and scope of promised pro-growth policies from the Trump administration.
The S&P 500 Index retreated from near record levels, as shares most tied to economic growth struggled after wage growth and uneven retail results raised questions about the strength of the American consumer.
EURUSD slumped amid signs of political uncertainty in France that could undermine the common currency.
With a light calendar of US economic data slated for the week, investors will keep an eye on political developments as the Trump administration takes swipes at the judicial branch for suspending its immigration order.
Newell Brands sank 5.7% after the maker of Rubbermaid and other consumer products reported lower-than-expected sales. Shares of Tiffany fell 2.5% after the luxury jeweler announced Sunday that its chief executive was stepping down.
Government bonds strengthened and gold climbed 0.9% to $1,230 an ounce. The yield on the 10-year US Treasury note fell to 2.413%, according to Tradeweb, from 2.496% Friday.
Yields fall as prices rise. Market participants said investors appeared to be awaiting further policy moves from Washington, in the wake of a post-election rally driven by expectations of tax cuts and deregulation.
Disney, Gilead Sciences, BP, General Motors, Archer Daniels Midland, Cardinal Health, Statoil, BNP Paribas, Intercontinental Exchange, Michael Kors, Vulcan Materials, Tenneco, Wellcare Health, Mondelez International, Buffalo Wild Wings, Plains All American, Pioneer Natural Resources, Panera Bread, Zillow
Time Warner, Glaxo SmithKline, Whole Foods, Prudential Financial, Carlyle Group, Alaska Air, Humana, Allergan, Rayonier, Suncor, Lions Gate, Owens Corning, Sanofi, Level 3 Communications, Jacobs Engineering
Coca-Cola, Kellogg, Twitter, Yum Brands, Beazer Homes, Cummins, Total, Agrium, Occidental Petroleum, Nissan, Borg Warner, Dunkin Brands, Expedia, News Corp, Nvidia, Pandora Media, Activision Blizzard, Thomson Reuters, KKR
Aon, Calpine, Buckeye Partners, ArcelorMittal, Ventas, Nippon Telegraph, Interpublic
Local markets and commodities
- The S&P/ASX 200 Index futures contract fell 0.2%; futures relative to estimated fair value suggest an early decline of 0.1%.
- Bank of New York Australia ADR Index -0.6%, BHP Billiton ADR -0.3% to A$25.65 equivalent, 1% discount to last Sydney close, Rio Tinto ADR -0.1% to A$55.65 equivalent, 14% discount to last Sydney close.
- Gold prices rose to their highest level in nearly three months Monday, boosted by political uncertainty in Europe and a weakened case for interest rate increases in the US Spot gold rallied 1.2% to $1,234.96/oz to its highest close since November 10. In France, Marine Le Pen reiterated the National Front’s commitment to pull the country out of the European Union and NATO and to restore the franc as the country’s official currency, as she launched her presidential campaign over the weekend. The move increased nervousness in a market that has grown wary of political risk in the wake of Brexit and US President Donald Trump’s unexpected election victory last year, boosting demand for gold, a popular safe haven.
- Silver for March delivery closed up 1.2% at $17.69/oz. April platinum rose 0.7% to $1,014.90/oz, and palladium was up 3.4% to $774.30/oz. During the week ending January 31, hedge funds bought 12,388 lots bringing the net-long to a two months high at 72,067 lots. This still leaves the net-long down 75% compared to the record 287,000 lots seen last July. Open interest on Comex gold reached a one-year low on January 30 at 391,000 lots; since then, we have only seen a small pick-up to 405,000 as of last Friday. This is another sign that we have yet to see a significant pick-up in investor sentiment and demand. See gold analysis by Ole Hansen. Goldies rocketed over 4% overnight in Toronto. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
- Oil dropped as the dollar climbed and as the revival of US shale drilling boosted the country’s production outlook. West Texas Intermediate for March delivery slipped 82 cents to close at $53.01/b on the New York Mercantile Exchange. It was the biggest decline since January 18. Total volume traded was about 31% below the 100-day average. Brent for April settlement fell $1.09, or 1.9%, to $55.72/b on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.09 premium to April WTI.
- The USD rose 0.3% against leading currencies, making commodities priced in the greenback less appealing to investors. US oil drillers boosted the rig count by 17 to 583 last week, the most since October 2015, according to Baker Hughes. A government report on Wednesday is projected to show that US crude stockpiles climbed for a fifth week, according to a Bloomberg survey. Crude prices have fluctuated above $50 since Opec and 11 other nations agreed to start curbing output by 1.8 million barrels a day. While Opec members have implemented most of their cuts and Russia says its own reductions are ahead of schedule, US production has edged higher as drillers add rigs. Rising tensions with Iran aren’t yet seen threatening a nuclear deal that lifted sanctions on the country’s oil exports. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
- Steel, iron ore futures fell for a second day with spot iron ore prices threatening US 80/tonne as traders eyed higher stockpiles and waited for demand to return after the normal lull for the Lunar New Year holiday. Spot prices close just above $80 at $80.60, down 1.9%. According to SteelHome, stocks rose by 3.3% or 3.9 million tonnes to 123.45 million tonnes last week. This should come as no surprise, with subdued demand around the holidays coming amidst strong growth in supply. Exports from Australia’s Port Hedland hit an all-time record high of 40.3 million tonnes in January. This represents a 19.2% rise from January 2016. However, rising inventories in February are not unusual and should reduce over coming months amid stronger steel end-use. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
- Copper rose as investors' focus returned to supply risks in Chile and Indonesia. Three-month copper on the London Metal Exchange ended up 1.3 percent to $US5847 a tonne. The metal lost 1.9% on Friday in its biggest daily fall since December 19 on worries over Chinese policy tightening. Nickel rallied 2.2% to settle at $10,450/t on the London Metal Exchange, its highest close since January 13. Zinc, used to galvanise steel, closed 0.1% down at $2,792, hurt by the rise in China's interest rates that spurred a sell-off in ferrous metals. Lead ended up 1% at $2,348, tin was down 2.8% at $19,220/t, having earlier hit its lowest since last September at $19,100/t, while aluminium finished 0.1%down at $1,834. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- In other news: Cabcharge Australia (CAB): Confirms sale of 49% stake in CDC is progressing; Cimic (CIM): Banks eye PF for around A$3b Sydney Metro Project stage 2;Computershare (CPU), Link Administration (LNK): Bidders for NSW Land Registry sound banks for financing; Crown Resorts (CWN): Signs online betting deal with Clubs NSW; Macquarie Group (MQG): 3Q results expected; NOTE: Co. in October forecast FY17 results broadly in line with FY16; Origin Energy (ORG), APA Group (APA): Bidders for Darling Downs pipelines said to have 10 wks to prepare final offers: AFR; Rio Tinto (RIO): Working to finalize Simandou sale to Chinalco; UBS analysts expect Rio earnings to ‘positively surprise’; Shopping Centres Australasia (SCP): 1H results expected; NOTE: Co. in November forecast FY17 EPU A14.4c, DPU A13c; Spark N.Z. (SPK): Offers NZ$0.80/shr for TeamTalk; seeks access to books; Tabcorp (TAH): Trades ex-dividend; Transurban (TCL): 1H results expected.
- Beach Energy (BPT): Raised to neutral at Goldman
Australian releases due this week
Stock to watch
Fortescue Metals (FMG.xasx) enjoyed an impressive rally (~350%) from Jan 16 low at 1.44 and has now formed a clear double top near 7 which also served as a major resistance level back in 2010-2011.
The uptrend visibly remains valid if 6.20 holds but a break of this one year uptrend is expected to signal potential profit taking which seems overdue.
Fortescue Metals quarterly chart
It is quite surprising to see a divergence of the recent correlation between price actions of gold (XAUUSD) and AUDUSD last night. While gold appears to have made a break out of the recent swing high pf $1,225/oz, AUDUSD is currently well short of the nonfarm payroll double top of 0.7695.
The obvious focus for today will be the Reserve Bank of Australia rate decision at 1430 (0330 GMT) today therefore we expect choppy price actions heading into the meeting while maintaining bullish bias on AUDUSD.
AUDUSD daily chart
The technical outlook still looks strong as we have so far witnessed six consecutive weekly gains so we would look to go long either on the pull back down to support 0.7246 or break above resistance 0.7337.
NZDUSD monthly chart
Today's Trade information sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
-- Edited by Adam Courtenay
Today’s Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch the recording of this week’s Macro Monday Call. Follow us on twitter.com/SaxoAustralia