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#SaxoStrats
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.
Strategic trade
Trade view / 14 April 2015 at 1:08 GMT

Today's Trade: Miners drag S&P/ASX 200 lower, AUDUSD under pressure

Trading Desk / Saxo Capital Markets
Australia
Instrument: ASXSP200.I
Price target:
Market price:
  • BHP, Rio Tinto and Fortescue are in the spotlight as iron ore demand slows 
  • Miners helped drag the S&P/ASX 200 down in early trading
  • Higher oil prices overnight should draw market attention to oil explorers


By Saxo Capital Markets Australia

Overseas markets overnight / early trade

The Australian sharemarket has opened lower. The big miners dragged the market down, as the market shrugged off overnight commodity price rises. At 10:26am, the S&P/ASX200 index was down 21.6 points, or 0.3%, at 5938.7.

In overseas markets, US stocks edged lower last night after two consecutive weeks of gains. The Dow Jones Industrial Average fell 80.61 points, or 0.4%, to 17977.04 and the S&P 500 index shed 9.63 points, or 0.5%, to 2092.43. The Nasdaq Composite declined 7.73 points, or 0.15%, to end at 4988.25.

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An overnight rise in iron ore prices failed to impress the market, or to calm fears about long term depressed demand for steel in China. Photo: iStock

 

Traders said there was no single reason for stocks moving lower last night, adding that low trading volumes may have exacerbated declines. Monday was a quiet day in the markets, a continuing trend for U.S. equities with just 5.4 billion shares changing hands, making it the second-lowest volume day of 2015.

Shares in financial companies rose last night, making the sector the best performer in the S&P 500. Tonight, J.P. Morgan Chase & Co. and Wells Fargo & Co. are set to report quarterly results, setting the tone for the financial sector.

European stocks were mixed, though moves were muted. Germany’s DAX slipped 0.3%, France’s CAC 40 rose 0.3% and the UK's FTSE 100 lost 0.36%.Gold futures fell 0.4% to $1199.30 an ounce & crude-oil futures rose 0.5% to $51.91 a barrel.

Local markets

  • The S&P/ASX 200 Index futures contract fell 0.3% to 5,935 with futures relative to estimated fair value suggest an early decline of 0.2%.
  • Bank of New York Australia ADR Index fell 2.6% creating its biggest fall since March 10. BHP Billiton ADR dropped 4.2% (lowest since March 2009) with Rio Tinto ADR only down 1.2%
  • Spot gold fell 0.7% to US$1,199 after new comments from the Fed that the central bank may look at rising U.S. interest rates soon. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Oil was up a little with WTI and Brent rising 0.5% and 0.2% to US$52.02 and US$58.04 respectively as speculators continue to build on their net long positions. China’s March oil imports are up 14% y/y (6.3 million barrels a day) Oil stocks to watch: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore lifted 2.7% to US$48.82 as the Dalian Exchange cuts tick size for iron ore (it was halved for iron ore), coke and coking coal. This will add liquidity to the market by smaller traders, who were unwilling to take on the larger contract side and or meet indirect transaction costs due to the large contract size. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were generally lower with copper falling 0.9% to US$5,984. Chinese imports for unwrought copper and products soared 46% m/m, although this is still down 17% y/y. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
  • Iron ore miners (BHP, FMG, RIO): UBS cuts iron outlook through 2019 as supply rises, demand slows
  • APN Outdoor (APO): Quadrant seeks A$55 million block sale, offering 16.7 million shares at $3.31 each; to cut stake to 10% vs current 20%
  • Energy Resources (ERA): AGM in Darwin
  • Mineral Resources (MIN): Doesn’t see Atlas Iron’s suspension of Wodgina crushing operations having material impact on mining services business
  • SCA Property (SCP): Sells A$175m of 6-yr bonds

Data points

Tuesday
  • AUS: NAB Business Confidence (11:30am)
  • CNY New Loans & M2 Money Supply y/y (Tues-Thurs)
  • GBP : CPI y/y, PPI Input m/m, RPI y/y, HPI y/y
  • EUR: Industrial Production m/m
  • US: Core Retail Sales m/m, PPI m/m, Retail Sales m/m, Core PPI m/m, NFIB Small Business Index, Business Inventories m/m
  • US Earnings: JP Morgan Chase, Wells Fargo, Johnson & Johnson, Intel, CSX, Linear Tech, JB Hunt Transportation, Fastenal
Wednesday
  • AUS: Westpac Consumer Sentiment (10:30am)
  • CNY: GDP q/y, Industrial Production y/y, Fixed Asset Investment ytd/y, NBS Press Conference, Retail Sales y/y
  • JPN: Revised Industrial Production m/m
  • EUR: German Final CPI m/m, French CPI m/m, EUR Trade Balance, German 10-y Bond Auction, EUR Minimum Bid Rate, ECB Press Conference
  • US: Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production m/m, NAHB Housing Market Index, Crude Oil Inventories, Beige Book, TIC Long-Term Purchases
  • CAD: BOC Monetary Policy Report, BOC Rate Statement, Overnight Rate, BOC Press Conference
  • US Earnings: Bank of America, US Bancorp, Burberry, Charles Schwab, PNC Financial, Netflix, SanDisk, Universal Forest Products, Progressive, ASML Holdings
Thursday
  • AUS: MI Inflation Expectations (11am), Employment Change, Unemployment Rate & New Motor Vehicle Sales m/m (11:30am)
  • CNY: Foreign Direct Investment ytd/y (Thurs – Sund)
  • EUR: Italian Trade Balance, Spanish 10-y Bond Auction
  • G20 Meetings
  • US: Building Permits, Unemployment Claims, Housing Starts, Philly Fed Manufacturing Index, Natural Gas Storage
  • FOMC Member Lockhart Speaks: Due to speak about the US economic outlook and monetary policy at the Palm Beach County Convention Center.
  • FOMC Member Fischer Speaks: Due to participate in a panel discussion titled "The Elusive Pursuit of Inflation" at the International Monetary Fund Spring Meetings, in Washington DC
  • US Earnings: BlackRock, Citigroup, Goldman Sachs, Blackstone, American Express, Schlumberger, Celanese, Crown Holdings, UnitedHealth, Taiwan Semiconductor, Philip Morris, First Republic Bank, KeyCorp, Mattel, Sherwin-Williams, Sonoco Products, PPG Industries, WW Grainger
Friday
  • EUR: Current Account, Final CPI y/y, Final Core CPI y/y
  • GBP Average Earnings Index 3m/y, Claimant Count Change, Unemployment Rate
  • G20 Meetings
  • CAD: Core CPI m/m, Core Retail Sales m/m, CPI m/m, Foreign Securities Purchases, Retail Sales m/m
  • US CPI m/m, Core CPI m/m, Prelim UoM Consumer Sentiment
  • US Earnings: GE, Honeywell, Synchrony Financial, Comerica


Current ASX trades

  • Flightcentre (Ticker: FLT:xasx): Entered short position on March 9 at $43.05. Stop loss has been trailed now to our open price of $43.05 (-0.0%). First profit target was reached on Mar 11 at $40.56 (+5.8%), second profit target was reached on March 16 at $39.74 (+7.6%) and final profit target is $38.40 (+10.8%).
  • AMP Limited (Ticker: AMP:xasx): Entered long position on February 6 at $6.10. First profit target was reached on February 18 at $6.49 (C +6.4%) and second profit target at $7.12 (C +16.7%) and third and final profit target at $8.00 (C +31%) remains in place. Stop loss trailed to entry price of $6.10

Broker upgrades

  • Suncorp (SUN): Raised to outperform vs neutral at Credit Suisse
  • Mirvac (MGR): Raised to buy vs neutral at UBS
  • Qantas (QAN): Raised to hold vs sell at Morningstar
  • Regis Resources (RRL): Raised to buy vs neutral at UBS
  • Lend Lease (LLC): Said to have met with Crown Castle Australia: AFR; raised to buy vs neutral at UBS - Independence Group (IGO): Raised to buy vs neutral at UBS

Broker downgrades
   
  • CSR (CSR): Cut to neutral vs overweight at Commonwealth Bank
  • Drillsearch (DLS): Cut to neutral vs overweight at JPMorgan
  • Fortescue (FMG): Cut to sell vs neutral at UBS; may be cut by S&P
  • Insurance Australia (IAG): Cut to hold vs buy at Morningstar
  • M2 Group (MTU): Cut to sell vs neutral at UBS

S&P/ASX 200 fails to break 6,000

After yesterday’s weak Chinese trade balance, the S&P/ASX 200 once again failed to break above 6,000 and it continued to drop as other global markets were showing signs of concern over the Chinese economy.

While the support level is at 5,925, we expect cautious price moves today ahead of tonight’s key economic data: retail sales and PPI.

USDCAD trade

The Aussie dollar had the biggest daily range in sell off against the US dollar (120 pips) and we believe this was mainly because the AUDUSD was relatively strong last week, and yesterday’s price actions indicated some catchup on other major pairs weakness against the US dollar. It could not make a fresh low below the swing low 0.7532 and we should see some rebound today possibly towards 0.7630, but further downside pressure remains.

The USDCAD has been making lower highs in the last couple of weeks or so, and its price actions signal momentum is to the downside in the near term. Last two days of price actions suggest the strength is restricted, therefore we have a short trade just below the 61.8% level which happens to be also yesterday’s high 1.2645.

Short USDCAD

Entry: Limit 1.2633

Target: 1.2565

Stop loss: 1.2650
 

USDCAD trend
USDCAD




















Sources: AFR, SMH, CNBC, BBG, WSJ


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– Edited by Robert Ryan

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

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