- The ASX200 rose at the start helped by miners
- Industrial metals advanced as China's economy shows signs of improvement
- Gold prices slipped on the prospect of imminent interest rate rises
- Potential downside risk for EURUSD
By Saxo Capital Markets (Australia)
The ASX200 opened 0.28% higher with miners leading the charge after their offshore listed shares rose overnight. At the open BHP was up 1.9% while Rio Tinto was 2.4% higher.
- Treasuries fell overnight, pushing yields toward the highest level of the year, as investors anticipate a near-certain rate hike from the Federal Reserve on Wednesday. Stocks and the dollar traded in tight ranges ahead of a week packed with crucial central bank meetings, economic data releases and political risk.
- The Dow Jones Industrial Average and US government bond prices slipped as investors prepared for the Federal Reserve to raise interest rates later this week. The Fed is widely expected to raise borrowing costs Wednesday for the first time this year, with Fed-fund futures tracked by CME Group pointing to a roughly 95% chance of a rate rise. That has helped push bond yields higher as stocks have continued to climb on the back of a strengthening economy and hopes for improved corporate earnings.
- Expectations that the Fed would boost short-term rates lifted the yield on the benchmark 10-year US Treasury note to 2.609% – the highest closing level since September 2014 – from 2.582% Friday. Yields move inversely to prices.
- The Dow fell 21.50 points, or 0.1%, to 20881.48, amid relatively light trading activity. The S&P 500 inched up 0.87 point, or less than 0.1%, to 2373.47 (now sitting about 1% below its record high), and the Nasdaq Composite rose 14.06 points, or 0.2%, to 5875.78. The VIX dropped 2.66% to 11.35.
- Keeping risk sentiment subdued, US crude-oil futures for April delivery fell 0.2%, to $48.40/barrel, after losing 9% of their value last week. Prices have been dragged down by concerns that growth in US oil production could foil Opec's plan to shift the market into a shortage.
- Healthcare was the worst-performing sector of the S&P 500, shedding 0.2% as investors awaited a Congressional Budget Office analysis of a Republican bill to replace Obamacare. Merck & Co. fell 98 cents, or 1.5%, to $64.15, among the biggest declines in the Dow industrials. Intel shares fell 75 cents, or 2.1%, to $35.16 after the chip-maker struck a $15.3 billion deal to buy Mobileye, which makes technology for self-driving cars. Shares of Mobileye soared $13.35, or 28%, to $60.62.
- The Stoxx Europe 600 rose 0.4% as a pickup in metals prices boosted the mining sector. Shares of HSBC climbed 0.8% in London after the global bank said it was choosing an outsider as chairman for the first time. AIA Group Chief Executive Mark Tucker is set to become chairman October 1. Besides the Fed, the Bank of Japan, Bank of England and the Swiss National Bank are all set to hold meetings this week.
- Investors are also watching as Dutch voters head to the polls this week in the first of a series of key elections in the Eurozone this year. The performance of Geert Wilders’ anti-establishment party is seen as a bellwether for the chances of other populist candidates, including France’s Marine Le Pen, a foe of the euro who is seeking the French presidency.
Source: Bloomberg, TradingFloor.com
Local markets and commodities
- The S&P/ASX 200 Index futures contract rises 0.3%; futures relative to estimated fair value suggest an early gain of 0.3%
- Bank of New York Australia ADR Index +1.1%, BHP Billiton ADR +2.1% to A$24.02 equivalent, 1.6% premium to last Sydney close, Rio Tinto ADR +3.7%, most since Feb. 10, to A$53.94 equivalent, 8.8% discount to last Sydney close
- Gold prices slipped on Monday as the prospect of imminent interest rate rises kept them near the five-week lows touched last week. However, losses were limited by elections in Europe creating uncertainty and fuelling investor buying.
- Spot gold fell 0.03% at $1,204.11/ounce. US gold futures for April delivery rose $1.70 to settle at $1,203.10. Recent selling by investors can be seen in the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, which fell 1.06% to 825.22 tons on Friday. Goldies in Toronto rose 0.65% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
- Oil settles at the lowest level since November as record US crude inventories and a boost in drilling activity threaten Opec's efforts to reduce a global glut. Rigs targeting crude in the US climbed to the highest since September 2015.
- Kuwait supports extending Opec's output deal beyond June, Kuwait’s official news agency Kuna reported, citing Oil Minister Issam Almarzooq. West Texas Intermediate for April delivery fell by 9 cents to settle at $48.40/barrel on the New York Mercantile Exchange, the lowest since November 29. Total volume traded was about 7% above the 100-day average.
- Brent for May settlement declined 2 cents to end the session at $51.35/barrel on the London-based ICE Futures Europe exchange. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore futures in Dalian advance from the lowest since February 9 after a senior official in China flagged early indicators of an improving economy. Spot iron ore rebounded 1.54% to close up at $88.26. Positive commentary from the head of the National Bureau of Statistics (NBS) around industrial output (for January and February), electricity generation and freight usage have helped. As have comments from Miao Wei (head of the Ministry of Industry and Information Technology) that the targeted cuts of 50 million tons of excessive steel capacity will not include the so-called "illegal mills". So deeper capacity cuts are seemingly on the way.
- Coal prices pushed higher as reports that Coal India was struggling to meet output targets in 2017 raised hopes that imports of thermal coal would rise. The company expects to produce only 570mt in the current year, against a target of 598mt. Coal India produces more than 80% of India’s total production. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
- Industrial metals advanced for the second day, rebounding from the lowest level in about two months, as China’s economy shows signs of improvement in first two months, with little risk of a hard landing.
- Copper for delivery in three months gained 1.3% to $5,805.50/tonne on the London Metal Exchange, after sliding 3.1% last week. Over the past year, prices have rallied 17%. A workers’ strike at BHP Billiton’s Escondida copper mine in Chile, the world’s largest, entered its 33rd day on Monday amid stalled wage talks.
- In Peru, workers at Freeport-McMoRan’s Cerro Verde began an indefinite strike at 0630 local time Friday, alleging the company isn’t meeting obligations in areas such as safety and profit sharing.
- Zinc jumped 1.6% to $2757/tonne, its highest level in a week. Aluminium gained 0.1% to $1882/tonne. Nickel climbed 2.7%, its biggest daily jump in nearly a month, to $10,160/tonne, after sliding 10% last week. Lead rose 0.5% to $2274, while tin traded 0.5% higher at $19,450/tonne. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- Trading ex-dividend: Austal, Tassal
- ANZ Bank (ANZ), Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac (WBC): Aussies wave goodbye to lavish credit card perks as fees curbed
- ASX (ASX): May face competition clearing and settling equities from blockchain operator SETL: AFR
- Crown Resorts (CWN): A broker is putting together a group of funds to buy some of James Packer’s stake in Crown, AFR reported, citing fund manager sources it didn’t identify
- Duet Group (DUE): Minority holders of Li Ka-shing’s companies to vote on agreed takeover deal
- Fairfax Media (FXJ): Options surge as NZME merger decision delayed
- Hunter Hall (HHL), Washington H Soul Pattinson (SOL): Rejects increased WHSP offer, favors Pengana deal
- Macquarie Group (MQG): Loosens trading-research link with a la carte service
- Santos (STO): Partners with Zen Energy on solar, battery storage
Miners helped lift the ASX200 with BHP up around 2% at the start. Photo: Shutterstock
Companies going ex-dividend this week
- Tuesday: AMA, ASB, CAF, CDA, CCP, CTE, GRR, INM, MCY, MNY, NZK, NWS, PSQ, SSG, SIQ, TNK, TNG, TGR
- Wednesday: ADA, BRG, CSL, CWY, COH, DWS, JYC, LMW, MLM, PAF, RXP, REH, RWH, SSM, TOP
- Thursday: ONT, ASL, AHG, BAP, BWR, BWF, DTL, EBO, EMB, GFY, LBL, LGD, LAU, MEQ, MWY, MTO, PGR, PSI, SMX, SIV, SPL, SNL, VSC, ZGL
- Friday: CIW, GAP, PRY, QVE, TRS, RFG, SVW, SWM, XIP
Broker upgrades and downgrades
- Abacus Property (ABP): Cut to hold at Shaw and Partners, PT A$3.21
- Domino’s Pizza Enterprises (DMP): Cut to neutral at Citi
- Origin Energy (ORG): Raised to outperform at Credit Suisse
- TPG Telecom (TPM): Rated new neutral at UBS, PT A$6.20
- Vicinity Centres (VCX): Raised to buy at Morningstar
- Woodside (WPL): Rated new hold at Shaw and Partners, PT A$33
Stock to watch: Telstra
Telstra is fighting to maintain its 50% retracement level between the major 2010 low to the 2015 high at $4.64. On the weekly chart we notice an A class divergence: while prices make new lows, the RSI diverges. It is also interesting to note that since peaking at 2015, Telstra not only sits at the 50% retracement level in terms of price, but also sits at a 50% retracement in time from the rally in 2010 to 2015.
AUS200.i and EURUSD
Uptrend (from mid November 16) seems to be valid and the noticeable price action of AUS200
this month was the huge rebound after a false break below 5,600. Our big four banks are being bid up and upside momentum seems solid. Therefore AUS200 is expected to be supported by the financials and the recent double top of 5,826 should be tested soon. Yesterday all three Asian equity indices (Shanghai, Nikkei and the Hang Seng) looked strong hence positive sentiments are spreading.
rallied despite decent nonfarm payroll numbers last Friday night and extended the gains above the 1.07 handle (61.8% retracement of 1.0828-1.0495) but it didn’t take long for a sharp reversal to take place. Yesterday’s price actions seem to suggest the validity of the interim resistance level 1.07, therefore potential downside risk should not be ignored.
Source: SaxoTrader. Create your own charts with SaxoTrader; click here to learn more
Today's data sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
– Edited by Gayle Bryant
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