Article / 14 September 2017 at 0:53 GMT

Today's Trade: Miners pull ASX200 lower ahead of jobs data

Trading Desk / Saxo Capital Markets
Australia

  • The ASX200 was down 0.3% ahead of key employment data
  • AUD was trading just below 0.80 against the US dollar before the data
  • The US dollar held onto gains on revived hopes for tax reform
  • Traders turned their focus to upcoming US consumer inflation data
  • US crude for October delivery climbed 2.2% to reach $49.30 a barrel

By Saxo Capital Markets (Australia)

Overnight and early trading

The local market was down in morning trade as investors awaited today's release of jobs data. The ASX200 was off 0.3%, dragged lower by miners.

The rally in risk assets is taking a breather ahead of key data on China’s economy and US inflation. The dollar held onto gains triggered by revived hopes for US tax reform.

Asian stock futures pointed to a mixed start to Thursday trading after the S&P 500 Index eked out a fresh record high.

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 Economists are expecting Australia's jobless rate to remain at 5.6%. Photo: Shutterstock

The Dow Jones Industrial Average notched its 37th record of the year on Wednesday, boosted by shares of energy companies.

Major stock indices have risen every day this week as investors have shaken off concerns over tensions between the US and North Korea and early estimates have suggested that damage from Hurricane Irma was less severe than initially expected.

The S&P 500, Dow industrials and Nasdaq Composite hit records together for the first time since July on Tuesday and did so again on Wednesday. The Dow industrials swung between small gains and losses before closing up 39.32 points, or 0.2%, at 22158.18. The S&P 500 edged up 1.89 points, or 0.1%, to 2498.37 and the Nasdaq Composite inched up 5.91 points, or 0.1%, to 6460.19. Both indices turned positive late in Wednesday’s session.

Energy stocks were among the best performers in the S&P 500 on Wednesday, rising alongside oil prices after the US Energy Information Administration reported a record drop in gasoline inventories for the week ended Friday.

The S&P 500 energy sector gained 1.2%, posting its ninth day of gains in the past 10 sessions. Wednesday marked the first time this year the sector accomplished that feat.

Chevron shares rose $1.69, or 1.5%, to $114.18, accounting for nearly a third of the Dow industrials’ gain for the day. Chesapeake Energy rose 20 cents, or 5.3%, to 3.94.

US crude for October delivery climbed 2.2% to $49.30 a barrel, settling at the highest level in more than a month.

Earlier, stocks held steady and the dollar rose after the US Labor Department said the producer-price index, a measure of inflation experienced by businesses, increased 0.2% in August from a month earlier. That was the largest advance since April, although still below what economists surveyed in the street.

Government bonds fell, with the yield on the benchmark 10-year US Treasury note rising to 2.194% from 2.171% on Tuesday. Yields rise as prices fall.

Elsewhere, the Stoxx Europe 600 wobbled between slight gains and losses before closing down less than 0.1%, snapping a five-session winning streak.

Source: Bloomberg, TradingFloor.com, WSJ.com

Local markets

  • Bank of New York Australia ADR Index is down 1.0% to 278.2, BHP Billiton ADRs are down 1.6% to A$27.09 equivalent, a 1.1% discount to last Sydney close, Rio Tinto ADRs are down 1.7% to A$61.15 equivalent, a 12.0% discount to last Sydney close
  • Companies trading ex-dividend today: ADA, AMA, APE, BLX, BRG, BRI, CDA, CGR, DTL, EGL, EHH, EMB, EPW, FLT, GCS, GFY, GZL, KME, LBL, LMW, MHJ, MIL, PGR, PSI, PSQ, RXP, S32, SEK, SIQ, SNL, VRT, VTG, WSA, XRF
  • Gold fell to a one-and-a-half-week low on Wednesday, erasing earlier gains as the dollar index jumped, although a retreat in global stocks after Tuesday's record high prevented deeper losses. Gold traded in with an outside day bar with a close at its lows. The metal's move lower came as the dollar turned higher after a report showed US producer prices rebounded in August and as traders turned their focus to US consumer inflation data. A firmer dollar makes gold more expensive for holders of other currencies. Concerns over North Korea's nuclear ambitions were a key factor driving spot gold prices to 13-month highs last week at $1,357.54 an ounce. An easing of those worries helped lift equities to record highs early this week. Demand for gold, seen as a safe investment in uncertain times, revived earlier after US President Donald Trump pledged stronger measures against North Korea and Pyongyang promised to fight off what it said was the threat of a US invasion. Gold stocks tumbled 2% in Toronto overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil prices rose to a one-month high on Wednesday, supported by a record drop in gasoline inventories and signs that market supply and demand are coming back into balance. Light, sweet crude for October delivery gained $1.07, or 2.2%, at $49.30 a barrel on the New York Mercantile Exchange, closing out the third straight session of gains. Brent, the global benchmark, settled up 89 cents, or 1.6%, to $55.16 a barrel, the highest since April 17. On Wednesday, the International Energy Agency said global oil supplies fell for the first time in four months in August, while also revising its 2017 oil demand estimate up to 1.6m barrels a day from its July estimate of 1.5m. The IEA said that commercial oil inventories in the Organization for Economic Cooperation and Development, or OECD, stayed flat in July month-on-month, at 3.016bn barrels, about 190m barrels above their five-year average. The US Energy Information Administration also reported that gasoline stockpiles fell by 8.4m barrels in the week ended Sept. 8, the largest weekly drop on record in EIA data going back to 1990. Stocks of distillates decreased by 3.2m barrels, also exceeding analyst expectations. Crude stockpiles rose by 5.9m barrels last week, less than estimates from the American Petroleum Institute for a build of 6.2m barrels. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • The iron ore market remained quiet, whilst futures markets in China were under pressure. Iron ore futures were down 2.6% while steel futures were off 1.1% as concerns about rising supply impacted investor sentiment. However, this didn’t affect the physical market, with the spot index prices inching slightly higher. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper dropped for a second day as stockpiles surged on the world’s biggest metals bourse, while signs of loosening spot supply added to concerns that prices have overshot fundamentals. Copper fell 1.7% to settle at $6,553 a metric ton at 5:51pm on the London Metal Exchange, its weakest close since August. The metal slid as much as 2.1% after inventories tracked by the bourse rose for a second day. Shares in producers Freeport-McMoRan Inc. fell 2.5% while Teck Resources Ltd. fell almost 5%. Traders and analysts are turning cautious on copper, which reached a three-year high last week, amid signs that demand is weakening and the metal is in plentiful supply. The LME’s cash copper contract traded at a $43.50 discount to the benchmark three-month price on Wednesday. That’s the widest discount since 2009 and signals better conditions for buyers in the spot market. An 18% jump in LME inventories over two days suggests traders are looking to unload surplus stock, adding to concerns about conditions in the physical market. Stockpiles rose to a three-week high of 246,575 tons on Wednesday after European inventories surged by the most in nearly nine months. The sell-off came as all base metals on the LME dropped, coming under pressure as bullish investors closed out positions and recent declines attracted bearish funds. Nickel plunged 5.3%, aluminum declined after two days of gains & zinc slid 1.2%. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • AGL Energy (AGL): Competition regulator says AGL ownership of Liddell and Bayswater power plants “anti-competitive”: AFR
  • BHP Billiton (BHP): BHP-Vale Brazil mine venture said to project fourth-quarter 2018 restart
  • Commonwealth Bank (CBA): Prices $3bn debt issue
  • Fairfax (FXJ), Nine Entertainment (NEC), Seven West (SWM), Southern Cross Media (SXL): Australian govt reaches deal for media laws overhaul, ABC says
  • Fortescue (FMG): Expected to make decision on A$1bn Iron Bridge project in current FY: AFR
  • Mirvac (MGR): Scheduled to host roadshow
  • Myer (MYR): FY results expected; NOTE: FY17 adj. net income est. A$64.3m (10 analysts)

Broker upgrades and downgrades

  • Bendigo & Adelaide (BEN): Bendigo & Adelaide Upgraded to Buy at Bell Potter; PT A$12.50
  • Genworth Australia: (GMA): IFS rating cut to Baa1 from A3 by Moody’s
  • Healthscope (HSO): Healthscope Upgraded to Overweight at JPMorgan; Price Target A$2
  • Link Administration (LNK): Link Administration Upgraded to Buy at UBS; PT Raised to A$8.85
  • Sirtex (SRX): Sirtex Cut to Hold at Morgans Financial; Price Target A$16.53
  • WiseTech (WTC): WiseTech Downgraded to Sell at Bell Potter; PT Raised to A$8

AUDUSD & USDCHF

The uptrend line (from June low of 0.7373) continues to remain valid as AUDUSD seems to have paused selling ahead of today’s employment numbers which would be the major focus to determine whether we would see a break below the uptrend. Falling copper prices are not helping AUDUSD longs either, as well as recent resurgence from the US dollar. Another key data release would be tonight’s US CPI figures at 2230 local time.

AUDUSD chart
1
 
This week’s positive sentiments, along with declining volatilities, are lifting USDCHF off the double bottom level of 0.9440. The key resistance level sits at 0.9770, which corresponds to 50% retracement between the double top 1.01 handle and 2017 low of 0.9440. We are expecting continuation of the current momentum to remain solid.

USDCHF chart
Source: Both charts, Saxo Bank - Create your own charts with SaxoTrader; click here for more

Today's Trade information sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

Watch the video of this Week’s Macro Monday Call
-- Edited by Susan McDonald


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

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