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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.
Article / 03 April 2018 at 0:27 GMT

Today's Trade: US mini-tech wreck impacts Asian markets

Trading Desk / Saxo Capital Markets
Australia
  • The slide on Wall St gave a lift to havens like the yen and gold
  • Every stock in the S&P 500 tech sector ended lost ground
  • There was a healthy rebound in China's manufacturing PMI
  • Copper climbed for a fourth day, on the upbeat China PMI

By Saxo Capital Markets Australia

Overnight and early trading

  • The S&P/ASX 200 was down in early trading, but rebounded thanks to a mining sector rally. The benchmark index was up by a thin 0.09% to 5,764.40 at 1250 AEST (0350 GMT).
  • Asian markets look set to come under pressure as a selloff in once much-favored U.S. technology shares deepened and volatility soared. Safe havens like the yen and gold rose. Equity futures in Japan point to a lower open, as do those in South Korea. Australian and Hong Kong markets resume trading after a four-day long weekend.
  • U.S. stocks tumbled on the first day of the second quarter, as sliding technology shares and rising global trade tensions dragged major indexes lower.


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 China is in the news today, after Beijing slapped retaliatory tariffs on the US, and industrial metals gained ground in Shanghai, above, thanks to upbeat manufacturing PMI. Photo: Shutterstock


  • Stocks began the day on a downbeat note, with technology shares in Asia coming under pressure after a fresh string of negative news hit many of the industry’s leading companies.
  • The losses then carried through to the U.S., where every stock in the S&P 500 technology sector ended lower for the day.
  • Amazon.com shed $75.35, or 5.2%, to $1371.99, Tesla slipped 13.65, or 5.1%, to 252.48 and Facebook fell 4.40, or 2.8%, to 155.39, deepening its decline after its biggest one-quarter percentage loss since 2016.
  • The selling spread beyond companies whose businesses have come under scrutiny in recent weeks, with online retailer eBay losing 88 cents, or 2.2%, to 39.36 and Mastercard falling 3.56, or 2%, to 171.60.
  • Monday’s moves added to what has been a rough patch for the stock market, which has struggled for traction this year as investors have grappled with rising interest rates, weakness in technology shares and rising global tensions.
  • The Dow Jones Industrial Average fell 458.92 points, or 1.9%, to 23644.19, after falling as much as 758 points earlier in the session and logging its biggest quarterly loss in more than two years.
  • The S&P 500 lost 58.99 points, or 2.2%, to 2581.88 and the Nasdaq Composite declined 193.33 points, or 2.7%, to 6870.12, re-entering negative territory for the year.
  • Shares of manufacturers slid after China imposed tariffs on a range of U.S. agricultural goods, following through on a promise to retaliate against the Trump administration’s penalties on imports of Chinese steel and aluminum.
  • Caterpillar lost $3.49, or 2.4%, to $143.89, Boeing lost $5.44, or 1.7%, to $322.44 and farm-machinery maker Deere lost $3.50, or 2.3%, to 151.82.
  • S&P 500 earnings are expected to grow 17% in the first quarter from the year-earlier period, according to FactSet, building on gains that helped propel the index to its fastest pace of earnings growth since 2011.
  • Elsewhere, European, Australian and New Zealand markets were still closed for the Easter holiday, while lingering concerns about the technology sector broadly weighed on indexes across Asia.
  • Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC                            

Local markets

  • Bank of New York Australia ADR Index is down 1.7% to 260.9, BHP Billiton ADRs are down 1.7% to $A28.51 equivalent, a 1.1% premium to last Sydney close, Rio Tinto ADRs are down 0.4% to $A66.98 equivalent, a 7.9% discount to last Sydney close.
  • Gold prices rose overnight to close above its 50 day moving average amid renewed concerns over a trade war after China imposed extra tariffs on U.S. exports in response to U.S. duties on imports of aluminium and steel and as US stocks took a hit. The yellow metal rose 1.5% to $1,346.90/oz to take its year to day performance to 2.1%. In the past five years, gold crossed above this level 48 times and fell an average 0.2% in the next five days. It declined 26 times for an average loss of 1.6%, and advanced 21 times for an average gain of 1.5%. Gold stocks rallied 1.8% overnight in Toronto. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Crude slid the most in almost two months as fears of a trade war prompted investors to dump commodities and other risky assets. WTI for May delivery dropped $1.93 to settle at $63.01/barrel a barrel on the New York Mercantile Exchange, the lowest in two weeks. No futures were traded in New York or London on Friday due to the Good Friday holiday. Brent for June settlement fell $1.70 to end the session at $67.64/b on the London-based ICE Futures Europe exchange. The global benchmark traded at a $4.65 premium to June WTI. Subdued trading volumes lagged normal levels by about 20% in the first trading session after the Easter holiday weekend. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • Iron ore investors are weighing up the global impact from a prolonged stoppage at Anglo American’s Brazilian mine following a pipeline spill, including prospects for a boost for higher grades that may help to sustain a premium for better-quality ore over benchmark material. Benchmark iron ore futures rallied in both Singapore and Dalian on Monday, although the initial gains were pared back over the day. Spot iron ore settled 1.2% higher to $65.80 a tonne.  Iron ore slumped last month, tumbling back into a bear market, and the suspension of operations at Anglo American’s Minas Rio project for at least a month is a surprise development that’ll force investors to reassess the outlook. While the mine’s supply in 2017 was small in terms of the global seaborne market, it produces an iron-rich material that’s commanded strong demand as China clamps down on pollution and mills seek to boost productivity. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Copper climbed for a fourth day, the longest winning stretch since February 16, as a gauge of Chinese manufacturing rebounded, boosting demand outlook. Copper futures for May delivery rallied 0.8% to settle at $3.05/lb on Comex. Industrial metals were also broadly higher in Shanghai amid the manufacturing data, even as investors weigh risks from U.S., China trade frictions. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • Ex-Dividend: Clime Capital, Freedom Foods.
  • a2 Milk Co. (ATM NZ): Has not seen any change in growth of China business, continues to perform strongly in key markets.
  • Wesfarmers (WES): Australia’s Wesfarmers Hires Lazard for Homebase Sale, Sky Says
  • Santos (STO): Harbour Energy Is Said to Have Approached Santos Again: AFR.
  • Vocus (VOC): Brookfield Preparing Final Offer for Vocus New Zealand, AFR Says .
  • BHP (BHP): BHP to Start Talks With Chile Copper Workers on Tuesday: Union.
  • Beadell (BDR): Fidelity Select Gold Adds Freeport, Exits Beadell.

Broker upgrades, downgrades

  • Rio Tinto (RIO): Rio Tinto Upgraded to Hold at Morningstar.
  • Infigen (IFN): Infigen Upgraded to Overweight at JPMorgan.
  • Seven West Media (SWM): Seven West Upgraded to Buy at Morningstar.

USDCHF resilience

Despite the sharp sell off from the US major equity indices last night, USDCHF somehow remained resilient while gold (XAUUSD) and US treasury (ZN) rallied. 

The interim resistance level should continue to be in play at 0.9565 but we maintain a bullish bias on USDCHF as the last week’s price action for the currency pair formed an outside reversal that indicates a bullish engulfing pattern.

USDCHF chart

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Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters.

– Edited by Robert Ryan

For more on forex, click here.

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

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