Article / 24 January 2018 at 23:41 GMT

Today's Trade: Mnuchin's comments throw a cat among pigeons

Trading Desk / Saxo Capital Markets
  • The S&P500 closed flat while the Dow Jones Industrial Average rose 0.2%
  • Crude popped above $65/b for the first time in more than three years
  • Iron ore prices inched higher; but traders are reluctant to chase prices higher 
  • The Stoxx Europe 600 fell 0.5%, snapping a four-session winning streak 
  • Watch the recording of this Week’s Macro Monday Call here

By Saxo Capital Markets Australia

Overnight and early trading
  • The S&P/ASX200 lost ground at the open; it was down 0.37% to 6,032.00 at 1042 AEST (2342 GMT, on Wednesday).
  • Asian shares are set to open lower Thursday after a Trump administration official’s rhetoric on trade and the dollar roiled financial markets, sending the U.S. currency to its lowest level in three years and whipsawing stocks that had been buoyed by strong earnings.
  • The S&P500 closed flat after swinging between gains and losses. The threat of tit-for-tat tariffs weighed on technology stocks and industrial shares also fell. Futures in Australia and Japan point to declines. The yen pushed through ¥109 per dollar and Treasuries dropped. Commodities surged, with West Texas Intermediate oil climbing above $65 a barrel for the first time in more than three years.
  • The Dow Jones Industrial Average rose as much as 182 points in early trading, but later fell after U.S. Commerce Secretary Wilbur Ross, while speaking in Davos, Switzerland, accused Beijing of practicing protectionism under the guise of free trade. The Dow recovered from the decline later in the day to close at a new record.

 Iron ore prices inched higher, thanks to strong demand from steel mills, although traders are reluctant to chase prices higher, and trading is muted in China as the Lunar New Year approaches. Photo: Shutterstock

  • U.S. Treasury Secretary Steven Mnuchin said in Davos that the Trump administration supports “bilateral trade agreements” and that a weaker dollar was good for trade. The ICE U.S. Dollar Index fell below 90 for the first time since December 2014 after Mnuchin’s remarks.
  • The Dow Jones Industrial Average rose 41.31 points, or 0.2%, to 26252.12. The S&P 500 declined 1.59 points, or less than 0.1%, to 2837.54, while the Nasdaq Composite slipped 45.23 points, or 0.6%, to 7415.06—its biggest decline of the year.
  • Shares of technology companies in the S&P 500 fell 0.9%, making the sector the broad index’s worst-performing group. Chip maker Intel was down 55 cents, or 1.2%, at $45.51, while Apple shed 2.82, or 1.6%, to 174.22.
  • Changes to trade policy, such as the tariffs the Trump administration announced on imported solar panels and washing machines, could make certain goods more expensive, lead to an uptick in inflation and force the Federal Reserve to alter its glide path for interest rates, analysts said. For many investors, rising inflation is one of the biggest threats to the long-running rally.
  • Company earnings announcements also contributed to some of the biggest individual stock moves.
  • Shares of United Continental Holdings fell 11%, or 8.92, to 69.05 after investors worried that the airline’s expansion plans threatened profit margins and could spark a price war among its rivals. Shares of four other airlines due to report earnings Thursday also slipped, including Southwest Airlines and American Airlines Group.
  • Those losses offset gains among companies that posted generally positive results. Shares of W.W. Grainger added 42.52, or 19%, to 271.97 after the distributor of cleaning supplies, safety gear and other items reported better-than-expected earnings.
  • Navient shares gained 1.07, or 8%, to 14.51 after the student-loan servicer swung to a net loss due to a one-time write-down of deferred-tax assets. Excluding the write-down, Navient reported a profit slightly ahead of analysts’ projections.
  • Elsewhere, Mnuchin’s comments on the dollar contributed to modest pullbacks of shares in Europe and Japan.
  • A weaker dollar tends to be a boon for S&P 500 multinationals, with the index generating roughly 30% of revenues outside the U.S., according to FactSet. But the currency’s slide isn’t helpful for their overseas counterparts, whose revenues are worth less when translated back into stronger local currencies.
  • The Stoxx Europe 600 fell 0.5%, snapping a four-session winning streak.
US earnings announcements
  • Thursday: 3M, Caterpillar, Celgene, LVMH, Biogen, Union Pacific, Starbucks, Intel, Northrop Grumman, American Airlines, Freeport-McMoRan, Alaska Air, Fiat Chrysler, Raytheon, Southwest Air, Sherwin-Williams, JetBlue, Celanese, Intuitive Surgical, Diageo, Western Digital, KLA-Tencor.
  • Friday: Honeywell, Colgate-Palmolive, AbbVie, NextEra Energy, Air Products, Lear, Rockwell Collins, Gentex, PolyOne.
  • Source: Bloomberg,,, CNBC.
Local markets
  • Bank of New York Australia ADR Index is up 1.2% to 295.9, BHP Billiton ADRs are up 1.6% to $A30.67 equivalent, a 0.0% discount to last Sydney close, Rio Tinto ADRs are up 0.9% to $A69.51 equivalent, a 11.1% discount to last Sydney close
  • Gold futures settled at the highest since August 2016, as investors got behind a rally brought on by a falling dollar. Volume soared in the futures market, with trading more than double the daily average. Gold for April delivery climbed 1.5 percent to settle at $1,361.40 an ounce at 1:37 p.m. on the Comex in New York. January is traditionally gold’s strongest month, as consumers in top buyer China snap up metal ahead of the Lunar New Year. Gold stocks in Toronto rallied 1.47% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • In early reporting, Northern Star confirms its production & costs on track to meet full year guidance. All in sustaining costs came in at A1067 oz in quarter.
  • Crude popped above $65/barrel for the first time in more than three years after U.S. crude stockpiles fell for a 10th week in the longest stretch of declines on record. Oil hit the highest levels since 2014 in New York amid shrinking supplies in the U.S. and a united front by major oil producers including Opec and Russia. Meanwhile, Russia’s second-biggest crude producer expects worldwide supply and demand to balance out by April, Lukoil PJSC billionaire CEO Vagit Alekperov said at the World Economic Forum in Davos, Switzerland. West Texas Intermediate for March delivery jumped $1.14 to settle at $65.61/b on the New York Mercantile Exchange, the highest level since December 2014. Total volume traded was about 52% above the 100-day average. Brent for March settlement rose 57 cents to end the session at $70.53 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $4.92 to WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • Iron ore prices inched higher as traders remained reluctant to chase prices higher. With inventories high and the Spring Festival fast approaching, physical trading has been muted. Data released showed that demand remained strong. Chinese data showed rebar output rose 3.7% in 2017. December was even stronger, up 8.9% y/y. The positive environment for steel makers was highlighted by the Korean steelmaker Posco’s results, which showed its profit up by 60%. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Copper climbed by the most since October and nickel touched the highest in more than two years as the dollar dropped and a report showed a pickup in U.S. manufacturing. Copper for 3-month delivery on the London Metal Exchange +3.3% to settle at $7,150/ton in London with Nickel rising as much as 6.3%, to settle at highest since level mid-2015. Zinc was up as much as 1.3% and settled at highest since 2007. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • AWE (AWE): China Energy Reserve Seeking Approval From ASIC to Scrap Bid
  • BHP (BHP): Brazil Government Has Done What It Can to Open Samarco This Year: MME
  • Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac (WBC), AMP (AMP), ANZ Bank (ANZ): ASIC Review Over two Years to 2017 Found Financial Advisers Didn’t Act in Best Interest of Clients in 75% of Advice Files Reviewed: Australian
  • Macquarie Group (MQG): May Place Techem on Market: Frankfurter Allgemeine
  • Myer (MYR): South Africa’s Woolworths to Take $500 Million Noncash Charge on David Jones
  • Rio Tinto (RIO): Rio Says Force Majeure For Turquoise Hill’s Oyu Tolgoi in Place; Yancoal Is Said to Vie for More of Rio’s Coal Assets: Australian
Broker upgrades, downgrades
  • Bingo Industries (BIN): Rated New Buy at UBS; PT $A3.10
  • Boral (BLD): Upgraded to Overweight at JPMorgan; PT $A8.50
  • GrainCorp (GNC): Upgraded to Add at Morgans Financial; PT $A8.51; Australia 2017-18 Wheat Production Seen Falling: USDA FAS
  • Michael Hill (MHJ): Downgraded to Neutral at First NZ Capital
  • Ramelius (RMS): Upgraded to Buy at Hartleys Ltd; PT $A0.55
  • Somnomed (SOM): Downgraded to Hold at Morgans Financial; PT $A3.58
USDCHF plunges
Broad based weakness in US dollar resumed across the major currency pairs and safe havens rallied higher. Gold (XAUUSD) broke above 2017 high 1,357 while USDCHF plunged to test 2017 double bottom at 0.9440, which is expected to act as a key support level.

Selling pressure should continue to exist but short covering is also likely in the very near term.

USDCHF chart

Create your own charts with SaxoTrader; click here to learn more.

For more on forex, click here.

– Edited by Robert Ryan

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

Today's Trade is brought to you by Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286, AFSL 280372 (Saxo Capital Markets), in association with which is the property of Saxo Bank A/S, the parent company of Saxo Capital Markets. is a social trading facility offering clients of Saxo Bank Group access to in-depth market news, commentary, analysis and much more.
The content of the daily outlook should not be considered as a ‘personal’ or specific investment advice catered for your specific need, objectives or financial situation, or be construed as an express or implied promise, guarantee or implication by Saxo Capital Markets that clients will profit from the strategies expressed or that losses in connection therewith can or will be limited.
None of the information contained in the daily outlook constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. Saxo Capital Markets; shall not be responsible for any loss arising from any investment based on any forecast or other information contained in the daily outlook. Past performance is not a reliable indicator of future performance. Information contained in this daily outlook may have previously been distributed to; and acted upon; by other clients and persons who have shown interest in Saxo Capital Markets, as well as internal affiliates/employees of Saxo Capital Markets. Any trade ideas or positions contained herein relating to products or services offered by Saxo Capital Markets may be inconsistent to trades/positions entered into by Saxo Capital Markets and/or its affiliates. Further, any information contained may consist of opinions and views of the ‘Sales Trading Desk’ as a team, however does not reflect the ‘specific’ opinion of Saxo Capital Markets.
Trades in accordance with the information contained in the daily outlook, especially, but not limited to, leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the daily outlook do not occur as anticipated. Prior to making any investment or entering into any transaction, you should carefully consider your financial situation and consult your independent financial expert in order to understand the risks involved and ensure the suitability for you of any investment or transaction decision you enter. Any information or opinions in this material are not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be unlawful. Please refer to our Combined Financial Services Guide & Product Disclosure Statement available via Please also consider whether acquiring or continuing to hold financial products is suitable for you, prior to trading and investing.
If you would like to unsubscribe from the Daily Outlook, please reply ‘Opt Out’ to this email with your Client ID.
Terms & Agreement | Disclaimer | Financial Services Guide | Privacy Policy | Contact Us |



The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail