Article / 31 March 2015 at 23:59 GMT

Today's Trade: Ore and oil price falls pain; early dip for S&P/ASX 200

Trading Desk / Saxo Capital Markets
Australia
  • An early 0.5% dip is likely for the S&P/ASX 200, given futures contract indications
  • Falling oil and iron ore prices are likely to hut explorers and miners
  • The EURUSD is in a downtrend channel and any rises will be met with selling

By Saxo Capital Markets Australia

Overnight bourses fall

Stocks globally were sold off last night ending the quarter on a negative tone. In the US, the Dow Jones Industrial Average logged its first quarterly decline for the index since the first quarter of 2014. The S&P 500 and the Nasdaq Composite, however, rose for the ninth consecutive quarter.

The Dow Jones Industrial Average fell 200.19 points, or 1.1%, to 17776.12 – its ninth day during the quarter with a loss of at least 1%, the most such days since second quarter of 2012. The S&P 500 shed 18.35 points, or 0.9%, to 2067.89, and the Nasdaq Composite declined 46.56 points, or 0.9%, to 4900.88.

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Environmental concerns and the threat of inspections have served to dampen steelmakers' inventory orders in China, adding to downward pressure on iron ore prices. Photo: iStock
 

Oil prices fell for the third session in a row as expectations rose for a deal on Iran’s nuclear program [still continuing at the time of writing early on Wednesday]. Crude-oil futures dropped 2.2% to $47.60 a barrel, dragging down the energy sector. Shares of Chevron Corp. fell 1.8% and those of Exxon Mobil Corp. lost 0.7%.

It has been a bumpy road for US equities in the past three months as investors grappled with concerns about the pace of global growth, the sharp fall in the price of oil, the question of when the Federal Reserve will begin to raise interest rates as well as the strengthening dollar.

The Dow had the most swings of at least 1% in a quarter since the fourth quarter of 2011. The choppy trade has occurred even as volumes were below-average, traders said. Stocks in Europe were also weak, with both Germany’s DAX and France’s CAC 40 losing 1%. The FTSE100 tanked 1.72%.

Local markets

  • The S&P/ASX 200 Index futures contract fell 0.5% to 5,854 with futures relative to estimated fair value suggest an early decline of 0.5%
  • Bank of New York Australia ADR Index was down 1.3%, declining for a sixth day in a row. BHP Billiton ADR -1.5% and Rio Tinto ADR -2.3%
  • Spot gold weakened slightly, down just 0.2% to $1,184 as the market is left looking for direction and as the USD held up last night. Gold stocks across the Toronto Stock Exchange were smashed last night. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Brent oil has given up another 1.5% to $55.01 as the world waits to see what comes on the continued talks with Iran in Switzerland. A decision was expected to be reached overnight but with much to be said, talks are still going. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore has been crumbling at the knees, down another 2.5% to US$51.35. China's policy adjustments for home loans, which lowers home deposit requirements, failed to lift iron ore prices on speculation of increased residential construction and therefore higher steel demand. Instead it was environmental policy and the threat of inspections that has left steel producers holding off on inventory orders. It is thought that 40% of steel mill capacity may meet closures due to current pollution levels. This is fundamentally a big undertaking and the results will be watched with interest. Iron ore stocks: AGO, FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were weaker with Nickel prices tumbling again after some recent ‘catching-up’. Nickel is at near six year lows as it lost 4% to trade in the early hours of this morning at US$12,350. Lower demand for stainless steel comes from anti-dumping measures in Europe at this time. Nickel stocks: WSA, SIR [Triple bottom was broken yesterday and further selling is expected…]
  • Companies trading ex dividend: Recall (REC), STW Communications (SGN), Southern Cross Media (SXL)
 
Data points

Wednesday
  • JPN: Tankan Manufacturing Index, Tankan Non-Manufacturing Index
  • AUS: Building Approvals m/m (11:30am)
  • CNY: Manufacturing PMI, Non-Manufacturing PMI (12pm), HSBC Final Manufacturing PMI (12:45pm)
  • EUR: Spanish, Italian, EUR Final Manufacturing PMI
  • GBP Manufacturing PMI
  • US ADP Non-Farm Employment Change, Final Manufacturing PMI, ISM Manufacturing PMI,
  • Crude Oil Inventories
  • FOMC Member Williams & Lockhart Speaks, in a panel discussion titled "Financial Stability: How Essential Financial Stability be to Central Banks?" at the Federal Reserve Bank of Atlanta's financial markets conference "Central Banking in the Shadows: Monetary Policy and Financial Stability Post crisis," in Stone Mountain
Thursday
  • AUS: Trade Balance (11:30am)
  • GBP Construction PMI
  • EUR: ECB Monetary Policy Meeting Accounts 
  • US: Trade Balance, Unemployment Claims, Factory Orders m/m

Friday
  • Main stock markets closed due to Good Friday.
  • CNY: HSBC Services PMI (12:45pm) 
  • US Non-Farm Employment Change, Unemployment Rate

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 March 11 at $40.56 (+5.8%), second profit target is $39.74 (+7.6%) and final profit target is $38.40 (+10.8%).

  • AMP Limited (Ticker: AMP:xasx): Entered long position February 6 at $6.10. First profit target was reached on February 18 at $6.49 (+6.4%) & second profit target at $7.12 (+16.7%) and third and final profit target $8.00 (+31%) remains in place. Stop loss trailed to entry price of $6.10

Broker upgrades

  • Discount electronic goods retailer JB Hi-Fi (JBH): Cut to hold vs buy at Wilson HTM 
  • Seven West (SWM): Raised to buy vs hold at Morningstar

Broker downgrades
   
  • No downgrades today

EURUSD caught in downtrend

Following our short entry in the EURUSD yesterday's edition of Today's Trade, overnight price action confirms further structural weakness on lower timeframes. The EURUSD is now caught in a downtrend channel and any rises will be met with selling as recent candle bars continues to show bearish signals.

We are today adding to our short position entered yesterday and also trailing our stop loss down for total short position to 1.0805.

Sell EURUSD

Entry: Limit 1.0770

Target: 1.0620 [Target remains the same as yesterday]

Stop loss: 1.0805


EURUSD


















Chart: Saxo Bank. Create your own charts with SaxoTrader. Click here to learn more


Sources: AFR, SMH, CNBC, BBG, WSJ


– Edited by Robert Ryan

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

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