Short term
Trade view / 10 April 2015 at 1:03 GMT

Today's Trade: Ore price lifts, oil stocks in spotlight, AUD fragile

Trading Desk / Saxo Capital Markets
Australia
Instrument: ASXSP200.I
Price target:
Market price:
  • The S&P/ASX 200 is trading sideways, but should eventually break above 6,000
  • The iron ore price has edged higher, and signs are bullish for Fortescue Metals
  • The AUDUSD has hit highs in recent days, but it hasn't sustained them


By Saxo Capital Markets Australia


US, European stocks up overnight

We saw stocks gaining across Europe and the US last night with US stocks being lifted by a rise in oil prices whilst automobiles helping European stocks propel higher. The Dow Jones Industrial Average gained 56.22 points, or 0.3%, to 17958.73. The S&P 500 rose 9.28 points, or 0.45%, to 2091.18, and the Nasdaq Composite Index climbed 23.74 points, or 0.5%, to 4974.56.

Energy stocks pulled ahead, mirroring a rebound in oil prices from their biggest loss in two months. S&P 500 energy companies gained 1.5%, as oil futures rose 0.7% to $50.79 a barrel.
Trading activity was muted, with investors awaiting additional quarterly updates expected in the coming weeks. Money managers are widely bracing for what is expected to be one of the weakest earnings seasons in years.


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Iron ore has edged higher, but flagging steel output in China is driving a long-term downtrend in prices, and the fallout for miners includes falling earnings and even M&A moves. Photo: iStock
 

The Stoxx Europe 600 index gained 1.1%, closing at an all-time high – its first in 15 years. New figures last night showed impressive gains in auto sales for the European market. This helped major car manufacturers post gains on Thursday. Heavily weighted companies like Renault and BMW both closed over 2% higher and helped the wider benchmarks.

Germany’s DAX added 1.1%, notching its second-highest close on record. France’s CAC 40 gained 1.4%, but remains 25% below its 2000 record. London's FTSE 100 closed around 1.12% higher

Local markets

  • S&P/ASX 200 Index futures contract rose 0.3% to 5,951; futures relative to estimated fair value suggest an early gain of 0.5%
  • Bank of New York Australia ADR Index -1%, snapping 3-day advance; BHP Billiton ADR -1.9%, Rio Tinto ADR -1%
  • Spot gold retraced yesterday’s gains, losing 0.6% to trade at US$1,195 from a stronger USD and a lack of direct influential data. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Brent oil climbed 1.3% to US$56.77 after strong buying from a state owned Chinese oil company that has bought 8.5 million barrels so far in April. WTI lost 0.5% to US$50.69 following yesterday's published 14 year record monthly production surplus. Oil stocks to watch include: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore lifted 0.6% to US$48.34. Fortescue's recovery from lunch time yesterday has indicated a bullish signal. Given this lift in iron ore prices on little direct news, FMG offers a good entry point at these prices for a short term trade. We say this because, first, FMG failed to make a new low, and second, yesterday’s hammer candle is a bullish indicator. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • AACo (AAC): Indonesia issues import permits for 250k cattle for 2Q
  • Challenger (CGF): In talks to buy Dexion Capital
  • Rio Tinto (RIO), BHP (BHP): Mining earnings cuts yet to reach bottom, M&A not ruled out: Credit Suisse
  • Westpac (WBC), NAB (NAB): These two big four banks are jointly arranging TPG Telecom’s (TPM) $2 billion loan: IFR; NOTE: TPG Telecom in March agreed to buy iiNet for $8.60 a share in cash
  • Base metals were mixed overnight. Copper lost 0.9% after yesterday’s 1.4% lift. Aluminium fell 0.7% to US$1,771 with further pressure to be expected after Alcoa reported an expected global surplus of 326,000 tonnes in 2015, up from a deficit of 38,000 q/q. Nickel closed up 0.2% to US$12,580 after being down almost 1% as the market did believe these 6 year lows were warranted. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
 
Friday
  • AUS Home Loans m/m (11:30am)
  • CNY: CPI y/y, PPI y/y
  • EUR: French Gov Budget Balance, French Industrial Production m/m
  • GBP Manufacturing Production m/m, Construction Output m/m, Industrial Production m/m
  • FOMC Member Lacker Speaks: Due to speak about the economic outlook, in Sarasota
  • US Import Prices m/m

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 Mar 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 on February 6 at $6.10. First profit target was reached on February 18 at $6.49 (C +6.4%) and second profit target at $7.12 (C +16.7%) and third and final profit target at $8.00 (C +31%) remains in place. Stop loss trailed to entry price of $6.10

Broker upgrades

  • Greencross (GXL): Raised to buy vs hold at Morningstar
  • Independence Group (IGO): Raised to buy vs hold at Wilson HTM 
  • OZ Minerals (OZL): Raised to buy vs hold at Wilson HTM

Broker Downgrades:
 
  • SingTel (SGT): Singapore-listed stock cut to hold vs buy at DBS Vickers with PT S$4.45

S&P/ASX 200 ready to break 6,000

The S&P/ASX 200 is still holding just below 6,000 as US markets are starting to shift the gears to the upside. This week’s price action has been choppy in a relatively narrow range.

The S&P/ASX 200 may go through yet another day of trading sideways, but we believe it is only a matter of time before it breaks above the resistance level of 6,000. Therefore, positioning of this anticipation would be a key focus.

Long ASXSP200

Entry: Limit 5,929

Target: 6,048

Stop loss: 5,911


S&P/ASX 200 flirts with resistance at 6,000
SP200 DO























AUDUSD higher, but unsustainable

The US dollar strengthened the most against the euro, while the AUDUSD continued to show resilience, to hover around 0.7700 despite making a new swing high at 0.7738. The AUDUSD has been making higher highs in the last three days but could not manage to sustain these levels.

These price moves suggest that the AUDUSD is looking for its next catalyst. Today’s Chinese CPI (11:30am) and next Thursday’s employment number should be closely monitored while today’s home loans figure may influence AUDUSD, and offer some clues on its near-term direction.

AUDUSD can't sustain highs

AUDUSD DO
 

Sources: AFR, SMH, CNBC, BBG, WSJ

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– Edited by Robert Ryan

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

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