Today will bring some clarification about whether yesterday's moves in bond and stock markets will continue the same way. When it comes to data there is not much on the agenda that potentially could influence markets strongly.
Article / 31 August 2016 at 0:31 GMT

Today's Trade: Resources drag on ASX

Trading Desk / Saxo Capital Markets
  • Local markets fell at the start, weighed down by resources stocks
  • The US dollar strengthened to its highest level in more than a month
  • For the first time in seven years, gold has fared poorly in August

By Saxo Capital Markets (Australia)

Overnight and early trading

Local markets opened lower, weighed down by resources stocks after commodity prices fell overnight. At the start, the ASX200 was down 0.3% to 5463 while the All Ords had fallen the same to 5558.

BHP was down 2.3%, Newcrest was off 3.1% and Rio had fallen 1.6%. The four big banks were mixed.

 US markets slumped after Apple was ordered to pay billions
following a EU tax crackdown. Photo: iStock

In overnight trading

  • This month’s gains in US stocks almost vanished as Apple slumped ahead of Friday’s jobs report. The S&P 500 Index dropped from near a record high as the iPhone maker was ordered to pay €13 billion ($14.5 billion) plus interest in a European Union tax crackdown.
  • The Dow Jones Industrial Average fell 49 points, or 0.3%, to 18454. The S&P 500 declined 0.2%, weighed down by utilities shares, which have benefited this year from expectations that rates will stay low. The Nasdaq Composite was off 0.2%. Stock-trading volumes have been below the 2016 average this month, with Monday’s session the lightest of the year so far. Volumes overnight were 11% below the 30-day average.
  • The dollar strengthened to its highest level in more than a month, while US crude oil fell 1.3% to $46.35/barrel.
  • The prospect of a rate rise pushed up banking shares. Financials were the only S&P 500 sector with a gain on Tuesday, after leading Monday’s rally. Consumer shares were among the biggest decliners Tuesday. Hershey shares fell 11% a day after Mondelez International ended its pursuit of the chocolatier. Gap shares dropped 4.3%, and Urban Outfitters declined 2.5%.
  • European stocks climbed, extending gains in the month as a weaker euro boosted exporters. The Stoxx Europe 600 Index rose 0.5%, with almost all of its industry groups climbing. Commodity producers bucked the trend as metal prices fell and Citigroup analysts turned bearish on mining shares.

Source: Bloomberg,

Key earnings

  • Wednesday: AU: Independence Group NL
  • Thursday: AU: Energy World Corp Ltd

Local markets and commodities

  • The S&P/ASX 200 Index futures +0.1%; futures relative to estimated fair value suggest an early gain of 0.1%
  • Bank of New York Australia ADR Index -1.7%, BHP Billiton ADR -2.2% to $A20.97 equivalent, 0.7% discount to last Sydney close, Rio Tinto ADR -3.4% to $A40.74 equivalent, 17% discount to last Sydney close
  • For the first time in seven years, gold has fared poorly in August. Futures have dropped 3% this month as the Federal Reserve moved closer to raising interest rates and bullion purchases for exchange-traded funds slowed.
  • Gold futures for December delivery slid 0.8% to settle at $1,316.50/ounce at 1344 on the Comex in New York, heading for the first August decline since 2009. In the decade to 2015, bullion added 2.2% on average during August, the best month after January. 
  • Silver futures for December delivery dropped 1% to $18.673/ounce on the Comex. Prices are down 8.2% for the month. 
  • In another bearish sign for gold: central banks, the biggest owners of the metal, cut their purchases by 40% in the second quarter compared with the same period a year earlier to the lowest since 2011, according to World Gold Council figures. Goldies in Toronto were smashed, down 4.7%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil prices fell Tuesday on renewed uncertainty over whether major producers can agree to an output freeze and on expectations of rising US inventories. US prices for October delivery settled down 63 cents, or 1.3%, to $46.35/barrel on the New York Mercantile Exchange. 
  • Brent, the global benchmark, fell 89 cents, or 1.8%, to $48.37/barrel on ICE Futures Europe. Both contracts fell to their lowest settlements since August 15. Prices have hovered in a narrow trading range in recent sessions amid conflicting views about how quickly the global glut of crude is set to shrink. 
  • Stockpiles of crude oil and petroleum products around the world remain ample, with US inventories at record highs. 
  • The Organisation of the Petroleum Exporting Countries has announced plans to meet in late September to discuss taking action to raise oil prices. The group met in April to discuss a production freeze but the talks fell apart. Iran has repeatedly said that it plans to increase its production now that international sanctions have been lifted. 
  • Iran’s unwillingness to freeze its output thwarted the Opec talks in April and could imperil the September discussions, analysts say. But also on Tuesday, Iraq’s prime minister said the country supports an Opec production freeze, putting the weight of Opec’s second-largest producer behind the coming September talks. 
  • Traders are waiting on weekly inventory data due from the Energy Information Administration tonight. The market expects the agency to report that crude stockpiles rose by 1.2 million barrels in the week ended August 26, while supplies of gasoline fell. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore for January delivery lost 0.7% to 418 yuan/mt on Dalian Commodity Exchange, the lowest close for most-active contract since June 27. According to Chinese brokerage houses, supply continues to strengthen, and pressure from port inventory is still increasing. Now the market is hearing that Chinese steel companies that have been shut for some time now are slowly coming back to production despite the overcapacity in the steel sector.
  • Yicheng Iron & Steel, which has the annual capacity to produce over 2 million tonnes of steel, is planning to restart production after a two-year closure, according to one source at a Shanxi-based logistics company. It would be the second mill in the area to reopen this year and also at a time when China's central government has vowed to cut 100 to 150 million tonnes of steel production capacity by 2020, in an effort to make its economy more market-oriented and address the global steel glut. 
  • Now this is quite ironic but the global steel industry has been picking up in recent months on the back of rising prices in China. Hot rolled coil and rebar prices have seen their prices up more than a third in recent times which is inducing dormant steel mills to reopen AND as it lures in those retail investors into these commodities. So for iron ore the challenge remains in the steel sector in China. The recent rally in iron ore prices closely mirrored an improvement in Chinese steel prices, which were largely driven by a shuttering of excess capacity in the sector. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper sat near a 10-week low for the seventh consecutive session as inventories rose and as the US dollar continues to strengthen. Copper for delivery in three months dropped 0.2% to settle at $4,607/tonne ($2.09 a pound) on the London Metal Exchange, falling for a seventh straight session, the longest stretch since April. 
  • Copper futures for December delivery slid 0.1% to $2.0765/pound on Comex. It has fallen more than 8% since the middle of July. Stocks of copper in LME-approved warehouses rose 11,650 tonnes, bringing the total retained to 283,225 tonnes, with much of the build occurring in South Korea and Singapore. 
  • Zinc fell for the first time in three days falling 1% to $2,291/ton. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • Trades ex-div: AMP (AMP), Fonterra (FSF), Mineral Resources (MIN), Navitas (NVT), Star Entertainment (SGR), Tatts Group (TTS), Treasury Wine (TWE), Platinum Asset Mgmt (PTM).
  • Adelaide Brighton (ABC): Scheduled to release 1H results; NOTE: Rev. est. $A747.5mln (2 analysts)
  • Independence Group (IGO): Scheduled to release FY results; NOTE: Adj. net income est. $A29.6mln (11 analysts)
  • Metcash (MTS): Scheduled to host annual meeting
  • Qube Holdings (QUB): Carlyle Infrastructure said to sell stake: AFR; Block trade crossed yday
  • Rio Tinto (RIO): Outlook to stable from negative at S&P; L-T rating affirmed

Broker upgrades and downgrades

  • Amcor (AMC): Raised to hold vs sell at Morningstar
  • ANZ Bank (ANZ): Raised to overweight vs underweight at Morgan Stanley
  • Commonwealth Bank (CBA): cut to underweight vs equalweight at Morgan Stanley
  • BHP Billiton (BHP):Raised to buy vs hold at Argus Research
  • Flexigroup (FXL): Cut to hold vs buy at Morningstar; Raised to add vs hold at Morgans
  • Macquarie Atlas (MQA): Cut to neutral vs outperform at Credit Suisse
  • Sandfire Resources (SFR): Raised to overweight vs neutral at JPMorgan

Stock to watch: OZ Minerals (OZL:xasx)

We are seeing good shorting opportunities as we can see a clear divergence between the double top over the OZL share price and the declining RSI. Furthermore recent weakness in gold and base metals is expected to add to the selling pressure. 

The obvious key resistance level is $A7.00 and the key support level would be $A6.20 which served as a key resistance level back in early May and support levels in August. $A6.20 also coincides with the 38.2% retracement between $A7.00 and the breakout level $A4.90. A breakout below $A6.20 could trigger further selling towards $A6.

 OZ Minerals monthly
Source: Saxo Bank 


Gold (XAUUSD) continued to react with high sensitivity on the comments from the Federal Reserve’s Stanley Fischer who reiterated his view on the rate hike.  The US dollar (DX) shot up while the bond prices (ZN) plunged below the Friday’s low. AUDUSD sold off below the support level 0.7522 and now looks to approach the next support level 0.7450, which is 50% retracement of the recent three months rally.
Source: Saxo Bank
A previous uptrend became a resistance level yesterday as an early spike in AUS200 could not be sustained above 5,500. Recent price actions suggest that weakness exists but other major equity indices (JP225 and US500) are still maintaining resilience, therefore further confirmations may be needed by end of this week as we look ahead at some key data such as CAPEX, Chinese manufacturing PMI and the nonfarm payroll. Unless Monday’s low 5,452 is taken out, we prefer to buy any dips.
AUS200 monthly

Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more 

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

– Edited by Gayle Bryant

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Follow us on Watch the recording of this week’s Macro Monday Call here.
31 August
palz palz
any good suggestionfor XAUUSD my friends?


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