Article / 03 November 2015 at 1:02 GMT

Today's Trade: S&P/ASX200 sprints ahead, punters weigh odds of RBA cut

Trading Desk / Saxo Capital Markets
  • A two-week high in Russian output weighed on crude prices
  • Struggling commodities prices weighed heavily on the Australian dollar
  • Racing-obsessed traders are scrutinising the RBA's form and rate intentions
  • Leading miners will be under pressure following another fall in iron ore prices

 By Saxo Capital Markets Australia

Overnight and early trading

  • The ASX surged higher at the open, taking its lead from a jump on Wall Street. However uncertainty about today's RBA decision kept some investors wary. The S&P/ASX200 was up 1.56% to 5,246.20 at 1121 AEST (0021 GMT).


Forex traders will anxiously await the RBA announcement at 1430 AEST (0330 GMT) today, given that the odds of a rate cut have firmed to almost an even money bet. Photo: iStock

  • Global markets started the month on with positive gains last night with the Dow now positive for 2015 driven by health-care and energy stocks.
  • The Dow rose 165 points, or 0.9%, to 17829, up 0.03% for the year. The last time the blue-chip index closed with a 2015 gain was July 22. The S&P 500 gained 1.2% and the Nasdaq Composite climbed 1.5%.
  • The Nasdaq composite outperformed as Apple gained 1.4% and as the iShares Nasdaq Biotechnology ETF (IBB) rose nearly 3.9% for its best day since Oct. 15
  • Energy stocks in the S&P 500 rose the most on Monday, up 2.4%, followed by a 2% advance in the health-care sector.
  • Chevron (up 4.49%) and Exxon Mobil (up 3.07%) contributed the most to gains in the Dow, which closed up 165 points.
  • Valeant Pharmaceuticals International rose 7.3% after short-selling firm Citron Research offered no new allegations against the company in an updated report on Monday. Valeant shares slumped in the wake of an October report from Citron that questioned its business practices.
  • Early session saw major averages open little changed, with the Dow dipping into negative territory as Visa weighed. Visa closed down ~ 3% after falling more than 3.5% in morning trade. Visa reported earnings that missed but revenue that slightly topped expectations. Visa also announced the purchase of Visa Europe for about $18.2 billion and authorized a new $5 billion share repurchase program.
  • In economic news, the Institute for Supply Management’s gauge of manufacturing activity slipped to 50.1 in October from 50.2 in September. That was the weakest reading since May 2013 and barely above the 50 level that separates expansion from contraction.
  • The CBOE Volatility Index (VIX) was near 14.
  • The Stoxx Europe 600 rose 0.3%, rebounding from early losses after Eurozone manufacturing data for September was revised higher, suggesting the region remains resilient to spillover from China’s slowdown
  • The DAX added 0.93%, the FTSE closed barely unchanged eking out a 0.01% & the CAC rose 0.38%
  • Investors were focused on Commerzbank's better-than-expected third quarter earnings. Shares of the German bank ended 6.6% higher after it beat analysts' expectations for pretax profit. Its retail bank division performed well, provisions for bad loans decreased and its run-down portfolio of unwanted assets broke even
  • HSBC's third quarter earnings showed that pre-tax profit rose to $6.1 billion, up 32% from the same period a year ago and higher than expectations of analysts polled by Reuters. London-listed shares of the bank finished trade down 0.8%Budget airline Ryanair saw shares jump 3.2% Monday after reporting that it expected to post annual profits at the upper end of its forecast range, due to a lift in passenger numbers.
  • Shares in Swedish appliance maker Electrolux sank to the bottom of the STOXX 600, closing down 5.4%, after the U.S. Justice Department rejected the firm's offer to settle a dispute over whether it would be allowed to buy General Electric's appliance business, Reuters reported.
  • Greek bank shares got a major boost on Monday after the European Central Bank's stress tests of Alpha Bank, Eurobank, Piraeus Bank and National Bank of Greece showed a collective capital shortfall of 14.4 billion euros, Reuters reported. This was less than the 25 billion euro maximum earmarked for bank recapitalization as part of the country's latest bailout program.
  • Alphabank and Eurobank both closed up close to 29%. Piraeus Bank ended 18% higher and the National Bank of Greece was up more than 7.5%

Local markets
  • The S&P/ASX 200 Index futures contract rose 1.2% to 5,193; futures relative to estimated fair value suggest an early gain of 1.1%.
  • Bank of New York Australia ADR Index -0.7%, Rio Tinto ADR -0.8%
  • Gold futures falls for third day last night, declining to a four-week low as investors cut their holdings in bullion-backed funds to the smallest in two weeks as traders gave even odds that the Federal Reserve will raise interest rates in December. Last week, gold posted the biggest drop since August and hedge funds finally backed away from bullish bullion bets. Gold futures for December delivery dropped 0.5% to settle at $1,135.90 an ounce at on the Comex, after touching $1.132.50, the lowest since October 5. Holdings in exchange-traded products backed by gold declined 2.6 tonnes to 1,539.7 tonnes as of Friday, the lowest since October 16, data compiled by Bloomberg show. Silver futures for December delivery declined 1% to $15.408 an ounce on the Comex. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
  • Crude dropped from a two-week high as Russian output climbed and data on Chinese manufacturing signalled a slowdown in demand. WTI for December delivery fell $0.45 or 1% to settle at $46.14/barrel on the New York Mercantile Exchange. The volume of all futures traded was 34% below the 100-day average at 2:45 p.m. Prices have decreased 13% this year. Brent for December settlement dropped $0.77, or 1.6%, to end the session at $48.79/barrel on the London- based ICE Futures Europe exchange. The European benchmark crude closed at a $2.65 premium to WTI. Russia’s production of crude and gas condensate, which is similar to light oil, averaged 10.78 million barrels a day during the month, according to the Energy Ministry’s CDU-TEK unit. That’s an increase of 1.3% from a year earlier and 0.3% more than the previous month. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore dropped again last night, still below the $50 mark: Iron ore fell $0.33, or 0.7%, to $49.50 a tonne, according to a price index compiled by Metal Bulletin. A report by ANZ says that iron ore prices will be pressured by rising stockpiles. This follows a similar report by Goldman Sachs most recently that iron ore prices will continue to slide. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Copper prices were treading water as investors weighed up mixed Chinese economic data. Three-month copper on the London Metal Exchange was barely changed at $5,113 a tonne in midmorning European trade. Other base metals were mixed on Monday. The Caixin China manufacturing pPMI, a gauge of nationwide manufacturing activity, rose to 48.3 in October from 47.2 in September. Still, a reading below 50 indicates contraction; the index has stayed below this level for eight consecutive months. The official gauge of China’s factory activity, released Sunday, was unchanged at 49.8 in October. Aluminium futures rose 0.7% to $1,489 a tonne, zinc dropped 0.4% to $1,704 a tonne, nickel was up 0.7% at $10,105 a tonne and lead was up 0.1% at $1,700.50 a tonne. Tin was down 0.8% at $14,900 a tonne. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
  • RBA Nov. cash rate est. 2%, unchanged vs Oct.; announcement at 1430 AEST
  • Boral (BLD), James Hardie (JHX): REACT: US construction spending steadied by housing; NOTE: James Hardie received about 75% of its revenue from the US in FY15; Boral about 19%, which was almost double its FY13 level.
  • Crown Resorts (CWN): Possible visa shift may signal bottom for Macau: Union Gaming
  • Henderson (HGG): London-listed stk downgraded to sector perform from outperform at RBC Capital

Open positions
Broker upgrades
  • None today

Broker downgrades
  • Nearmap (NEA): Cut to hold from buy at Bell Potter; PT A$0.44

Data points
  • JPN: Bank Holiday
  • AUS: Cash Rate & RBA Rate Statement (2:30pm)
  • EUR: Spanish Unemployment Change
  • GBP: Construction PMI
  • US: Factory Orders m/m
  • Overnight Earnings: Archer-Daniels-Midland, Tesla Motors, Bayerische Motoren Werke, Hugo Boss AG, Associated British Foods, UBS Group
  • ECB President Draghi Speaks (6am): Due to deliver opening remarks at the European Cultural Days 2015 event, in Frankfurt
  • Retail Sales m/m & Trade Balance
  • CNY: Caixin Services PMI (12:45pm)
  • EUR: Spanish / Italian Services PMI, French / German / EUR Final Services PMI
  • ECB President Draghi Speaks: Due to deliver opening remarks at the ECB Forum on Banking Supervision, in Frankfurt
  • FOMC Member Brainard Speaks: Due to participate in a panel discussion at the European Central Bank, in Frankfurt
  • US: ADP Non-Farm Employment Change, Trade Balance, ISM Non-Manufacturing PMI, Crude Oil Inventories
  • Fed Chair Yellen Testifies: Due to testify on bank regulation before the House Financial Services Committee, in Washington DC
  • FOMC Member Dudley Speaks: Due to speak about the economy, in New York
  • Overnight Earnings: Time Warner, Allergan, Twenty-First Century Fox, Marathon Oil, Qualcomm, Whole Foods Market, Transocean, Liberty Media, Facebook, NG Groep, Marks & Spencer Group
  • AUS: RBA Gov Stevens Speaks (0925 AEST): Due to speak at Melbourne Institute's Economic and Social Outlook Conference, in Melbourne
  • JPN: Monetary Policy Meeting Minutes (1050 AEST)
  • FOMC Member Fischer Speaks: Due to speak at the National Economists Club, in Washington DC (1130 AEST)
  • RBA Deputy Gov Lowe Speaks (12pm): Due to participate in a panel discussion at the Financial Services Institute of Australasia Regulators Conference, in Sydney
  • EUR: German Factory Orders m/m, Retail PMI, EU Economic Forecasts
  • ECB President Draghi Speaks: Due to speak at the Catholic University of the Sacred Heart, in Milan
  • GBP: BOE Inflation Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate, Asset Purchase Facility, MPC Asset Purchase Facility Votes
  • BoE Gov Carney Speaks: Due to hold a press conference, along with other MPC members, about the Inflation Report, in London
  • US: Unemployment Claims, Prelim Nonfarm Productivity q/q, Prelim Unit Labor Costs q/q, Crude Oil Inventories
  • FOMC Member Dudley Speaks: Due to deliver opening remarks at the Workshop on Progress and Challenges, in New York
  • FOMC Member Fischer Speaks: Due to participate in a panel discussion at the Workshop on Progress and Challenges, in New York
  • FOMC Member Lockhart Speaks: Due to speak at the Joint Central Bank Conference, in Bern
  • Overnight Earnings: Earnings: Tata Steel, Alstom, Apache, Molson Coors Brewing, Walt Disney, News Corp, Toyota Motor Corp., Melco Crown Entertainment, Credit Agricole, Deutsche Telekom, Societe Generale
  • AUS: RBA Monetary Policy Statement (1130 AEST)
  • AUS: RBA Assist Gov Edey Speaks (1200 AEST): Due to speak at the Queensland Property Conference, in Gold Coast
  • GBP: Manufacturing Production m/m, Trade Balance, Industrial Production m/m
  • US: Average Hourly Earnings m/m, Non-Farm Employment Change, Unemployment Rate
  • Overnight Earnings: Berkshire Hathaway is expected to report third-quarter earnings after the close of US markets; ArcelorMittal, Telecom Italia, Telefonica, Allianz, AP Moeller-Maersk

AUDUSD under pressure

The AUDUSD is expected to remain under selling pressure as the iron ore stockpiles in China posted the longest run of gains this year. But there is a 44% chance of rate cut in today’s RBA meeting at 1430 AEST, so if the rates are kept on hold, then we may see a brief rally to the upside. The key resistance levels are between 0.72 handle and 0.7250 where we look to sell
AUS200.i struggles higher

We are seeing a massive divergence between the S&P500 and ASX200 as our market extended its losing streak to six straight sessions while the S&P500 rallied to break 2,100. The AUS200 found a support level at 5,149, which is the 38.2% retracement between the August low 4,766 and the October high 5,385. The AUS200 should be well bid up today and may even attempt to climb up to the key resistance level 5,250, but this is unlikely to happen today unless the Shanghai Composite Index makes a sharp reversal from yesterday’s weakness.

The major focus for today is on the RBA rate decision at 1430 AEST (0330 GMT).

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

– Edited by Robert Ryan

For more on forex, click here.

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch our daily morning call on Periscope at 0945 AEST
: #SaxoAPAC


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