Article / 01 February 2017 at 23:23 GMT

Today's Trade: S&P/ASX200 gains ground on positive overseas lead

Trading Desk / Saxo Capital Markets
Australia
  • Gold remains resilient and looking to push higher
  • The FOMC statment had minimal impact on markets
  • The S&P500 and the Stoxx Europe 600 made gains, ending their losing streaks
  • USD trimmed gains on disappointment with the Fed's dovish tone rate hikes

Overnight and early trading
  • The S&P/ASX200 headed higher at the open, adding to Wednesday's gains. It was up 0.23% to 5,666.40 at 1022 AEDT (2322 GMT, on Wednesday). 
  • The latest Federal Reserve policy statement did little to alter market views on the timing for further interest-rate hikes, leaving assets from the dollar to Treasuries and stocks little changed on the day.
  • The Fed acknowledged rising confidence among consumers and business and reiterated its intention to lift rates gradually as the labour market tightens. The central bank left its options open before Friday’s jobs report delivers the latest reading on labour-market strength and as they grapple with the uncertainty created by a new presidential administration. Members differ over assumptions regarding the extent to which policies proposed by President Donald Trump might boost inflation.
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Spot gold pared declines after the Fed left interest rates unchanged, but the outlook for the yellow metal looks resilient. Photo: Shutterstock

  • U.K. Prime Minister Theresa May faces a battle with pro- European lawmakers in her Conservative Party after they grudgingly backed her plan to trigger Brexit negotiations by the end of March in its first test in Parliament.
  • The S&P 500 rose less than one point to close at 2,279.42. That was good enough to halt a four-day slide that was the longest since the November election. The Dow Jones Industrial Average advanced 24.86 points to end a three-day slump. The index is down 1.1% from a record set January. 26. Apple Inc. surged 6.1% after earnings topped estimates. It was the biggest rally since July and left the stock at its highest level since July 2015. The Stoxx Europe 600 Index climbed 0.9% to stop a losing streak.
  • The US dollar trimmed gains on disappointment that the Fed did not take a more hawkish stance on interest rate increases paring a gain that reached 0.4% after data from the ADP Research Institute showed private payrolls climbed by 246,000, compared with the 168,000 median projection of analysts surveyed by Bloomberg. The euro fell 0.2% to $1.0778, while the yen traded for 113.06 per dollar.
  • The yield on the 10-year U.S. Treasury note added four basis points to 2.49%. It fell four basis points on Tuesday. The US yield curve steepened Wednesday in the minutes after the Federal Reserve left its benchmark lending rate unchanged. The difference between two-year yields and those on 30-year bonds widened to about 186 basis points, from about 182 basis points before the announcement, as shorter-maturity Treasuries pared losses. Verizon Communications Inc. swapped less than a third of the $29 billion it originally sought to exchange in a transaction designed to refinance bonds maturing in the next five years.
  • Source: Bloomberg, TradingFloor.com
Local markets
  • Bank of New York Australia ADR Index +0.7%, BHP Billiton ADR +0.3% to A$27.30 equivalent, 0.8% premium to last Sydney close, Rio Tinto ADR +1.2% to A$59.80 equivalent, ~11% discount to last Sydney close.
  • Spot gold pared declines after the Federal Reserve left interest rates unchanged and repeated that it anticipates rates will rise gradually. Bullion for immediate delivery fell 0.1% to $1,209.50/oz. The metal slid as much as 1% earlier. Gold stocks in Toronto inched higher by 0.55% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil rose to the highest close in more than three weeks as the dollar retreated after the Federal Reserve left interest rates unchanged and as evidence mounts that Opec and its partners are making promised output cuts. WTI for March delivery rose $1.07 to settle at $53.88/barrel. It’s the highest close since Jan. 6. Brent for April settlement climbed $1.22 to $56.80/b. Oil gained almost 15% the last two months of 2016 as Opec agreed on November 30 to reduce supply, with 11 other nations including Russia joining the deal less than two weeks later. While Middle East producers implement the cuts, US drillers targeting crude have increased the nation’s rig count to its highest level since November 2015. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
  • Iron ore spot prices remain unchanged at $83.34, with China exchanges still closed for Lunar New Year holidays. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Workers at BHP Billiton Ltd.’s Escondida copper mine in Chile voted against the company’s latest wage offer, opening the door for a strike and potentially heralding a wave of stoppages at global suppliers after a rally. Copper prices rose above $6,000 a metric ton but failed to hold closing at $5,945 a ton. Nickel gained 3% to $10,250, biggest gain since January 4, as short covering continues ahead of results of Philippines mining audit. Lead fell on LME, while zinc and tin rose. Aluminium closed unchanged. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • ANZ Bank (ANZ): May sell partnership stakes in Asia: Nikkei.
  • Crown Resorts (CWN): Macau January casino revenue increases 3.1% y/y; Est. 8.5% rise
  • Downer EDI (DOW): 1H1results expected; NOTE: two-analyst revenue est. $A3.43bn; Co. in August forecast FY17 NPAT of $A163mln.
  • Graincorp (GNC): Australia wheat output seen increasing USDA FAS say.
  • Prairie Mining (PDZ): Jumps after raising estimate of Debiensko Coal Reserves.
  • Tabcorp (TAH): 1H results expected; NOTE: Co. in Oct. agreed to buy Tatts Group; Co. planned buyback after deal done.
  • Yancoal Australia (YAL): Ratings unaffected by Australia purchase says Fitch.
  • Zimplats (ZIM): Sells 10% of unit to employees for $A95m, Reuters Says.
Broker upgrades, downgrades
  • Adelaide Brighton (ABC): Raised to neutral vs underweight at JP Morgan.
  • GUD Holdings (GUD): Cut to neutral at JPMorgan.
  • Macquarie Group (MQG): Cut to hold vs buy at Morningstar.
  • Sky Network TV (SKT): Cut to neutral vs buy at UBS.

Aussie releases due out this week
  • Thursday: Tabcorp, Downer.
  • Friday: James Hardie.
Stock to watch: Sydney Airport

Sydney Airport (SYD) has been trading in a tight range $A6.10 - $A5.90 this year and $A5.90 has been a major support level since September last year although we have witnessed numerous false breaks.

This stock is expected to remain sensitive to the bond yields which are showing signs of strength and we are cautiously anticipating potential break out to the downside but we would like to see a weekly close below 5.90 as a confirmation.
 
Sydney Airport share price trend
1
 
AUDUSD stuck in a range

It has been two weeks since AUDUSD got stuck in the range between 0.75-0.76 and sideways price actions continue. The FOMC meeting failed to deliver any clearcut indication on future rate hikes, but some US data (ADP nonfarm payroll and ISM manufacturing) has been impressive.

Again we will continue to monitor both copper and gold, which remains resilient and looking to push higher. Near term outlook looks strong although downside risk also should not be ignored heading into tomorrow night’s nonfarm payroll release.

AUDUSD trend
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Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters

– Edited by Robert Ryan

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


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