Article / 08 January 2018 at 23:25 GMT

Today's Trade: S&P/ASX200 gains ground, resources in spotlight

Trading Desk / Saxo Capital Markets
Australia
  • US stocks rose for a fifth straight day, with tech shares boosting major indices
  • Gold edged down on Monday, retreating further from last week's high
  • Oil rose, on lingering tensions in Iran and declining exploration work in the US
  • Copper has hit a two-week low, thank to the strong USD and market consolidation

By Saxo Capital Markets Australia

Overnight and early trading
  • The S&P/ASX200 edged higher at the open. It was up 0.24% to 6,145.20 at 1020 AEST (2320 GMT, on Monday evening).
  • US. stocks rose for a fifth straight day, with technology shares bolstering major indexes, as investors continue to price in the impact of tax cuts before corporate earnings start later in the week. The dollar strengthened after three straight weekly declines.
  • The S&P 500 Index shrugged off early sluggishness to push to a fresh record, giving it gains in every session so far this year. The Nasdaq index rose as semiconductors advanced whilst the Dow slipped 0.1% or 13 points.
  • European equities added to the biggest weekly advance since April, and markets in Tokyo were closed for a holiday. The US dollar index climbed the most in three weeks whilst oil held above $61/barrel, and a measure of financial-market stress sank to its lowest level since 2014.
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The seaborne iron ore market is strong, with some Chinese steel mills (above) and traders stocking up for the Lunar New Year break that starts on February 16. Photo: Shutterstock

  • Corporate news drove much of the moves in individual stocks on Monday.
  • Kohl’s shares jumped 4.7% after the retailer boosted its annual profit outlook and said its comparable sales jumped over the holidays, thanks to stronger store traffic.
  • Shares of Crocs, which raised its guidance for fourth-quarter revenue, added 8.4%.
  • Meanwhile, GoPro shares fell 13% after the company said its fourth-quarter revenue would come in below what it had previously expected and that it would cut about 20% of its workforce.
  • Shares of Nvidia climbed 3.1% after it said Uber and Volkswagen would use its artificial-intelligence technology in upcoming projects.
  • Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC

Local markets
  • Bank of New York Australia ADR Index is little changed at 291.7, BHP Billiton ADRs are up 0.6% to A$30.88 equivalent, a 1.1% premium to last Sydney close, Rio Tinto ADRs are up 1.9% to A$70.90 equivalent, a 9.1% discount to last Sydney close
  • Gold edged down on Monday, retreating further from last week's 3-1/2 month high as the dollar clawed back some ground against the buoyant euro and as traders bet on further increases to U.S. interest rates after Friday's payrolls data. Dollar weakness, which continued into early January after its biggest annual drop since 2003, had helped to lift assets priced in the US currency, with gold last week registering a fourth straight weekly gain for the first time since April. Spot gold ended up 0.04% at $1,320.31/oz, while U.S. gold futures for February delivery were down 0.09% at $1,321.10/oz. US Commodity Futures Trading Commission data on Friday showed that hedge funds and money managers raised their net long positions in COMEX gold in the week to Januar 2. Gold stocks in Toronto fell 1.07% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil rose, clinging to last week’s gains as political tensions in Iran and declining exploration work in the US threatened output growth. Futures advanced 0.5% on Monday, settling near $62/barrel in New York. A simmering power struggle in Iran has raised anxieties over the stability of Opec’s third-largest crude producer. Meanwhile, US explorers cut the number of rigs searching for oil last week by the biggest margin in two months. Oil has held above $60/b since late December in New York with US crude stockpiles contracting and oil drilling stalling out. Output curbs by Opec and allied suppliers have buoyed prices, with producers promising to continue the curbs for all of 2018. WTI for February delivery added 29 cents to settle at $61.73 a barrel on the New York Mercantile Exchange. Total volume traded was about 8% below the 100-day average. Brent for March settlement climbed 16 cents to end the session at $67.78/b on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.06 to March WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • The seaborne iron ore concentrates market has remained strong over the past two weeks, with some mills and traders stocking up for the Chinese New Year break, according to Metal Bulletin. China's seven-day Lunar New Year celebrations start on Friday February 16 and market participants do not anticipate a resumption in production until mid March. But there are concerns that the upward momentum might slow due to reduced buying activity at Chinese ports. China's Ministry of Industry & Information Technology announced on Monday that no new capacity will be allowed in the steel, cement and flat glass industries, and issued specific requirements for steel mills replacing old with new capacities. The announcement sparked a boost in steel and iron ore futures curves with participants expecting a stable supply of steel through 2018, Metal Bulletin reported. The spot price for ore with 62% content in Qingdao was at $76.80 a dry ton on Friday - the highest in four months and iron ore futures on SGX AsiaClear in Singapore traded 1.7% higher at $76.60 a ton yesterday, gaining for a third day. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Copper hit a two-week low, weighed down by a stronger US dollar and as the market consolidated following sharp gains in December, while zinc again reached its highest in more than a decade on supply concerns. Copper speculators raised their net "long" or buy positions by 13,604 contracts to 113,124 contracts in the week to January 2. In zinc, the cash contract on the London Metal Exchange traded at a $US26 premium to the three month benchmark, up from a $10 discount on December 12, the latest indicator of supply tightness in the metal used to galvanise steel. LME copper ended up 0.1% at $7,125 a tonne, having hit its lowest in two weeks at $7,105. Prices on December 28 topped out at $7312.50 a tonne, the highest since January, 2014. Copper stocks: OZL, SFR. Nickel stocks: IGO, WSA.
  • Aluminium closed down 1.3% at $2175, having hit its lowest in nearly two weeks at $2,171 with Shanghai Futures Exchange stockpiles at record highs, up some 660% since the start of last year.  Aluminium stock: AWC.
  • Auckland Airport (AIA): Continues to Pursue Sale of Stake in Cairns Airport Owner: AFR.
  • Kingsgate (KCN): Holders to Vote on Board Proposal Including Ousting Chairman: AFR.
  • LendLease (LLC): Axa Is Said Near Deal to Buy Stake in U.K.’s Bluewater Mall.
  • Lucapa (LOM): Two Diamonds Larger Than 100 Carats Each Found in Lesotho Mine.
  • Rio Tinto (RIO): Tropical Low Risks Becoming Cyclone Near Western Australia: BoM.
Broker upgrades and downgrades
  • Billabong (BBG AU): Downgraded to Neutral at Citi; price target set to $A1.05
Stock to watch: CBA

Shares in the big four bank Commonwealth Bank of Australia (CBA.xasx) spent the final trading sessions of 2017 under pressure at the 200 daily moving average, as well as the 2017 downtrend. The start to the year looks promising as shares were able to break above this April 17 – July 17 – November 17 downtrend after trading in a converging and narrowing price pattern as it closed off 2017 with an annual loss.

The claiming of the 200 day moving average combined with the break of the downtrend translates to an extremely positive backdrop for CBA and we look for further gains towards $A83.78 followed by $A85.00. An unexpected drop towards the 200DMA ~$A80.75 would be welcome by traders wanting to position their books ahead of CBA’s reporting due 7th of February.

CBA chart
1
 
USDJPY may break downtrend

Price action for USDJPY has been subdued below downtrend (from 2015 high of ¥125.86), which has remained intact. The 1 month implied volatility of USDJPY dipped below the 6 handle for the first time since 2014. So we are yet to see any significant moves anytime soon.

USDJPY is expected to eventually break the downtrend as long as both Nikkei and US treasury yield continue their solid run. The obvious support level is ¥112 which held since last month and the next key resistance level would be ¥114.37 where USDJPY failed to close above since May 2017.

USDJPY chart
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– Edited by Robert Ryan

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

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

 
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