Article / 06 December 2017 at 23:41 GMT

Today's Trade: S&P/ASX200 heads higher as miners, energy firms retreat

Trading Desk / Saxo Capital Markets
Australia
  • Technology stocks continued to rebound, rising 0.8% in the S&P 500
  • The gains countered slumps in consumer and financial firms
  • Oil had its worse day in two months on a surge in US gasoline supplies
  • Copper rebounded from its worst day in three years
  • Gold held near a two-month low, while spot iron ore prices fell sharply

By Saxo Capital Markets Australia

Overnight and early trading
  • After an initial dip, the S&P/ASX200 edged higher in early trading, thanks to gains for consumer staples and three of the four big banks. The index was up 0.36% to 5,967.10 at 1036 AEST (2336 GMT, on Wednesday evening).
  • US stocks put the brakes on a global equity selloff as technology shares advanced. Oil tumbled the most in two months, while the US dollar strengthened amid a broad risk-off mood.
  • Gains in tech shares fought slumps in consumer and financial firms to a virtual draw, leaving the S&P 500 down less than a point. However small, it was the fourth loss in a row, the longest slump since March. European stocks almost erased losses following the Nikkei’s worst rout in nine months.
nnn
 The spot iron ore price has fallen sharply, thanks to a jump in inventories at Chinese ports, and talk of curbs on the real estate market and the steel industry (above). Photo: Shutterstock

  • Treasuries rose as investors’ focus turned to efforts to avert a US government shutdown Saturday. Developing-nation stocks sank to a two-month low.
  • In a listless day of trading for US stocks, the S&P 500 wavered between slight gains and losses before narrowly notching its longest losing streak since March. As the index fell for a fourth straight session, analysts said investors were growing nervous about markets trading near record highs as well as uncertainty about how political developments will affect stocks.
  • The S&P 500 has added 17% this year, on pace for its biggest annual gain since 2013.
  • The S&P 500 inched down 0.30 point, or less than 0.1%, to 2629.27. The Dow Jones Industrial Average fell 39.73 points, or 0.2%, to 24140.91, and the Nasdaq Composite added 14.16 points, or 0.2%, to 6776.38.
  • Shares of energy firms in the S&P 500 shed 1.3%, falling alongside oil prices after government data showed a steep rise in U.S. fuel inventories during the week ended December 1.
  • Technology stocks continued to rebound, rising 0.8% in the S&P 500. The sector is still down 2% over the past month, as investors sold some of the best-performing stocks of the year and favored shares of companies expected to benefit the most from tax cuts.
  • News out of Washington has contributed to the market’s pullback this week, investors and analysts said. A dispute among House Republicans over their year-end strategy forced GOP leaders to delay a vote on a stopgap spending bill Tuesday, just a few days before a partial government shutdown.
  • Some pointed to uncertainty around Republicans’ attempt to reconcile the Senate’s version of the tax bill with the House’s and U.S. President Donald Trump’s announcement that the U.S. recognizes Jerusalem as Israel’s capital as other sources of investor anxiety.
  • Investors picked up assets they consider to be relatively safe. The yield on the 10-year U.S. Treasury note fell to 2.330%, from 2.356% Tuesday. Yields fall as prices rise.
  • Home Depot shares declined $2.05, or 1.1%, to $180.80 following the home-improvement retailer’s announcement that it would launch a $15 billion share-buyback program and accelerate investments in its business.
  • Shares of DaVita surged 8.27, or 14%, to 69.20 after UnitedHealth Group said it would buy DaVita’s physician group for about $4.9 billion in cash.
  • Brown-Forman shares rose 4.04, or 6.5%, to 65.85 after the owner of brands including Jack Daniel’s whiskey beat analyst expectations for earnings in the latest quarter and boosted its full-year earnings outlook.
  • The global economy has improved more than expected this year and corporate earnings have picked up, helping support major stock indexes despite elevated valuations.
  • Data Wednesday showed private payrolls grew by 190,000 in November and U.S. productivity surged in the third quarter while labor costs fell further, another sign of subdued inflation pressures despite a sturdy economy.
  • Still, some investors have begun to question how long such a backdrop can continue to boost stocks.
  • Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC

Local markets
  • Bank of New York Australia ADR Index is little changed at 262.3, BHP Billiton ADRs are down 0.5% to $A27.24 equivalent, broadly in line with last Sydney close, Rio Tinto ADRs are up 0.8% to $A62.90 equivalent, a 8.6% discount to last Sydney close.
  • Gold held near a two-month low on Wednesday, under pressure from an advancing dollar ahead of a vote on the US tax reform plan, but a potential government shutdown lent support to prices. Spot gold slipped 0.11% to $1,264.78/oz by after it hit its weakest since October 6 in the previous session. U.S. gold futures rose 0.17% to $1,267.10/oz. In November, gold traded in its narrowest range in 12 years. Meanwhile, the Republican-controlled House of Representatives voted on Monday to go to conference on tax legislation with the Senate, moving Congress another step closer to a final bill. Adding pressure on gold was market expectation that the U.S. Federal Reserve is almost certain to raise interest rates next week at its final monetary policy meeting for the year, a view reinforced by a Reuters poll of economists. Gold stocks in Toronto fell 0.38% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil had its worse day in two months as a surge of gasoline supplies held in US storage tanks signals refiners will need less crude. West Texas Intermediate oil futures slid 2.9%, while gasoline hit its lowest in almost seven weeks. US gasoline inventories rose by 6.78 mln barrels last week, the most since January, the Energy Information Administration said. That exceeded the estimates of every analyst in a Bloomberg survey and overshadowed a third weekly slide in crude stockpiles. Meanwhile, US refineries boosted operating rates for a seventh straight week, contributing to excess supplies. Oil topped $59/barrel last month for the first time since mid 2015 as production cuts by Opec and allied producers such as Russia chewed into a worldwide glut.
  • Meanwhile, US shale explorers have been a thorn in the side of the Opec-led coalition, boosting output on an almost-weekly basis all year long. West Texas Intermediate for January delivery fell $1.66 to settle at $55.96/b on the New York Mercantile Exchange, the lowest close in more than two weeks. Total volume traded was about 5% below the 100-day average. Brent for February settlement dipped $1.64 to end the session at $61.22 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $5.19 to February WTI. U.S. crude supplies shrank by 5.61 million barrels to 448.1 mln in the week ended December 1, the EIA data showed. Crude production also crept higher, climbing for a seventh week. Gasoline stockpiles rose to 220.9 mln barrels, with supplies in the Central Atlantic region increasing by the most since February. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • The spot physical price for iron ore finally succumbed to weakness in the futures market. After holding up against falls in futures contracts for the past few days, spot prices fell sharply as traders pushed to the sidelines. This caution was likely caused by another large rise in inventories. Chinese ports are now holding 127.3mt, up 1.2mt last week according to Antaike. Ongoing chatter about curbs on the real estate market and the steel industry also played their part in the negative tone in the market. Iron ore dropped 3.4% to $69.36 a tonne. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper prices rose Wednesday, rebounding from their worst day in three years. Copper for March delivery closed up 0.5% at $2.9615 a pound on the Comex division of the New York Mercantile Exchange. Prices fell 3.5% on Tuesday to their lowest close since September, after a jump in copper inventories sparked concerns of waning demand for the metal. Some investors are worried that a possible slowdown in China, which accounts for roughly half of the world’s copper consumption, could weigh on prices moving forward. Copper stocks: OZL, SFR.
  • Nickel slumped 4.6% to $10,865 a tonne on Tuesday, while benchmark LME aluminium fell 0.8% to $2052 per tonne. Zinc and lead also finished lower. Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • Companies trading ex-dividend today: BT Investment Management.
  • BHP Billiton (BHP): Port Hedland’s November Iron Ore Exports Rise to 41.3m tons: PPA.
  • Challenger (CGF): Federated Investors Is Said to Weigh Bid For Hermes Fund: Sky.
  • Commonwealth Bank (CBA): Board Hoping to Make Decision on CEO by Christmas But No Formal Timetable Set: AFR.
  • Fonterra (FSF): Cuts 2017-18 Milk Price Forecast by 35 NZ Cents.
  • GetSwift (GSW ): Seeks Up to $A100 Million in Capital Raising: AFR.
  • Orocobre (ORE): Macri’s ’Buy Argentina’ Mission Prompts Oil, Lithium Listings.
  • Rio Tinto (RIO London): Rio Tinto Met With Chile Government Official to Discuss SQM Spat; Indicative Bids for Rio’s Coal Assets Due Wednesday With Apollo Global Mgmt, AMCI and Whitehaven Among Potential Buyers: AFR; Upgraded to Hold at Morningstar.
  • Spark NZ (SPK): Says Jason Paris Resigns as CEO of Biggest Division.
Broker upgrades, downgrades
  • Ellex (ELX): Rated New Buy at Maxim; price target $1.50.
  • TPG Telecom (TPM): Upgraded to Hold at Morgans Financial; PT $A5.95.
  • Tassal Group (TGR): Downgraded to Underweight at JPMorgan; PT $A3.43.
  • Woodside (WPL): Upgraded to Buy at Morningstar.
Australian corporate events
  • Thursday: Nufarm (NUF) AGM
  • Friday: Westpac (WBC) AGM
XAUUSD looking weak

On the back of broad based US dollar strength, gold (XAUUSD) is looking weak as it appears to have broken the key support level 1,267 where 200 day moving average crosses an uptrend (from its December 16 low at 1,123). The downside momentum seems to be building smoothly and we are anticipating further declines heading into the Federal Open Market Committee interest rate decision next week.

The direction of US 10 year yields remains unclear as it has been showing choppy price actions but we are yet to see any signs of weakness either. We look to remain short as long as 1,277 remains intact, however the risk for gold shorts could be disappointing nonfarm payroll number on Friday.

XAUUSD chart

























Create your own charts with SaxoTrader; click here to learn more

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


– Edited by Robert Ryan

For more on forex, click here.

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

Saxo Capital Markets (Australia) Pty Ltd | A part of Saxo Bank Group
ABN 32 110 128 286 | AFSL 280372
Level 25, 2 Park Street SYDNEY NSW 2000
Phone: +61 (2) 8267 9000 | Fax: +61 (2) 8267 9050
Please visit our website at: http://www.saxomarkets.com.au
IMPORTANT INFORMATION
The daily outlook is brought to you by Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286, AFSL 280372 (Saxo Capital Markets), in association with TradingFloor.com which is the property of Saxo Bank A/S, the parent company of Saxo Capital Markets. TradingFloor.com is a social trading facility offering clients of Saxo Bank Group access to in-depth market news, commentary, analysis and much more.
The content of the daily outlook should not be considered as a ‘personal’ or specific investment advice catered for your specific need, objectives or financial situation, or be construed as an express or implied promise, guarantee or implication by Saxo Capital Markets that clients will profit from the strategies expressed or that losses in connection therewith can or will be limited.
None of the information contained in the daily outlook constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. Saxo Capital Markets; TradingFloor.com shall not be responsible for any loss arising from any investment based on any forecast or other information contained in the daily outlook. Past performance is not a reliable indicator of future performance. Information contained in this daily outlook may have previously been distributed to; and acted upon; by other clients and persons who have shown interest in Saxo Capital Markets, as well as internal affiliates/employees of Saxo Capital Markets. Any trade ideas or positions contained herein relating to products or services offered by Saxo Capital Markets may be inconsistent to trades/positions entered into by Saxo Capital Markets and/or its affiliates. Further, any information contained may consist of opinions and views of the ‘Sales Trading Desk’ as a team, however does not reflect the ‘specific’ opinion of Saxo Capital Markets.
Trades in accordance with the information contained in the daily outlook, especially, but not limited to, leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the daily outlook do not occur as anticipated. Prior to making any investment or entering into any transaction, you should carefully consider your financial situation and consult your independent financial expert in order to understand the risks involved and ensure the suitability for you of any investment or transaction decision you enter. Any information or opinions in this material are not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be unlawful. Please refer to our Combined Financial Services Guide & Product Disclosure Statement available via www.saxomarkets.com.au. Please also consider whether acquiring or continuing to hold financial products is suitable for you, prior to trading and investing.
If you would like to unsubscribe from the Daily Outlook, please reply ‘Opt Out’ to this email with your Client ID.
Terms & Agreement | Disclaimer | Financial Services Guide | Privacy Policy | Contact Us |
SAXO CAPITAL MARKETS (AUSTRALIA) PTY LTD
LEVEL 25, 2 PARK STREET SYDNEY NSW 2000 AUSTRALIA

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com 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 Tradingfloor.com 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 Tradingfloor.com 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 Tradingfloor.com or as a result of the use of the Tradingfloor.com. 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 Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com 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