Today's Trade: S&P/ASX200 heads higher as miners, energy firms retreat
- 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.
- 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
- 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.
- 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.
- Thursday: Nufarm (NUF) AGM
- Friday: Westpac (WBC) AGM
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.
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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.