Article / 16 September 2016 at 0:06 GMT

Today's Trade: S&P/ASX200 rallies, helped by gains on Wall Street

Trading Desk / Saxo Capital Markets
  • The S&P/ASX200 (AUS200.i) appears to have found support
  • The buying momentum should continue throughout trading today
  • Copper futures hit their highest level in three weeks
  • US oil and gas companies rebounded from their worst two-day drop since June
  • Watch for volatility in the Aussie dollar until the FOMC decision next week

By Saxo Capital Markets Australia

Overnight and early trading

  • The S&P/ASX 200 headed higher at the open; it was up 0.19% to 5,250.00 at 1003 AEST (0003 GMT).
  • US stocks rose from a two-month low, as Apple Inc. extended a rally, while a rebound in crude boosted shares of energy producers. Treasuries retreated with the dollar amid data showing the American economy is on uneven footing.
  • The S&P 500 Index jumped as Apple pushed its four-day gain past 12%. The index bounced off its 100-day moving average before pushing higher as the level held for a fourth day. Industrial production contracted more than forecast and retail sales unexpectedly slid, sending the odds for a rate increase next week below 20%. The dollar was little changed, while the yield on the 10-year Treasury note rose to 1.70%.

Gold prices fell to a two-week low on Thursday, as lower safe haven demand and uncertainty surrounding Fed policy led investors to sell positions. Photo: iStock

  • Equities continued to whipsaw investors after Friday’s rout jolted markets from a two-month torpor and wiped almost $2 trillion in value from stocks amid concern that central banks would deliver smaller doses of stimulus even as the global economy sputters along. Apple’s advance has buttressed U.S. equity indexes, as consumers snapped up the new iPhone model. The Federal Reserve and Bank of Japan meet separately next week, while U.K. policy makers maintained the BoE’s asset-purchase target.
  • The S&P 500 Index gained 1% to 2,147.30 in New York, after a 0.1% slide on Wednesday left the index at its lowest level since July 7. The measure is down 1.6% since Friday and is up 2.3% for the third quarter.
  • Apple rallied for a fourth day to the highest this year on continued optimism over the prospects for its new iPhone. Skyworks Solutions Inc. rose 6.3% and Intel Corp. gained 2.5% to lead chip stocks higher. Oil and gas companies rebounded from the worst two-day drop since June. Wells Fargo & Co. fell 0.7% after reports that the Justice Department is investigating its sales practices.
  • The Stoxx Europe 600 Index added 0.6%, halting a five-day slide. Siemens climbed 1.6% after chief executive officer Joe Kaeser said Europe’s biggest engineering company may beat its earnings forecast for the fiscal year ending this month. Lenders rebounded after their worst three-day drop in two months, with those in Italy, Spain and Portugal among the biggest gainers.
  • The yield on U.S. Treasuries due in a decade rose one basis point to 1.70%, after falling three basis points the previous day. Thirty-year yields rose two basis points to 2.47%. The spread between the two securities reached the widest in more than six weeks on Wednesday.
  • Securities with longer due dates have come under pressure after a selloff in Japan’s 30-year debt before next week’s Bank of Japan meeting. Traders have been favouring shorter-dated notes, which tend to be influenced more by the prospect of policy changes from central banks, on confidence that the Fed will keep interest rates on hold, at least through next week’s policy meeting.
  • Yields rose across the euro area as Spain and France sold bonds. Germany’s benchmark 10-year bond yield increased three basis points to 0.05%. Yields on similar-maturity French bonds also rose three basis points, to 0.35%, and Spain’s were one basis point higher at 1.08%.
  • The U.S. dollar fell 0.1% to $1.1240 against the euro and dropped 0.3% to ¥102.16. Britain’s pound was little changed at $1.3239 as Bank of England policymakers indicated there’s still a chance of another rate cut this year as they assess the potential longer- term fallout from Britain’s decision to leave the European Union.
  • Crude climbed, led by gasoline’s biggest jump since May, after the restart of a pipeline carrying fuel to New York Harbor was delayed. Gasoline surged 5.1% after the projected restart of Colonial Pipeline’s Line 1, which can carry more than 1 million barrels a day of gasoline from the Gulf Coast to the eastern U.S., was pushed back to next week. West Texas Intermediate for October delivery advanced 33 cents, or 0.8%, to settle at $43.91 a barrel on the New York Mercantile Exchange. It slid almost 6% in the prior two days.
  • Copper futures touched the highest in three weeks amid signs that demand may improve in China, the world’s biggest consumer of the metal. Aluminum, nickel, tin, zinc and lead fell in London.
Source: Bloomberg,

Local markets

  • Bank of New York Australia ADR Index +2.2%, BHP Billiton ADR +2% to $A20.35 equivalent, 1.4% premium to last Sydney close, Rio Tinto ADR +0.6% to $A40.57 equivalent, ~14% discount to last Sydney close.
  • Gold prices fell to a two-week low on Thursday, as lower safe haven demand and uncertainty surrounding Federal Reserve policy led investors to sell positions. Gold for December delivery settled down 0.6% at $1,318.00 a troy ounce on the Comex division of the New York Mercantile Exchange, and traded as low as $1,312.10 earlier in the session. Prices closed at the lowest level since September 1. The release of lackluster economic data, including weak retail sales, helped boost gold prices briefly Thursday morning. However, continued concerns over the possibility of an interest-rate increase next week has kept investors on edge, prompting some to close out long positions in gold, traders said. Goldies in Toronto managed to rise overnight, up 0.63%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Gasoline made some of its biggest daily gains of the summer as pipeline and refinery outages had traders surging into fuels, eventually pulling crude prices up, too. Light, sweet crude for October delivery settled up 33 cents, or 0.8%, to $43.91/barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained $0.74, or 1.6%, to $46.59/b. Crude oil has benefited from much larger gains in refined products, a trader, broker and analyst said. Gasoline futures settled up 6.87 cents, or 5%, at $1.4302 a gallon. It is only the third time since mid-May that gasoline futures gained more than 5% in one day. Diesel futures gained 3.45 cents, or 2.5%, to $1.4162 a gallon.
  • Many in the oil markets had expected crude to rebound Thursday. It fell on Wednesday after federal data showed stockpiles of gasoline and distillates, including heating oil and diesel fuel, rising, pushing total supplies of crude oil and refined products to 1.4 billion barrels, back near a record high. But while that seemed bearish to some, others noted crude stocks fell for a second-straight week. That prior week had also been a fall of 14.5 million barrels, the second biggest weekly drop since 1982, according to the U.S. Energy Information Administration. Many attributed that to stormy weather keeping export cargoes away, but a second week of declines suggests that may not be the case, or at least that a delayed wave isn’t coming into storage. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore was flat at $US55.97 a tonne. Meanwhile BlackRock in a statement increased their exposure to Vale on higher iron ore prices. Strengthening iron ore prices and potential for further asset sales to be announced had led the investment manager to raise exposure to Vale in August, according to the statement. BlackRock also said it continues to have a quality bias through exposure to companies with tier 1 assets and management teams with strong track records. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL
  • Copper futures touched the highest in three weeks amid signs that demand may improve in China, the world’s biggest consumer of the metal. Copper futures for December delivery rose 0.2% to settle at $2.1595 a pound at 1:13 p.m. on the Comex in New York, after touching $2.1635, the highest intraday price since Aug. 22. The metal also advanced as global stockpiles on the London Metal Exchange, Comex and Shanghai Futures Exchange fell for a third straight day, the longest losing streak since July 26. Copper for delivery in three months rose 0.2% to $4,781 a tonne ($2.17 a pound) in London whilst aluminum, nickel, tin, zinc and lead fell on the LME. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
  • ANZ Banking (ANZ), Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac Banking (WBC): To face lawmakers Oct. 4-6
  • APN News (APN): General meeting scheduled
  • CSL (CSL): Barclays sees Baxter posting ‘significantly faster’ Ebit/EPS growth vs peers next few yrs
  • Macquarie (MQG): Said to prepare metering firm Techem for sale: Reuters
  • National Australia Bank (NAB): Mulling sale of stake in Cambridge Industrial Trust: AFR
  • OceanaGold (OGC): Says drill results support future of New Zealand mines
  • PSivida (PVA): Names Nancy Lurker president, CEO; Ashton resigns
  • Qantas (QAN): CEO Joyce says govt needs to relax co.’s restrictive foreign ownership cap: Australian
  • Southern Cross Electrical Engineering (SXE): Trades ex-div.
  • Sundance Energy (SEA): Rated new ’focus list’ at Scotia Howard Weil
Broker upgrades and downgrades
  • REA Group (REA): Raised to add vs hold at Morgans Financial
Stock to watch: Medibank Private (MPL.xasx)

The health fund Medibank Private (MPL.xasx) consolidated in a defined range (see orange consolidation range) for the most of 2015 and managed to break out of this consolidation range in February this year. A 100% extension of this range was at $3.17 however the strong momentum was able to drive the stock higher to the 123.6% extension of this consolidation range.

MPL.xasx has subsequently reversed off its peak and is now trading just below the break out level however above the 61.8% retracement. Given the amount of traffic enjoyed at these current levels we look for a potential bounce in the stock as the RSI starts to show signs of life after ticking to oversold levels.
Medibank Private

S&P/ASX200 (AUS200) finds support

Support seems to have been lent to the AUS200.i index from the 200 day moving average as well as the 50% retracement mark between February lows to August high. The index managed to log a gain in yesterday’s session as our oversold banks staged a rebound and with the positive leads overnight, it is expected for the buying momentum to continue throughout the day.

First set of resistance lies at 5,326 in the coming session and above that at 5,381 where an opportunity for a short could develop.
S&P/ASX200 (AUS200) trend
Commodities lift Aussie dollar

The continued rise in copper overnight along with crude’s gains translated into direct support for our commodity currency. It appears as if the red downtrend line has arrested the Aussie’s slide for the week, and should commodities have the horsepower to continue their march higher, then the Australian dollar should follow suit.

Next week is key with the FOMC decision due on September 22 (Thursday morning) and we aussie dollar expect volatility to increase, beginning tonight.
The US dollar index is currently trading within a channel – but will the lower trend line hold?
Source: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters. 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. xxx


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