Today's Trade: S&P/ASX200 rebounds, iron ore gains to benefit miners
- Oil notched its fourth decline in five sessions in New York
- Benchmark copper on the London Metal Exchange closed 0.8% higher
- Iron ore pushed higher, and steel futures were stronger in China
- Investors expect pent-up steel demand when winter constraints are removed
Overnight and early trading
- The S&P/ASX 200 made gains in early trade; it was up 0.20% to 5,957.40 at 1023 AEST (2323 GMT, on Monday evening).
- The US dollar gained and US stocks rose on Monday, driving gold to its biggest drop in two months, as Congress took a holiday break from tax talks and markets absorbed political developments in the Americas and Europe.
- At the start of a truncated Thanksgiving week, investors were unfazed by the news that Fed Chair Janet Yellen had tendered her resignation.
- Rising industrial and financial shares helped push US stocks higher Monday. Major indexes opened little changed, then gained later in the trading session, leaving six of the 11 sectors in the S&P 500 higher for the day.
- With the US stock markets closed on Thursday in observance of Thanksgiving and few major economic reports on the docket this week, some analysts and investors say trading is likely to be relatively quiet over the next couple of days.
- The Dow Jones Industrial Average climbed 72.09 points, or 0.3%, to 23430.33. The S&P 500 added 3.29 points, or 0.1%, to 2582.14 and the Nasdaq Composite rose 7.92 points, or 0.1%, to 6790.71.
- Dow component 3M rose $2.13, or 0.9%, to $231.49 while Boeing added 2.37, or 0.9%, to 264.63.
- The advance in the two stocks contributed nearly half of the blue-chip index’s total gains for the day.
- Shares in financial companies rose 0.5% in the S&P 500, with Navient and Cboe Global Markets posting the biggest gains in the sector.
- Meanwhile, shares in energy companies in the S&P 500 fell with oil prices, deepening their losses for the year. Range Resources fell 73 cents, or 4%, to 17.30 and Marathon Oil fell 58 cents, or 3.9%, to 14.47. U.S. crude for December delivery fell 0.8% to $56.09 a barrel, notching its fourth decline in five sessions
- Elsewhere, the Stoxx Europe 600 added 0.7%, with stocks in Germany reversing earlier declines.
- A collapse of talks over the weekend left German Chancellor Angela Merkel without a majority in parliament. Analysts said the development would likely result in the formation of a minority government or new elections, heightening political uncertainty in the country. Still, Germany has been a strong contributor to Europe’s economic recovery, and few investors believe the most recent developments will change that.
- Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC
- Bank of New York Australia ADR Index is down 0.2% to 266.7, BHP Billiton ADRs are down 0.7% to $A27.22 equivalent, a 0.4% premium to last Sydney close, Rio Tinto ADRs are up 0.3% to $A63.23 equivalent, a 10.7% discount to last Sydney close
- Gold dropped on Monday as the dollar rose but political and economic uncertainty in the US continued to dominate sentiment. Spot gold was down 1.43% at $1,275.80/oz, off Friday's peak of $1,297, its strongest since October 16. U.S. gold futures for December settled down at $1,275.30/oz. Gold stocks in Toronto suffered overnight dropping 1.15%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
- Oil notched its fourth decline in five sessions in New York, as markets digested political uncertainty in Germany amid anticipation about Opec’s next move. Futures slipped 0.8%, reversing course after a 2.6% gain Friday. In Germany, the breakdown of talks to form a new government coalition raised questions about the future of Europe’s biggest economy. That led USD to rally, reducing the appeal of commodities. Opec, meanwhile, will be briefed this week by oil-service provider Schlumberger Ltd. as well as Citigroup Inc. as the cartel debates whether to extend output cuts at a summit in Vienna November 30.
- West Texas Intermediate for December delivery, which expires Monday, slipped 46 cents to $56.09/barrel on the New York Mercantile Exchange, after declining 0.3% last week. Total volume traded was about 20% below the 100-day average. The more-active January contract dropped 29 cents to $56.42. Brent for January settlement lost 50 cents to $62.22/b on the London-based ICE Futures Europe exchange, after dropping 1.3% last week. The global benchmark crude traded at a premium of $5.79 to January WTI.
- Saudi Arabia has had extensive talks with Russia, Saudi energy minister Khalid Al-Falih said on Thursday. Opec will ensure that its exit strategy from the current accord will be a gradual adjustment that prevents the return of any glut, he said. Oil inventories are unlikely to drain to average levels by the time the Opec deal expires at the end of March, the minister said. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
- Bulks were stronger, with iron ore prices pushing higher. Steel futures were stronger in China, as investors continue to look to pent-up demand in early 2018 when winter production constraints are removed. The gains in the spot market came despite inventories continuing to grow in China. Stockpiles at Chinese ports rose 0.4% to 138.48mt, according to Steelhome data. Spot iron ore rose 1.4% or $0.86 to close at $63.47. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
- Benchmark copper on the London Metal Exchange ended 0.8% up at $6,828 a tonne, having posted its second weekly decline on Friday. Copper stocks: OZL, SFR
- Nickel ore output fell 11% in the nine months to September as several mines remained shut under the government crackdown and others were hit by bad weather. Brazil's Vale denied that it had decided to postpone the sale of a stake in the New Caledonia nickel mine, saying it is continuing to look for a partner. Nickel closed with a 0.7% gain at $11,655 a tonne. Nickel stocks: IGO, WSA.
- Aluminium finished 0.8% down at $2086 a tonne, lead slipped by 1.2% to $2,460, tin fell 1.5% to $19,450 and zinc eased by 0.5% to $3,163. ; Aluminium stock: AWC.
- Morgan Stanley Sees Aussie Sliding to 65 Cents as Yield Fades.
- Costa Group (CGC AU): Costa Family Said to Have Cut Stake With Block Trade at $A6.55/Shr: AFR.
- Fisher & Paykel Healthcare (FPH): First-Half Earnings, Profit Increased
- Macquarie Group (MQG): U.S. Executive Departs Amid Sexual Harassment Claim
- Santos (STO): Seeking Pitches From Independent Financial Advisers: AFR
- Technology One (TNE): FY Results Expected; NOTE: FY17 Adj. Net Income Est. $A45.3m (six analysts).
- Janus Henderson, Qantas, Fairfax had largest one-day increase in short positions as percentage of free float on S&P/ASX200, according to data compiled by Bloomberg; Woodside, Iluka, NAB had largest decrease in short position. Woodside short positions were at 52-week high November 6, NAB 52-week peak on November 9; Iluka short positions at 52- week low: Bloomberg data.
- NOTE: Australian short interest data is collated by the Australian Securities & Investments Commission and published four days after reporting.
- Aristocrat (ALL AU): Rated New Equal-weight at Morgan Stanley; price target $A25
- Macquarie Atlas (MQA AU): Upgraded to Add at Morgans Financial; PT $A6.24; Raised to Outperform at Credit Suisse; PT $A6.50
- Tuesday: AGM: a2 Milk Co Ltd, Monadelphous Group Ltd. Earnings: Fisher & Paykel Healthcare Corp Ltd, GrainCorp Ltd, Technology One Ltd, CYBG PLC.
- Wednesday: Sonic Healthcare Ltd, Qube Holdings Ltd, NEXTDC Ltd, Webjet Ltd, Mantra Group Ltd, Mineral Resources Ltd, Growthpoint Properties Australia Ltd, REA Group Ltd, Shopping Centres Australasia Property Group, Infigen Energy.
- Thursday: IOOF Holdings Ltd, Woolworths Ltd, Investa Office Fund, Beach Energy Ltd, Primary Health Care Ltd, Evolution Mining Ltd, Regis Resources Ltd, South32 Ltd, Saracen Mineral Holdings Ltd, Western Areas Ltd.
- Friday: Orocobre Ltd, Myer Holdings Ltd, Automotive Holdings Group Ltd, Independence Group NL.
US 10 year bonds chart
Positive sentiment for USDJPY
In a similar fashion, USDJPY has been showing strong correlations to US 10 years and it managed to stay above the recent swing low at ¥111.65.
Volatilities remain subdued and sentiments seem positive. We prefer getting long on USDJPY, as it looks undervalued relative to US yields and Nikkei index, which look bullish.
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Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
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– Edited by Robert Ryan
Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets.