Article / 06 May 2016 at 1:27 GMT

Today's Trade: S&P/ASX200 retreats as bank shares plunge

Trading Desk / Saxo Capital Markets
Australia
  • The S&P/ASX 200 headed sharply lower at the open on bank share falls
  • Falling copper prices weighed on the Australia dollar
  • Iron ore has held above the key $60 level, closing up 0.3%
  • The release of a soft NFP today would impact US equities and the greenback
By Saxo Capital Markets Australia

Overnight and early trading

  • The big four listed banks dragged the S&P/ASX200 into negative territory. The index was down 0.77% to 5,238.60 at 1109 AEST (0109 GMT).
  • US stocks gave up early gains a sharp rally in the oil market and energy shares faded.
  • The Dow Jones Industrial Average rose 9.5 points, less than 0.1%, to 17661, after earlier rising as much as 85 points. The Nasdaq Composite fell 0.2%, while the S&P 500 edged down half a point.
  • Six of the 10 S&P500 sectors fell Thursday. Energy shares in the index gained 0.7%, while heath care companies rose 0.4%.


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Spare a thought for Canadian firefighters today, who have put themselves in harm's way to tackle blazes that threaten lives and property, and the oil sands industry in Alberta. Photo: iStock


  • US oil futures rose 1.2%, to $44.32/barrel, after rising by more than 5% earlier Thursday. Devastating wildfires in northern Alberta hindered production operations in Canada, supporting prices.
  • Consumer discretionary stocks fell more than the broader market. L Brands Inc. fell 12% after the Victoria’s Secret parent reported lower sales growth than expected, making it the company the biggest laggard in the S&P 500. Tesla Motors Inc. dropped 5% after the electric-car maker said late Wednesday its first-quarter loss doubled from a year ago
  • Kraft Heinz Co. gained 3.7% after the packaged-food firm reported a higher quarterly profit.
  • The Dow transports closed more than 1 percent lower as Matson fell 12.5% to lead decliners.
  • The CBOE Volatility Index (VIX) traded lower near 15.9.
  • Over in Europe the Stoxx Europe 600 index closed 0.3% higher. The Dax rose 0.24%, the FTSE added 0.09% & the CAC lost 0.11%.
  • Stocks in the oil and gas sector posted strong gains in Europe, with Repsol finishing up 4.68% despite reporting a 43% fall in net income for the first quarter of 2016. Tullow Oil led the sector, jumping 6.07%
  • UK listed companies delivered a whole raft of earnings last night: BT reported a 6% rise in full-year revenue on Thursday to £18.91 billion ($27.46 billion), including the acquisition of mobile operator EE, and up 2% on an underlying basis, sending shares to close 2.6% higher.
  • British supermarket chain Morrisons saw shares jump 2.4% after it said like-for-like sales in the 13 weeks to May 1 rose 0.7%
  • Software firm Sage Group saw a 15.6% year-on-year fall in pretax profit for the half year ending March 31 as it continues to turn around the business, sending shares to close over 3.5% down
  • Shares in Insurance group RSA rallied 2% after it saw net written premiums for the first quarter fall 1% but operating profits were ahead of the company's expectations
  • British engineering firm Rolls-Royce reiterated its 2016 outlook after a tough 2015 which saw a number of profit warnings. Still shares slipped to close 2.3% down
Local markets
  • Bank of New York Australia ADR Index +0.3%. Rio Tinto ADR -0.2%. Rio Tinto ADR -0.2%.
  • Spot gold saw a selloff in the U.S. session with lows of $1,268 on a stronger USD before being bid back up on growing expectations on a weaker jobs report tonight. In the end gold finished the session down 0.2% to $1,277. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
  • Crude oil closed down with WTI and Brent off 0.6% and 0.5% to $44.42 and $45.13. The fact that oil held up so well was a surprise. The wildfire in the oil sands region of Canada still causing chaos which is causing supply disruptions. EIA data showed that production fell again in the U.S. to the lowest levels since November 2014. The price move indicates the market is not wanting buy oil up at the moment even on what could be seen as ‘good news’ for oil supply. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
  • Iron ore has held above the key $60 level, closing up 0.3% to $60.25. Derivatives however look to be bearish. Port Hedland has exported an additional 6.5% y/y in April which is expected given Roy Hill is online. Shipments from the port was 37.7mt of which 80% went to China. Chinese shipments y/y were up 8.3%. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
  • Base metals were down across the board. Aluminium, copper, nickel and zinc lost 1.6%, 1.5%, 5.2% and 1.1% respectively. Copper appears to have had a false break above its 200DMA for the time and now looking to test April lows. Chinese demand concerns loom and are tarnishing the recent rally in metals. Glencore has curtailed production in New Caledonia and is now well below its 60,000 tonne/year nameplate capacity. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC.
  • Chorus (CNU): Tracking to top half of FY16 Ebitda guidance.
  • Macquarie Group (MQG): FY results expected; NOTE: Net income GAAP est. $A2.037bn (8 analysts).
  • Metcash (MTS), Woolworths (WOW): Metcash may bid for Woolworths’ hardware unit by itself: AFR.
  • Psivida (PSV): Q3 loss $A0.15/share; rev. $A324,000.
  • Qantas (QAN), Virgin Australia (VAH): IATA says March global air passenger traffic demand rose 5.3%.
  • Sky Network TV (SKT): FY2017 earnings may be less than consensus; NOTE FY17 adj. net income est. $NZ146.3mln (eight analysts).
US earnings this week

  • Friday: Cigna, ArcelorMittal, Weyerhaeuser, Willis Towers Watson, Buckeye Partners, Dentsply, Exelon

Broker upgrades, downgrades

  • Crown Resorts (CWN): Melco Crown cut to hold vs buy at Union Gaming
  • Fortescue (FMG): Raised to outperform vs neutral at Credit Suisse
  • Iluka (ILU): Raised to neutral vs sell at UBS
  • National Australia Bank (NAB): Raised to outperform vs neutral at Credit Suisse
  • Seven West Media (SWM): Cut to neutral vs buy at UBS
  • Speedcast (SDA): Rated new buy at New Street Research
  • Vicinity Centres (VCX): Cut to underweight vs overweight at Morgan Stanley

Open orders


S&P/ASX 200 (AUS200) close to key support

The S&P/ASX 200 (AUS200) fell short of 5,300 and now approaching the key support level 5,200. A weekly close below 5,200 would be required to confirm further weakness, otherwise AUS200 would remain resilient.

The price actions of big-four bank CBA calls for cautious ahead of next Monday’s reporting, and $75 continues to be the major resistance level to monitor. The uptrend in AUS200 was broken in the SYCOM session as the US stock indices continued to fall. If we see a disappointing nonfarm payroll data tonight, we expect to see negative reactions from the E-mini S&P500, which may sell down towards 2,030.

S&P/ASX 200 trend
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AUDUSD loses gains

AUDUSD pushed above 0.75 handle again yesterday but it failed to stay above it, while 0.7450 remained as an interim support level. Copper extended the losses and this seems to be putting the downward pressure on the AUDUSD. We maintain our view to buy AUDUSD at 0.7380.

The ADP payroll figures release hinted at signs of weak employment, so tonight’s nonfarm payroll (due out at 1230 GMT) will be compared to the ADP numbers to confirm the current conditions of US job markets. We expect a soft NFP and the US dollar should reverse this week’s rebounds.
 
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– Edited by Robert Ryan

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

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Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch our daily morning call on Periscope at 0945 AEST: #SaxoStratsAPAC



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