Article / 12 October 2017 at 23:22 GMT

Today's Trade: S&P/ASX200 shrugs off falls on Wall St with early gains

Trading Desk / Saxo Capital Markets
Australia
  • Gold is close to its highest level in two weeks
  • The marked is focused on US inflation due out today, for clues on monetary policy
  • Oil declined as the IEA cast doubts on the prospect of reducing the global glut
  • Iron ore reversed four days of losses as bargain hunters re-entered the market
By Saxo Capital Markets Australia

Overnight and early trading
  • The S&P/ASX200 was up 0.17% to 5,804.10 at 1021 AEST (2321 GMT, on Thursday evening).
  • Declines in bank shares pulled US stock indexes away from records on Thursday.
  • Earnings season kicked off in earnest this week, with J.P. Morgan Chase and Citigroup reporting quarterly results that disappointed investors Thursday.
  • The Dow Jones Industrial Average fell 31.88 points, or 0.1%, to 22841.01 after finishing at a record Wednesday. The S&P 500 edged down 4.31 points, or 0.2%, to 2550.93, while the Nasdaq Composite fell 12.04 points, or 0.2%, to 6591.51.


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Gloomy outlook ... If Opec and other suppliers prolong their output curbs, surging output from US shale fields and elsewhere will frustrate their efforts, says the International Energy Agency. Photo: Shutterstock


  • J.P. Morgan shares declined 85 cents, or 0.9%, to $95.99 after the company beat expectations for earnings and revenue, but said revenue from fixed-income trading fell.
  • Shares in Citigroup lost 2.57, or 3.4%, to 72.37 after the bank topped analysts’ forecasts for revenue and earnings. Still, the company’s return on equity continued to lag behind its peers.
  • Bank of America and Wells Fargo & Co. are expected to report results on Friday.
  • CarGurus, which made its stock-market debut Thursday, opened 81% above its initial public offering price—marking the biggest pop on an opening trade for US-listed IPOs this year. Shares of the online car-seller closed up 11.58, or 72%, to 27.58.
  • Technology-services company DXC Technology was the biggest gainer in the S&P 500, adding 3.55, or 4.1%, to 91.20. Elsewhere in the tech sector, semiconductor company Advanced Micro Devices added 32 cents, or 2.3%, to 14.20.
  • Energy shares in the S&P 500, one of the worst-performing groups of the year, fell 0.4% on Thursday as oil prices slid. U.S. crude for November delivery fell 1.4% to $50.60 a barrel.
  • Elsewhere, the Stoxx Europe 600 swung between small gains and losses before finishing up less than 0.1%.
  • Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC
Local markets
  • Bank of New York Australia ADR Index is up 0.5% to 272.6, BHP Billiton ADRs are up 0.3% to $A26.23 equivalent, a 0.1% discount to last Sydney close, Rio Tinto ADRs are up 0.7% to $A61.47 equivalent, a 9.3% discount to last Sydney close
  • Gold began to lilt to around its highest level in two weeks as focus shifted to U.S inflation figures due on Friday which are expected to give more clues on monetary policy. After a four-session streak of gains, spot gold's trajectory flattened at $1,293.64 an ounce, after earlier hitting $1,297.40. US gold futures climbed 0.54% to $1,295.90 per ounce. Minutes from a September meeting by the Federal Reserve showed policymakers had a prolonged debate about the prospects of a pick-up in inflation and slowing the path of future interest rate rises if it did not. Gold stocks in Toronto gave back most of Wednesday’s gains overnight dropping 0.4%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR
  • Oil declined as the International Energy Agency cast doubts on the prospect of reducing a price-killing global glut, even as a report showed a bigger-than-expected drop in U.S. crude inventories. Futures fell 1.4% in New York, erasing some losses during the session. The IEA said crude inventories may remain bloated next year, capping prices. Even if Opec and other major oil suppliers prolong production cuts, surging output from U.S. shale fields and elsewhere will frustrate those efforts, the Paris-based agency said. The Energy Information Administration’s weekly tally showed domestic stockpiles slid for a third straight week. Oil climbed the first three days of this week on speculation that output curbs by Opec, Russia and other suppliers were helping to erode elevated inventories that triggered the worst market collapse in a generation.
  • Opec expects its efforts to clear the surplus to succeed by the end of the third quarter of next year, said people familiar with the group’s internal forecasts. Yet, the IEA forecast indicates that if the producers prolong the same level of supply cuts, they won’t deplete inventories. Global oil demand will increase next year, yet most of this growth can be satisfied by rising production from the US, set to grow by 1.1 million barrels a day, the agency said. West Texas Intermediate for November delivery dropped 70 cents to settle at $50.60 a barrel on the New York Mercantile Exchange. Total volume traded was about 7% below the 100-day average. Brent for December settlement declined 69 cents to end the session at $56.25/b on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.32 to December WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY
  • Iron ore reversed four days of losses as bargain hunters re-entered the market. Volatility on the Dalian and Singapore exchanges was high, as traders grappled with higher iron ore inventories against still strong demand for steel. However the market continues to fret about what the upcoming winter production curbs will mean for iron ore demand. Spot iron ore added 0.7% or $0.44 to close at $60.09. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • London Metal Exchange copper closed up 1.3% at $6,887 a tonne, having earlier hit its highest since September 8 at $6,903. Prices were edging towards a three-year peak of $6,970 hit on September 5. Output at BHP Billiton’s Escondida copper mine in Chile soared in August and is expected to continue growing over the next few months as it ramps up a processing plant. Production was 97,800 tonnes in August, the highest since June 2015, according to monthly data compiled by the Chilean government’s copper commission, known as Cochilco. That’s up 20% from the previous month and 30% from a year ago. Copper stocks: OZL, SFR.
  • LME nickel ended at $US11,395 a tonne, up 2.3%, having touched a three-week peak of $11,425. Zinc finished the day up 1% at $US3251 a tonne, while lead closed 0.4% lower at $US2556 a tonne. The latter was held in check by prospects of rising supply after a Chinese smelter said it had restarted production. Aluminium ended the day 0.8% higher at $US2146.50 a tonne, while tin closed down 0.6% at $IS20,740 a tonne. Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • Amcor (AMC): Flexibles Americas Raises Prices Due to Raw Material Costs
  • BHP Billiton (BHP): Output at World’s Top Copper Mine Escondida Jumps 30% in August; Iron Exports From Top Miners to Climb to 337 mln tons in Q4: Bernstein.
  • Base Resources (BSE): Base Resources Kenya Unit Q3 Sales Drop 36% on Lower Ore Prices.
  • Innate Immunotherapeutics (IIL): Rep. Collins Faces Further Scrutiny on Innate Immunotherapeutics.
  • Lendlease (LLC): CIC may take minority stake in Lendlease’s retirement village assets: AFR.
  • Medibank Private (MPL): Australia to Unveil Changes to Health Insurance Laws: AFR
  • ResMed (RMD): Wins German Patent Infringement Case.
  • Rio Tinto (RIO): Apollo, CPP Are Said to Bid for Coal Assets: Reuters.
  • Telstra (TLS): Foxtel, Fox Sports Merger to be Reviewed by Australia Regulator.

Broker upgrades, downgrades
  • Whitehaven (WHC AU): Cut to Neutral at Credit Suisse; price target raised to $A3.40.
  • Regis Resources (RRL AU): Cut to Sell at Morningstar.
  • Bank of Queensland (BOQ AU): Cut to Underweight at Morgan Stanley.
EURUSD in recovery mode
Since finding a low last week, the euro has traded in a recovery mode until yesterday where gains failed to push beyond the 50% retracement between the Sept high to October low.

Should the euro fail at these levels, it would have completed its formation of a final shoulder of a head and shoulder bearish set up, with the focus on the neckline in the weeks ahead.

EURUSD chart
1
 
Watch for gold pullback

Gold’s gains were met with retracement overnight at its 38.2%,which interestingly coincided with the 50 day moving average.

Prices are trading at the significant previous 2017 double top level. So we are expecting an initial challenge to push through these levels, so a pullback in prices is the scenario for the session ahead to consider.

XAUUSD chart
2
 
AUDCAD opportunities

AUDCAD has built a solid base throughout September 2017 on the backdrop of a B class divergence, which is where the market witnesses divergence as measured by the RSI.

We highlight long opportunities given this setup with a stop below 0.9990, and we aim for parity as the profit target or the 200daily moving average.

AUDCAD chart
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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.

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