Article / 08 June 2016 at 1:05 GMT

Today's Trade: S&P/ASX200 slides as top miners take a tumble

Trading Desk / Saxo Capital Markets
  • The top miners drove the S&P/ASX200 into the red in early trading
  • The AUDUSD has rallied and soared above 0.74, thanks to the RBA
  • On both sides of the Atlantic, crude oil closed above $50/barrel
  • It was the first time since October 9 that crude hit that level
  • Iron ore rallied hard for the third day in a row, up 2.8% to $52.54/tonne

By Saxo Capital Markets Australia

Overnight and early trading

  • The S&P/ASX200 lost ground at the start of trading. It was down 0.19% to 5,360.80
    at 1047 AEST (0047 GMT)
  • The S&P 500 Index rose to the highest level since July as crude settled above $50 a barrel and the dollar weakened to a one-month low on speculation that the Federal Reserve won’t rush to raise rates amid moderate growth in the world’s largest economy.


Falls for leading miners, including BHP and Rio Tinto, weighed on the S&P/ASX200 today; the pickup in the iron ore price failed to help top miners. Photo: iStock

  • The US equity benchmark edged higher for the fourth time in five days, climbing within 0.7% of a record before fading late as banks retreated. The Nasdaq Composite Index turned negative amid losses among biotechnology shares. Crude jumped above $50/barrel, pushing energy shares in the S&P 500 to a seven-month high. The dollar dropped to a one-month low, boosting emerging-market stocks and currencies for a fourth day. Treasuries rose, sending the 10-year yield to 1.71%.
  • Stocks pared gains late in the session. The Dow Jones Industrial Average rose 17.95 points, or 0.1%, to 17938.28, its highest close since April 27. The S&P 500 climbed 2.72 points, or 0.1%, to 2112.13, its highest close since July 22. The Nasdaq Composite Index fell 6.96 points, or 0.1%, to 4961.75 and is still down so far in 2016. The gains pushed S&P’s advance in 2016 to 3.3% as the index rallied back from the worst start to a year on record. The VIX jumped 2.93% to settle above 14
  • Energy shares jumped 2.2% to the highest since November. The group has rallied 14% this year, following a 24% rout in 2015. Biotechnology shares slid 0.9% for the biggest drop among 24 S&P 500 groups. Valeant Pharmaceuticals International Inc. tumbled after it cut its 2016 profit forecast, citing “significant disruption” over the past nine months. MSCI’s global index rose 0.6%, set to close at its strongest level since April 20.
  • The Stoxx Europe 600 Index climbed the most in two weeks. Germany’s benchmark Dax Index was among the best-performing western-European markets after data showed industrial output in the nation rebounded in April. The MSCI Emerging Markets Index rose 1.8%, the most since March 30 on a closing basis. The Philippine Stock Exchange Index rallied 1.5%. South Korea’s Kospi climbed 1.3%.
  • The Bloomberg Commodity Index advanced 0.2% for a fifth straight gain, the longest run since March. It’s now at a seven-month high, having ended Monday more than 20% above its January low. A four-year bear market that pushed raw materials to the lowest level in a quarter century has drawn to an end after supply constraints drove a recovery from soybeans to zinc.
  • Gold slipped 0.1%, trimming this month’s advance to 2.5%, as traders anticipate rate hikes this year even if they are gradual. Copper fell 2.2% as data showed the biggest two-day increase in stockpiles since 2004, while aluminum declined 0.2%. Oil extended gains from the highest close in more than 10 months in New York before the release of US government data forecast to show crude stockpiles fell for a third week, trimming a glut. West Texas Intermediate crude oil advanced 1.4% to settle at $50.36. a barrel, having climbed 2.2% to a 10-month high on Monday. (See short trade set up over OILUSJUL16 CFD: WTI July future races to key resistance level).
  • The dollar declined against most major currencies as traders took Janet Yellen’s latest words to mean U.S. policymakers aren’t in a hurry to raise interest rates. The Bloomberg Dollar Spot Index slipped 0.4%, set for its weakest since May 11 based on closing prices. The pound was 0.8% higher. Sterling has fluctuated in recent weeks, depending on which side of the EU referendum argument was gaining momentum. Sterling’s climb comes after it dropped in early trading Monday, as three polls were released showing more Britons favor quitting the EU than staying. Two more surveys that came later the same day showed slim leads for the “Remain” camp.
  • Treasuries rose, following European government debt higher, after the U.S. sold $24 billion of three-year notes. The yield on 10-year notes fell to 1.71%, after rising four basis points on Monday. Tuesday’s note sale, the first of three Treasury offerings this week totaling $56 bn, comes after demand rose to the highest on record at a string of blockbuster auctions last month.
  • The yield on 10-year German bunds fell four basis points to a record low of 0.048% amid a surge in demand for the safest fixed-income assets. Bonds advanced across Europe, led by the region’s higher-yielding sovereign markets. Spain’s 10-year yield fell four basis points to 1.48%, while that on similar-maturity Italian securities slipped three basis points to 1.44%.
  • Source: Bloomberg,
Local markets
  • Bank of New York Australia ADR Index +0.2%. BHP Billiton ADR -1.4%. Rio Tinto ADR -1.5%
  • Spot gold edged 0.2% lower to $1,243 on Tuesday, as investors turned cautious after the metal failed to sustain a recent rally, though it held near the previous day's two-week high after the Federal Reserve further dampened speculation about an imminent U.S. rate rise. Meanwhile, world stocks advanced while the U.S. dollar was near a four-week low against a basket of currencies. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR
  • Crude oil on both sides of the Atlantic closed above $50/barrel for the first time since October 9, with WTI and Brent finishing the session up 1.6% and $1.9% to $50.38/barrel and $51.42/b. Expectations of US crude draws underpinned a market already worried about potential supply shortages from attacks on Nigeria's oil industry.
  • Analysts think US crude stockpiles fell by 3.5 million barrels last week to mark a third straight week of declines, a preliminary Reuters poll showed. Nigeria until last year was Africa's biggest producer turning out about 2 million barrels per day. SaxoStrats Ole Hansen sees no fireworks above $50/b as correction looms. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
  • Iron ore has rallied hard for the third day in a row, up 2.8% to $52.54/tonne. Iron ore prices moved higher as steel mills continued to restock for their production needs in June and July. Iron ore shipments from Australia's Port Hedland, the world's largest bulk-export terminal, expanded to the third-highest level on record, signalling that a global surplus is set to persist. Exports totalled 39.4 million tonnes last month from 37.7 mln tonnes in April and 38 mln tonnes a year earlier, according to data from the port authority. Keep in mind that Roy Hill has recently come online so levels are unlikely to fall back to ‘average’ in Port Hedland shipments anytime soon. Cargoes to China were 31.7 mln tonnes in May compared with 32.6 mln tonnes in April and 31.7 mln tonnes in May 2015. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
  • Base metals were mixed with aluminium rising 0.6% but copper being hit with a 2.5% selloff. Inventories at the LME have risen 28% in the past two days, despite still being down 20% for the year. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC.
  • Australia April home loans rising 2.5% m/m, according to Bloomberg survey; due out at 1130 AEST (0130 GMT).
  • BHP (BHP): Said to bid against Glencore for Anglo’s Australian coal mines; Adaro Energy to buy co.’s stake in joint coal operation.
  • Myer (MYR): CEO to speak at AICC event in Sydney; NOTE: May 12: Affirmed FY16 NPAT target $A66mln-$A72mln ex-New Myer costs.
  • National Australia (NAB): Taken to court as rate-fixing case widens.
  • Rio Tinto (RIO): Starts $3b bond buyback amid commodities pickup.
  • Vicinity Centres (VCX): Scheduled to host investor day in Melbourne; NOTE: May 4: Co. forecast FY16 underlying EPS $A0.191; pay-out ratio 90%-95% underlying EPS.
  • Woolworths (WOW): May extend deadline for homeware unit bids as long as one month: Australian.
Stock to watch: Charter Hall Office Property (CHC.xasx)

Charter Hall Office Property (CHC.xasx) spent the good part of a year consolidating, before breaking out at the beginning of May. Fuelled by the RBA rate cut, CHC is now taking time to stabilise at its new levels. CHC has formed a classic flag pattern with a very distinct flagpole.

We are watching CHC to retrace to near $5.17 which will be the Fibonacci 23.6% retracement from the top of the flag to the floor. The market we anticipate will then be ready for its next leg up. Should the flag breakout take place at $5.35 a strong buy signal will be triggered.

Be mindful that this could also be a double top (from March 2015) and a fall down and out of the flag patter may see fall to the prior ceiling near $4.90

Charter Hall Office Property (CHC.xasx)
China Molybdenum update

We would also like to update the stock to watch from May 20, which was China Molybdenum Co. (03993:xhkg), which after its breakout held above the prior ceiling and made a move to trade at its 100% Fibonacci extension.

The stock is now at its prior break out level from March 2015 and if it continues to see buying support, it could easily run to $1.88 which is its 161.8 Fibonacci extension and Q4. 2015 high.

China Molybdenum trend
Broker upgrades, downgrades
  • Greencross (GXL): Raised to buy vs hold at Morningstar

Open positions

Original trade views

US dollar index, EURUSD in the spotlight

The US dollar index (DX) again failed to recover the huge losses from last Friday as it closed below 93.92 which is the 50% retracements between the May low of 91.88 and the May high at 95.96.

The price actions of the EURUSD were subdued and it looks like it is forming a bullish pennant unless the EURUSD breaks below the overnight low 1.1338. The next interim resistance level would be the 1.14 handle and the support level is at 1.13.

EURUSD trend

RBA drives AUDUSD rally
After the cash rate was unchanged at 1.75% at yesterday’s Reserve Bank of Australia announcement, AUDUSD rallied to break the 0.74 handle and now approaching the next resistance level 0.75 handle which acted as solid support levels during March and April.

Furthermore we are starting to see a divergence between the iron ore and the AUDUSD, therefore we would look to sell any rallies near the 0.75 handle.   
AUDUSD chart
S&P/ASX200 running out of steam

After the S&P/ASX200 (AUS200.i) failed to test the psychological level of 5,400 yesterday, the upside momentum appears to be exhausting. The breakout below the interim support level 5,350 is expected to trigger sharp sell off to the next support level 5,300.
S&P500 makes gains before retreating

The S&P500 (US500) broke above its  November 15 high of 2,117 but then it reversed to the April high of just 2,111.

Price moves for commodities were mixed as copper (HG) sold off aggressively while crude oil broke above the key resistance level at $50/barrel. However, we are biassed to the near term selloff.
S&P500 trend
Chart: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more. 

– Edited by Robert Ryan

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

For more on forex, click here.

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Join us for the Weekly macro call each Monday morning at 1030 AEST (please see Adobe connect morning call).  And watch our daily morning call on Periscope at 0945 AEST: #SaxoStratsAPAC

Saxo Capital Markets (Australia) Pty Ltd | A part of Saxo Bank Group
ABN 32 110 128 286 | AFSL 280372
Level 25, 2 Park Street SYDNEY NSW 2000
Phone: +61 (2) 8267 9000 | Fax: +61 (2) 8267 9050
Please visit our website at:
The daily outlook is brought to you by Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286, AFSL 280372 (Saxo Capital Markets), in association with which is the property of Saxo Bank A/S, the parent company of Saxo Capital Markets. is a social trading facility offering clients of Saxo Bank Group access to in-depth market news, commentary, analysis and much more.
The content of the daily outlook should not be considered as a ‘personal’ or specific investment advice catered for your specific need, objectives or financial situation, or be construed as an express or implied promise, guarantee or implication by Saxo Capital Markets that clients will profit from the strategies expressed or that losses in connection therewith can or will be limited.
None of the information contained in the daily outlook constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. Saxo Capital Markets; shall not be responsible for any loss arising from any investment based on any forecast or other information contained in the daily outlook. Past performance is not a reliable indicator of future performance. Information contained in this daily outlook may have previously been distributed to; and acted upon; by other clients and persons who have shown interest in Saxo Capital Markets, as well as internal affiliates/employees of Saxo Capital Markets. Any trade ideas or positions contained herein relating to products or services offered by Saxo Capital Markets may be inconsistent to trades/positions entered into by Saxo Capital Markets and/or its affiliates. Further, any information contained may consist of opinions and views of the ‘Sales Trading Desk’ as a team, however does not reflect the ‘specific’ opinion of Saxo Capital Markets.
Trades in accordance with the information contained in the daily outlook, especially, but not limited to, leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the daily outlook do not occur as anticipated. Prior to making any investment or entering into any transaction, you should carefully consider your financial situation and consult your independent financial expert in order to understand the risks involved and ensure the suitability for you of any investment or transaction decision you enter. Any information or opinions in this material are not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be unlawful. Please refer to our Combined Financial Services Guide & Product Disclosure Statement available via Please also consider whether acquiring or continuing to hold financial products is suitable for you, prior to trading and investing.
If you would like to unsubscribe from the Daily Outlook, please reply ‘Opt Out’ to this email with your Client ID.
Terms & Agreement | Disclaimer | Financial Services Guide | Privacy Policy | Contact Us |


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail