Today's Trade: S&P/ASX200 soars on Wall St gains, crude lift
- Brent crude settled above $50/barrel for the first time since November
- The oil price lift was due to continued declines in US crudel inventories
- Crude prices and a positive lead from Wall Street have given the S&P/ASX200 a lift
- Iron ore fell 0.5% to just $48.18 a dry tonne on Thursday after posting sharp falls in May
- Iron ore is at risk of losing all of this year’s gains
- Gold and copper prices have headed lower
Overnight and early trading
- The S&P/ASX 200 rebounded from two days of sharp losses. The benchmark index was up 0.72% to 5,316.80 at 1028 AEST (0028 GMT) .
- US stocks rebounded from a morning selloff to close at a seven-month high, while Treasuries advanced as investors awaited Friday’s jobs data for clues on the timing of the Federal Reserve’s next policy move. Oil traded near $49/barrel.
- The S&P 500 Index ended above 2,100 for the first time since April, as a rally in health-care shares pushed the gauge to its highest since November. Oil erased losses to trade little changed after US data indicated supplies contracted, overcoming Opec's failure to agree on production limits.
- Brazil’s currency rose after acting President Michel Temer scored a victory in his effort to shore up the country’s finances. European assets were little changed as ECB President Mario Draghi stood pat on rates while leaving the door open for additional stimulus.
- Global markets have started June tentatively, as investors assessed the ECB and Opec decisions and await US jobs data due out on Friday (that is, the employment report, including nonfarm payrolls, and the unemployment rate, which is due at 1230 GMT) that may determine the Fed’s next policy move. Equities have failed to retake highs from late April as the Fed looks determined to tighten even as data continue to show tepid growth in the global economy. The UK vote on whether to remain in the European Union looms in three weeks.
- The European Central Bank didn’t lift its inflation targets, raising concern that an enlarged stimulus program has yet to take hold a day after manufacturing readings from Asia to Europe signaled tepid growth. A US jobs report from ADP showed 173,000 workers were taken on in May, while filings for US unemployment benefits declined for a third consecutive week, according to a separate report.
- The S&P 500 Index rose 0.3% to 2,105.09, following two days with little movement. The index had twice failed to hold 2,100 this week, a level that has provided a cap to two rallies in the past eight months. It’s 1.2% below the all-time high from May 21, 2015. The CBOE Volatility Index (VIX) traded lower near 13.6
- The Stoxx Europe 600 Index rose 0.1%, after Wednesday capping its biggest two-day decline in four weeks. A drop in energy companies helped outweigh gains among banks.
- Energy and raw-material producers led the MSCI Emerging Markets Index up 0.3% in its first gain this week. Chinese shares climbed in the final half hour of trading, lifting the Shanghai Composite Index up 0.4% to a one- month high. The Hang Seng China Enterprises Index of mainland companies in Hong Kong rose 0.6%.
- Oil traded near $49/barrel in New York after a US crude supply decline tempered the impact of OPEC’s failure to reach an agreement for a new production ceiling. West Texas Intermediate fell less than 0.1% to $48.99/b. Brent crude rose 0.4% to $49.93/b. (See short trade set up over OILUSJUL16 CFD: WTI July future races to key resistance level) https://).
- Saudi Arabia was discussing ideas with fellow Opec members including restoring a production target scrapped in December, according to delegates familiar with the situation. Iran resisted overtures from Saudi Arabia to restore a production target scrapped at the group’s last meeting in December.
- Currency investors let down by lack of surprises from Opec and the European Central Bank are turning their attention to Friday’s U.S. jobs report.
- Investors are paying close attention to U.S. data after Fed officials indicated a potential interest-rate hike as soon as this summer was contingent on continued improvement in the economy.
- The yield on the 10-year Treasury note fell three basis points to 1.80%, while the rate on two-year notes dropped one basis points to 0.89%. Even as the spread between Treasury two- and 30-year securities fell to the lowest since 2008, there may be space for further so-called curve flattening as the market underestimates the chances of two interest-rate increases this year, according to BlackRock Inc. A flattening of the curve may suggest investors see rates going up.
- Ten-year Japanese government bonds yielded minus 0.12% after a sale of the tenor achieved the highest bid-to- cover ratio since August 2014.
- The ECB, which is set to begin buying corporate bonds next week, said it won’t have to sell notes downgraded to junk as it fleshed out the latest expansion of a stimulus program.
- Source: Bloomberg, TradingFloor.com
- Bank of New York Australia ADR Index -0.5%, BHP Billiton ADR +0.5% to A$18.51 equivalent, 1.5% premium to last Sydney close Rio Tinto ADR +0.2 to A$38.16 equivalent, 9& discount to last Sydney close
- Gold prices closed lower on Thursday, after swinging between gains and losses as investors weighed the possibility that the Federal Reserve will raise interest rates in June. Gold for June delivery settled down 0.2% at $1,209.80 on Comex after trading as high as $1,214.90 earlier in the session. Gold stocks in Toronto were up 0.5% on average. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR
- Brent crude, the global crude oil benchmark, settled above $50/barrel Thursday for the first time since November on continued declines in U.S. crude-oil inventories and production. Prices fell early in the session as Opec opted not to freeze production at its meeting in Vienna, but the market recovered after US data was released midmorning. The US data demonstrated how more than a year of low prices and spending cutbacks by oil companies are shrinking supplies, helping reduce the oversupply of crude without intervention from Opec. Brent crude settled up $0.32, or 0.6%, at $50.04/b on ICE Futures Europe, the highest settlement since November 3. US crude oil for July delivery settled up $0.16, or 0.3%, at $49.17/b on the New York Mercantile Exchange. US crude inventories fell by 1.4 million barrels in the week ended May 27 as refiners ran at a slightly higher rate, the Energy Information Administration said Thursday. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore is at risk of losing all of this year’s gains. Ore with 62% content fell 0.5% to $48.18 a dry tonne on Thursday after posting the biggest monthly loss in about five years in May. The drop has left prices that topped $70 in April less than $5 above the 2015 close. Goldman Sachs Group Inc. has warned the global market faces a rising surplus as miners will increase low-cost supply, while China’s steel output slows. The bank predicts prices will drop to $38 in the final three months and average $46 for the year. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
- LME 3-month copper settled $9 lower at $4,608 a ton while zinc extended its rally to a 10-month high amid expectations for a global shortage of one of this year’s best-performing commodities. Zinc for delivery in three months climbed as much as 1.7% to $2,004 a ton before settling at $1,982. Prices rose for sixth straight session, the longest run since March. Zinc, used for rustproofing steel in everything from auto bodies to suspension bridges, has surged 23% in 2016, outperforming other base metals. Banks from Goldman Sachs Group Inc. to Macquarie Group Ltd. see further gains for prices that have risen for six straight days. Zinc deficits could even send prices to a record in the next two years, ICBC Standard Bank Plc said in March. The metal peaked at $4,580 a metric ton in 2006. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
- Alacer Gold (AQG): Names Stewart Beckman COO.
- ALS (ALQ): Raised to hold vs sell at Shaw & Partners.
- Arrium (ARI): Said to appoint Deutsche Bank for Moly Cop process: AFR.
- Asciano (AIO): Holder meeting scheduled.
- BHP (BHP): Jiangxi Copper says it agrees to higher 2H fees with BHP.
- Crown Resorts (CWN): Hidden earpieces in VIP rooms show Macau money laundering risks.
- Lendlease (LLC AU): Establishes A$400m managed investment vehicle.
- Pilbara Mines (PLS): Rated new buy at Numis.
- Treasury Wine (TWE): Cut to equalweight vs overweight at Morgan Stanley.
- Westpac (WBC): Set to announce partnership with Uber: Australian.
- Flexigroup (FXL): Cut to hold vs add at CIMB, PT $A2.30
- Newcrest (NCM): Raised to sector perform vs underperform at RBC Capital Markets
- XAUUSD: Gold looks poised for a breakout
- EURUSD: Outlook turns bearish as EURUSD fails to close above resistance
- OILUSJUL16: WTI July future races to key resistance level
AUDUSD looks weak
EURUSD under pressure
We expect EURUSD to remain under further selling pressure and today’s focus would be the non farm payroll at 10:30pm tonight. Last month, the US dollar rallied despite the disappointing NFP figures, therefore another unpredictable reactions could be possible.
The overnight low at 5,269 would now be the key support level.
The interim resistance level is the April high 2,111 and the support level sits at 2,088.
– Edited by Robert Ryan
Source: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch our daily morning call on Periscope at 9:45am: #SaxoStratsAPAC