Today's Trade: S&P/ASX200 takes a tumble following slide on Wall St
- The Dow Jones Industrial Average has its sharpest fall in almost five months
- The S&P500 took a tumble as well on Monday
- Base metals were largely higher, with zinc leading the pack
- Crude saw its sharpest fall in more than a week as the US dollar strengthened
By Saxo Capital Markets Australia
- The S&P/ASX200 took a tumble in early trading. It was down 0.53% to 6,043.20 at 1112 AEST (0012 GMT).
- The Standard & Poor’s 500 Index declined by the most since September and yields on benchmark Treasuries touched the highest levels since early 2014 as traders gear up for a hectic week of data and policy announcements. The dollar strengthened against all its major rivals.
- The Dow Jones Industrial Average also declined by the most in almost five months. The euro retreated as German bonds dropped for a fourth day, while the Stoxx Europe 600 Index inched lower after the MSCI Asia Pacific Index slumped earlier. Treasuries climbed from the lows of the day after data on personal income and spending.
- U.S. stock indexes were mainly weighed down by falling utilities and real-estate shares.
- Monday’s pullback, which came as government bond yields jumped to new highs, marked the biggest one-day percentage decline for the S&P 500 and Dow Jones Industrial Average since September.
- Although the recent uptick in bond yields has prompted some analysts to question how much longer relatively risky stocks will remain attractive relative to Treasuries, some investors say the moves have yet to pose a threat to the stock rally.
- The Dow Jones Industrial Average fell 177.23 points, or 0.7%, to 26439.48, closing near its session low. The S&P 500 lost 19.34 points, or 0.7%, to 2853.53, while the Nasdaq Composite shed 39.27 points, or 0.5%, to 7466.51. The VIX rose to 13.84.
- Shares of utilities and real-estate companies, considered by many investors to be bondlike because of their relatively hefty dividends, were among the biggest decliners in the S&P 500, falling alongside U.S. Treasury prices.
- Eversource Energy fell $1.63, or 2.5%, to $62.44, while CenterPoint Energy lost 73 cents, or 2.6%, to 27.73.
- Deal news drove swings in individual stocks, with shares of Dr Pepper Snapple Group jumping 21.42, or 22%, to 117.07 after the company said it would be acquired by Keurig Green Mountain.
- Meanwhile, a recent pickup in bond yields continued, with the yield on the benchmark 10-year U.S. Treasury note settling at 2.695%, the highest level since April 2014, compared with 2.661% on Friday.
- Yields, which rise as bond prices fall, have ticked higher in recent sessions, as investors have bet on an uptick in growth and inflation following the passage of U.S. corporate tax cuts.
- Elsewhere, the Stoxx Europe 600 fell 0.2%, pressured by declines in shares of utilities and real-estate companies.
The bulk commodities market remained subdued, with traders continuing to sit on the sidelines. Photo: Shutterstock
- Tuesday: McDonald's, Pfizer, Aetna, Autoliv, Corning, Danaher, CIT Group, Pulte Group, Harley-Davidson, Chubb, Equity Residential, Boston Properties, Stryker, Electronic Arts, SAP, AK Steel, Scotts Miracle-Gro.
- Wednesday: Boeing, AT&T, Microsoft, Facebook, MetLife, Mondelez International, PayPal, Eli Lilly, Johnson Controls, Nintendo, Qualcomm, Samsung Electronics, Vertex Pharma, U.S. Steel, Citrix, Tractor Supply, Textron, Anthem, Nasdaq OMX, Johnson Controls, Sirius XM, DR Horton, Siemens.
- Thursday: Apple, Alphabet, Amazon, Alibaba, Tableau Software, Blackstone, Mastercard, DowDuPont, ConocoPhillips, AutoNation, Amgen, GoPro, Ralph Lauren, Hershey, CME Group, Cigna, Brunswick, Mattel, Time Warner, International Paper, UPS, Daimler, Royal Dutch Shell, Altria.
- Friday: Exxon Mobil, Chevron, AstraZeneca, Deutsche Bank, Merck, Clorox, Sony, Philips 66, Estee Lauder, BT Group, Charter Communications, Aon, Weyerhaeuser, Roper Industries, LyondellBasell.
- Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC.
- Bank of New York Australia ADR Index is down 0.3% to 296.9, BHP Billiton ADRs are down 0.7% to $A30.65 equivalent, a 0.3% discount to last Sydney close, Rio Tinto ADRs are up 1.1% to $A70.27 equivalent, a 11.1% discount to last Sydney close
- Gold fell on Monday as a revival in the dollar and a rise in bond yields to multi-year peaks prompted some buyers to cash in gains in the metal after its sixth weekly price increase in seven weeks. Gold has risen more than 3% so far this month, and after a strong end to December touched its highest since August 2016 last week at $1,366.07/oz. Its strength has been driven largely by a slide in the dollar index to three-year lows. An uptick in the currency on Monday after six straight weeks of losses has prompted a pullback. Spot gold was down 0.53% at $1,342.63/oz, while U.S. gold futures for February delivery were down 0.79% an ounce at $1,341.40/oz. Gold stocks in Toronto sunk by 3.34% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR .
- Crude dropped the most in more than a week as the dollar strengthened and traders braced for an end to a record run of U.S. inventory declines. Futures in New York dipped 0.9% on Monday as the rising value of the U.S. currency crimped demand for dollar-denominated assets. At the same time, crude held in U.S. storage tanks and terminals probably increased last week for the first time since early November, halting an unprecedented run of withdrawals.
- Oil lingers near the highest levels in three years amid supply caps by Opec and allied producers including Russia. The majority of Opec members agree that cuts should be maintained until the end of the year, Iraqi Oil Minister Jabbar Al-Luaibi said. West Texas Intermediate for March delivery fell 58 cents to settle at $65.56/barrel on the New York Mercantile Exchange. Total volume traded was about 3% above the 100-day average. Brent for March settlement dropped $1.06 to end the session at $69.46/b on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $3.90 to WTI, the smallest since August. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
- The bulks market remained subdued, with traders continuing to sit on the sidelines. This has, in part, been driven by continued bad weather in China, with snowfall and icy weather affecting some eastern Chinese ports. High iron ore inventories, both at the ports and at steel mills suggest the impact from such disruptions will be low and have little price impact. This was despite data showing a fall in inventories. Chinese port stockpiles fell by 1.2% w/w to 137.8mt, according to Antaike. Spot iron ore was flat closing at $75.96. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL .
- In early reporting, Newcrest Mining reaffirmed FY18 gold output target at 2.4m-2.7m oz and copper production forecast 80,000-90,000 tons, putting the gold miner on track for H2 production from continuing operations to be stronger than H1. Free cash flow seen positive in 1H, substantially stronger in H2 and expects to release Cadia East mine pre-feasibility study in August. In other reporting, Fortescue Metals shipped a 40.5 mln tons, which missed estimates of 43 mio in Q2.
- Base metals were largely higher, with zinc leading the pack. Prices soared to a fresh 10-year high amid dwindling inventories. Stockpiles in LME warehouses have fallen to 176.3kt, the lowest level since 2008. There was also a sudden spike in cancelled warrants (order to remove inventory from warehouses), while a huge jump in open interest on both the SHFE and LME suggests investors are becoming increasingly bullish about the prospects for the metal. The rest of the complex was relatively strong, driven by investor optimism regarding US demand. It is believed that US President Trump’ infrastructure program will be a highlight of his State of the Union speech, raising hopes that US demand growth will pick up. Zinc was the best performer on the London Metal Exchange at the close on Monday January 29, while the other metals diverged, Metal Bulletin reported. Zinc's three-month price was up $US72, or 2 per cent, to $US3550 a tonne, mostly on the back of supply-side factors. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- AP Eagers (APE): Upgraded to Add at Morgans Financial; PT A$9.10
- Ausnet (AST): May Be Bidder for Basslink, With Indicative Offers Due Today: AFR
- BHP (BHP): Coal Workers at Colombia’s Cerrejon Mine Vote to Strike
- Bendigo & Adelaide Bank (BEN AU), Bank of Queensland (BOQ AU), Suncorp (SUN AU): May Be Among Bidders For Arab Bank Australia Assets: AFR
- Origin Energy (ORG): High Australian Gas Prices Migrate South to Victoria, Study Says
- Reliance Worldwide (RWC): Fidelity Pacific Basin Adds SMC, Exits Reliance Worldwide
- Rio Tinto (RIO LN): Studying Autonomous Truck Expansion in Iron Ore Unit
Broker upgrades, downgrades
- AWE (AWE), Mineral Resources (MIN): Mineral Resources Considers Position After Mitsui’s Bid for AWE; AWE Downgraded to Neutral at Credit Suisse; PT $a0.95; AWE Downgraded to Hold at Canaccord; PT $A0.95
- Alliance Aviation (AQZ): Downgraded to Hold at Wilsons; PT $A1.78
- Automotive Holdings (AHG): Cut to Hold at Morgans Financial; PT $A3.84
- Beach Energy (BPT): Downgraded to Sell at Morningstar
- Beacon Lighting (BLX): Upgraded to Add at Morgans Financial; PT $A1.77
- CBA (CBA): Upgraded to Add at Morgans Financial; PT $A81.50
- G8 Education (GEM): Rated New Overweight at Morgan Stanley; PT $A4.25; Upgraded Upgraded to Buy at Morningstar
- Lovisa (LOV): Upgraded to Add at Morgans Financial; PT $A7.84
- Pilbara Minerals (PLS): Downgraded to Hold at Baillieu Holst; PT $A1.09; Oppenheimer Gold & Special Minerals Adds Pilbara Minerals
- Regis Resources (RRL): 2Q Production Report Scheduled; NOTE: Co. in August Forecast FY18 Gold Output 335,000-365,000 ounces; Upgraded to Hold at Morningstar
- Super Retail (SUL): Downgraded to Hold at Morgans Financial; PT $A9.58
- Sydney Airport (SYD): Rated New Overweight at JPMorgan; PT $A8.45
- Wagners Holding (WGN): Rated New Outperform at Credit Suisse; PT $A4.20
- Tuesday: Credit Corp Group Ltd, Navitas Ltd: Earnings; Fortescue Metals Group Ltd, Newcrest Mining Ltd: Quartely release; CYBG PLC: Trading Update
- Wednesday: GUD Holdings Ltd: Earnings; Independence Group NL, Origin Energy Ltd: Qrtly release. CYBG PLC: AGM
- Friday: James Hardie Industries PLC: Q3 Earnings; Downer EDI Ltd: Earnings
Stock to watch: Credit Corp
Credit Corp's chart
Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets.