Today's Trade: Top miners, energy stocks drive S&P/ASX200 higher
- Walls St rebounded on Thursday, snapping its recent run of losses
- But the Stoxx Europe 600 index fell 0.2% to halt a two-day winning streak
- Steel prices fell sharply in China upon the re-opening of markets
- The falls delivered a rocky start for the bulk commodities markets
- Gold rose on Thursday, snapping recent losses as USD surrendered early gains
By Saxo Capital Markets Australia
Overnight and early trading
- The S&P/ASX200 was up 0.37% to 5,973.20 at 1033 AEDT (2333 GMT on Thursday evening), thanks in part to gains for top miners.
- The Dow Jones Industrial Average and the S&P 500 rose on Thursday to snap the indexes’ recent run of losses, as concerns subsided over whether the Federal Reserve will have to ramp up its pace of interest-rate increases.
Opec's output curbs have helped drain a global oil glut, and the United Arab Emirate' energy minister even believes that oil undersupply is a worry, not oversupply. Photo: Shutterstock
- Stocks have fluctuated wildly this week, highlighting the market’s fragility as investors continue to assess the quickening pace of economic growth and the prospects of the Fed’s tightening efforts. Investors have had to balance that unease against the fact that many companies are posting their best earnings in years.
- The Dow industrials gained 164.70 points, or 0.7%, to 24962.48 after rising more than 350 points earlier in the session. The S&P 500 added 2.63 points, or 0.1%, to 2703.96, while the Nasdaq Composite declined 8.14 points, or 0.1%, to 7210.09.
- The gains helped break a two-session streak of declines for the Dow industrials and S&P 500, paring their weekly losses to 1% each. However the Nasdaq, which is down 0.4% for the week, has posted losses for four consecutive days, its longest losing streak since November 2016. All three indexes remain on pace for their worst month since January 2016.
- Energy firms were among the best performing stocks Thursday, with those companies in the S&P 500 rising 1.1%, while U.S. crude for April delivery settled up 1.8% at $62.77. Chesapeake Energy contributed to the rise after the natural-gas company beat analysts’ expectations on earnings and revenue to send shares up 57 cents, or 22%, to $3.20.
- Among the Dow industrials, United Technologies climbed 4.32, or 3.3%, to 133.58, contributing roughly 30 points to the blue-chip index’s gain, after its chief executive said at a Miami conference that the company is considering splitting up key parts of its business.
- The market’s latest rattle came Wednesday after the minutes for the Fed’s meeting signaled officials were increasingly confident that the U.S. economy was set to grow quickly. The view supports the Fed’s current rate path and could serve as a prerequisite for a more aggressive increase plan.
- U.S. 10-year Treasury yields jumped after the release, hitting a new four-year high but edged down Thursday to settle at 2.917%.
- Elsewhere, the Stoxx Europe 600 index fell 0.2% to halt a two-day winning streak.
- Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC
- Friday: Royal Bank of Canada, Berkshire Hathaway, Cinemark, Public Service
- Bank of New York Australia ADR Index is up 1.5% to 284.0, BHP Billiton ADRs are up 2.5% to $A30.34 equivalent, a 0.5% premium to last Sydney close, Rio Tinto ADRs are up 1.1% to $A72.14 equivalent, a 10.0% discount to last Sydney close.
- Gold swung higher on Thursday, snapping four sessions of losses as the dollar surrendered early gains, though the metal remained on track for its biggest weekly decline this year. The dollar had risen after minutes from the last Federal Reserve meeting showed policymakers backed further interest rate increases but later eased into negative territory against the euro. Spot gold was 0.37% higher at $1,328.81/oz, off an earlier low of $1,320.61 but still down 1.8% this week. U.S. gold futures for April delivery were down 0.07% at $1,331.10. Gold stocks in Toronto fell by 0.72% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
- Oil surged to the highest in two weeks as American supplies unexpectedly shrank and exports surged, dispelling fears that a new shale boom will leave the country awash in crude. Futures advanced 1.8% in New York after a government report showed US crude stockpiles slid 1.62 million barrels last week, the largest draw in five weeks. That contrasted with a 2.9 million increase estimated in a Bloomberg survey ahead of the release. At the same time, crude moving from storage facilities in Cushing, Oklahoma, to tankers on the Gulf Coast helped exports jump 55% to 2 million barrels a day, the most since October.
- Meanwhile, output cuts from Opec helping drain a global glut. Shipments from the group will fall by 300,000 barrels a day in the four weeks to March 10, according to tanker-tracker Oil Movements. The worry is oil undersupply, not oversupply, United Arab Emirates Energy Minister Suhail Al Mazrouei said at the International Petroleum Week conference in London. West Texas Intermediate for April delivery rose $1.09 to settle at $62.77/barrel on the New York Mercantile Exchange. Total volume traded was about 6% below the 100-day average. Brent for April settlement climbed by 97 cents to end the session at $66.39/b on the London-based ICE Futures Europe exchange. The global benchmark traded at a $3.62 premium to WTI for the same month. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
- The bulks markets got off to a rocky start, with steel prices in China falling sharply upon the re-opening of markets. Steel rebar futures for May fell 1.7%, while hot rolled coil prices slumped 1.4%. While expected weak physical demand will keep physical traders quiet, another increase in steel inventories kept investor appetite weak as well. Spot iron ore added 0.5% or $0.37 closing at $77.18 overnight. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
- Base metals came under pressure early in the session as the FOMC minutes flagged additional increases in interest rates this year. However, prices recovered some of those initial losses as the USD weakened. The return of traders in China also seemed to weigh prices in early trade. With many Chinese factories likely to remain closed for the time being, physical traders remained quiet.
- LME three-month copper rose 0.6% to finish at $7162 a tonne. Record high stocks of copper in land-locked Arizona and Utah are a reflection of soaring transport costs in the US and weak demand for the industrial metal produced in the Americas, copper industry sources say. Nickel and zinc hit their lowest levels in over a week on Thursday as Chinese investors sold metals as their markets opened after holidays and steel prices dropped. LME benchmark nickel closed down 0.1% at $US13,830 a tonne, bouncing after touching $13,390, the weakest since February 13. Zinc shed 0.3% to end at $3530 a tonne after hitting $3437, the lowest since February 13. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC
- Woolworths Q2 Same Store Sales Outpace Coles as H1 Net Rises. May see moderation in Australian food sales growth in H2; Comp. store sales +3.7% in early H2. Sees Big W H2 better than year ago; targets FY loss before interest and tax $A80mln-$A120mln. H1 net $A969mln, up 37.6% y/y; NPAT cont. ops A$902m, up 14.7%. EPS cont ops $A0.693 vs $A0.612 year ago; Total EPS $A0.744 vs $A0.565. Gross profit margin cont. ops 29.3% vs 28.9% yr ago; Ebit margin 4.8% vs 4.5%. Australian food A$901mln, up 11% y/y. Food Q2 same store sales growth 5%; total sales growth 5.1%, Peer Wesfarmers Coles H1 food & liquor same store sales +0.9%; Q2 same-store food sales +1.3%
- Mayne Pharma Eyes Stronger H2 After H1 Loss Amid Teva Charges. Says improved trading in Q2 continued into January, well positioned for stronger H2. Sees pipeline driving growth in future periods include generic NuvaRing and patented formulation of SUVA-Itraconazole. H1 net loss $A174.2mln vs profit $A72.73mln a year ago; Loss driven by asset impairments tied to Teva purchase, abnormal Doryx returns, restructuring and U.S. tax rate charges. Adj. net income $A16m, down 73% y/y. Adj. Ebitda $A70.2mln, down 36% y/y. Reported Ebitda $A23mln, down 82% y/y. Operating cash flow $A48mln. Gross profit A$95.9m, down 44% y/y. Gross margin 39% vs 58% yr ago. Rev. $A243.3mln, down 17.5% y/y. Interim div. nil. Net debt $A303mln at end-December.
- Ex-dividend: Domain Holdings, Evolution Mining, IOOF, Whitehaven Coal, Ooh!media
- AP Eagers (APE AU): Non-Deal Roadshow Scheduled By Morgans for Feb. 23
- Aurizon (AZJ): Opens Some Sections of Closed Queensland Coal Rail Line
- Beacon Lighting (BLX): Non-Deal Roadshow Set By Morgans for February 23
- BluGlass (BLG): Non-Deal Roadshow Scheduled By Stifel for March 1.
- Corporate Travel (CTD): Non-Deal Roadshow Set By Morgans for Februarey 23.
- Emeco Holdings (EHL): Non-Deal Roadshow Set By Morgans for March 2.
- Jumbo Interactive (JIN): Non-Deal Roadshow Set By Morgans for March 2.
- Macquarie Group (MQG): Denies Claims Its Brokers Manipulated Mining Stock; EWE Stake Sale Is Said to Attract Macquarie, Shell, ACP: Reuters.
- Myer (MYR): Peer retailer David Jones Reported Operating Profit for 26 Weeks to December Down 29.4%: SMH..
- OceanaGold (OGC): Record 4Q Net Profit $88.6m vs $42.6mln Year Ago.
- Platinum Asset (PTM): Billionaire Stock Picker Neilson Hands Over Reins.
- Santos (STO): May Have Interest in Brookfield’s Stake in Quadrant Energy: Australian.
Broker upgrades, downgrades
- Bellamy’s (BAL): Upgraded to Buy at Goldman; price target $A18.
- Blackmores (BKL): Downgraded to Neutral at Credit Suisse; PT $A130.
- Carindale Property (CDP): Raised to Buy at Moelis & Company; PT $A8.16.
- ERM Power (EPW): Upgraded to Add at Morgans Financial; PT $A1.93.
- Estia Health (EHE): Upgraded to Buy at UBS; PT $A4.
- Fairfax Media (FXJ): Upgraded to Buy at Deutsche Bank; PT $A0.80.
- Michael Hill (MHJ): Upgraded to Outperform at First NZ Capital.
- Nine Entertainment (NEC): Upgraded to Neutral at UBS; PT $A1.90.
- RCR Tomlinson (RCR): Upgraded to Buy at Hartleys Ltd; PT $A4.67.
- Reject Shop (TRS): Upgraded to Buy at UBS; PT $A7.50.
- RXP Services (RXP): Downgraded to Hold at Shaw and Partners; PT $A0.60.
- Pacific Smiles (PSQ): Downgraded to Hold at Bell Potter; PT $A1.85.
- Perpetual (PPT): Cut to Neutral at Credit Suisse; Price Target $A56.
CL is the only contract that has positive year to date return with 2.45% in the energy sector and this outperformance should continue thus we look to add bullish exposure as long as CL makes a weekly close above $61. The focus for tonight would be on the weekly US oil rig count which has been gradually on the rise.
Crude oil chart
Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters.
– Edited by Robert Ryan
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Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets.