Article / 05 March 2018 at 0:34 GMT

Today's Trade: Top miners, global jitters drive AUS200 into the red

Trading Desk / Saxo Capital Markets
Australia
  • Gold gained as the threat of a global trade war pushed stocks and USD lower
  • The S&P/500 and the Nasdaq rebounded into positive territory on Friday
  • The spot price for iron ore has taken a 1.3% tumble
  • The euro pushed higher after Germany’s political stalemate ended
By Saxo Capital Markets Australia

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Overnight and early trading
  • The S&P/ASX200 lost ground in early trading; it was down 0.25% to 5,914.00  at 1129 AEDT (0029 GMT).
  • Asian equities were set for a mixed start to the week as investors assessed the impact of US tariffs on the global economy. The euro pushed higher as Germany’s political stalemate ended and Italians voted in an election which showed exit polls pointing to the center-right bloc winning the most seats but failing to get a majority.
  • Futures pointed to a flat start for Japanese stocks, while Hong Kong indicated more declines are on the way.
nnn The US oil and gas industry has slammed Trump's tariff plan, saying it would kill jobs by raising costs for infrastructure projects (above), and the EU has threatened to retaliate against the US.
Photo: Shutterstock

  • The threat of a trade war spurred turmoil in financial markets around the world as investors scrambled to assess a potential disruption to a rare period of synchronized global growth.
  • The Dow Jones Industrial Average closed down 0.3% Friday, recovering most of morning losses that worsened after President Donald Trump doubled down with tweets on a pledge made a day earlier to impose stiff tariffs on steel and aluminum imports. His plan sent overseas stocks tumbling and was met with warnings of retaliation across Asia, Europe and North America.
  • Japan’s Nikkei ended Friday 2.5% lower as steelmakers and car manufacturers came under pressure, while London’s FTSE 100 returned to levels last seen in 2016. Despite staging a comeback, major U.S. indexes suffered their worst week since early February.
  • Although the market scare over the tariffs at least temporarily abated, other fears linger as investors reassess the prospects for continued global growth, brace for the possibility of a broader trade war and await the outcome of an parliamentary election in Italy.
  • The Dow Jones Industrial Average ended Friday down 70.92 points at 24538.06, putting its weekly decline at more than 3%. The S&P 500 rose 0.5% and the Nasdaq Composite gained 1.1%, though the indexes posted weekly losses of 2% and 1.1%, respectively.
  • In a flight to relative safety, gold rose 1.4% to $1,321.10 a troy ounce, shares of gold miners jumped and the yen strengthened 0.6% against the dollar. But government bonds found little support. Yields on 10-year Treasuries rose to 2.855% Friday from 2.802% Thursday. Yields rise as prices fall.
  • Trump’s trade proposal, as well as comments from new Federal Reserve chairman Jerome Powell earlier in the week, added to an investment landscape already characterized by fears about inflation and tighter monetary policy. These jitters have rendered stock and bond markets more susceptible to big swings in recent weeks, as investors worry that a years long policy of low short-term interest rates and accommodative central banks could be upended more quickly than expected.
  • Leaders around the world are expected to respond to Trump’s tariff plan, stirring more uncertainty for markets. Already the government of Ontario, home to the bulk of Canada’s steel production, urged Prime Minister Justin Trudeau to “aggressively explore all options” if the Trump administration pushes ahead with the broad tariffs. Meanwhile, European Commission President Jean-Claude Juncker said Europe would respond with tariffs on Harley-Davidson motorcycles, bourbon and blue jeans.
  • The Cboe Volatility Index, often referred to as Wall Street’s fear gauge, jumped on Thursday to its highest reading since early February. Though it pared its gains on Friday, it still ended the week sharply higher at $19.59
  • Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC

Local markets

  • Bank of New York Australia ADR Index is up 0.1% to 277.8, BHP Billiton ADRs are down 0.6% to $A29.30 equivalent, a 1.1% discount to last Sydney close, Rio Tinto ADRs are down 2.2% to $A66.27 equivalent, a 13.8% discount to last Sydney close.
  • Gold prices rose on Friday as the threat of a global trade war pushed shares and the dollar lower and spurred demand for assets such as bullion that are seen as safer investments. President Donald Trump's decision on Thursday to place tariffs on imports of aluminium and steel raised fears of retaliation by other nations and knocked the dollar from a six-week high, making dollar-denominated gold cheaper for users of other currencies. Spot gold add 0.4% to $1322.16/oz. However the yellow metal ended the week down 0.4%. It touched $1,302.61, the lowest since January 2, on Thursday, pushed down by expectations that the Federal Reserve will raise interest rates more aggressively than previously thought. In other gold news, Australian gold output hit its highest since 1999 according to Surbiton. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil prices rose on Friday as Wall Street stocks bounced off session lows, but crude benchmarks posted their first weekly fall in three weeks on fears U.S. plans to impose tariffs on steel and aluminium could squeeze economic growth, and as U.S. crude inventories climbed. On Thursday, oil followed the stock market lower after President Donald Trump said he would impose hefty tariffs to protect U.S. producers. Investors feared the move would spark a trade war, with retaliation from major partners such as China, Europe and Canada. The U.S. oil and gas industry slammed the tariff plan, saying it would kill energy jobs by raising costs for big infrastructure projects. Oil slid along with equities again early on Friday, but oil rebounded with U.S. stocks as the S&P 500 index and the Nasdaq moved into positive territory.
  • The global benchmark Brent was up 45 cents at $64.28/b at 1429 ET after spending most of the session lower. The contract settled down 1.4% on Thursday at a two-week low and is set for a weekly fall of 4.5%. U.S. West Texas Intermediate crude ended Friday's session up 26 cents at $61.25 after touching a two-week intraday low of $60.13. U.S. crude posted a 3.6% drop this week, its first weekly decline in three, having given up much of the gains in recent weeks when sentiment was boosted by a fall in inventories at the Cushing delivery point for WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • Expectations that more Chinese cities could curb steel output after the top steel-producing city Tangshan announced it would extend production restrictions beyond the end of the heating season on March 15 buoyed steel prices this week, with raw materials iron ore and coking coal also hitting multi-week highs. But steel's pullback on Friday also weighed on iron ore and coking coal prices. The spot price for iron ore fell 1.3% to $78.34 a tonne, according to Metal Bulletin. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Three-month aluminium on the London Metal Exchange ended up 0.1% at $2149 a tonne, bucking a mostly falling trend in base metals. Aluminium on the Shanghai Futures Exchange (ShFE) closed down 0.1% after touching a two-week high. Aluminium stock: AWC.
  • Copper ended down 0.4% at $6,898 a tonne, zinc closed down 1.5% at $3,355, lead closed up 0.1% at $2448, tin ended down 0.8% at $21,475 while nickel ended down 0.2% at $13,450. Chinese steel futures retreated on Friday after a five-day rally, though traders pointed more to rising inventories than the US tariff plans. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA.
  • Ex-dividend: Ainsworth Game; Collection House, Credit Corp., ERM Power, Invocare, Sandfire, Spark Infrastructure.
  • AMP (AMP): Could Start Sales Process For N.Z. Wealth Management Imminently: Australian.
  • Alumina (AWC): Aluminum, Nickel Drop as Trump Vows Import Tariffs.
  • Amcor (AMC): Threadneedle Asia Adds Infosys, Exits Amcor, Buys More BHP.
  • Oil Search (OSH): Satellite Images Show Damage From Papua New Guinea Earthquake; LNG Tanker Headed to PNG Export Plant Changes Destination.
  • Perpetual (PPT): Said to Consider Bid For Pinnacle Investment Management: AFR.
  • Rio Tinto (RIO): Former Rio Tinto CEO Tom Albanese Faces Australian Legal Action.
  • Slater & Gordon (SGH): Debt Risk Rises 3 Levels in Bloomberg Model.
  • Telstra (TLS): M&A Head Nehemiah Richardson to Depart: AFR .
  • Vocus (VOC ):. TrustPower, 2degress Said Among Bidders Into Next Round For N.Z. Assets: AFR.
Broker upgrades, downgrades
  • AMA Group (AMA): Downgraded to Neutral at Evans and Partners; PT $A1.38.
  • ARB (ARB): Upgraded to Hold at Morningstar.
  • Adelaide Brighton (ABC): Downgraded to Hold at Taylor Collison.
  • Flight Centre (FLT): Upgraded to Hold at Morningstar.
  • Platinum Asset (PTM): Upgraded to Buy at Morningstar.
Bitcoin recovery

We highlighted Bitcoin (BITCOIN_XBTE) on February 6, when it was approaching its 200 day moving average. Since then, bitcoin has bounced off both 200DMA and uptrend (from its July 17 low).

The recovery has been impressive as its price almost doubled and it appears to have formed an inverse head and shoulders, with a break out level sitting at 12,000.

Bitcoin chart1





















Bitcoin chart

























Create your own charts with SaxoTrader; click here to learn more.

– Edited by Robert Ryan

For more on forex, click here.

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

Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets.

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