Today's Trade: Top miners surge as S&P/ASX200 slides
- Base metals made gains on the weaker US dollar
- AUDUSD hit a high at $0.7243 on the back of a rally in copper
- But the AUDUSD reversed sharply, to trade below the $0.72 handle
- The S&P/ASX200 has been swinging wildly; it's below key resistance at 5,000
- Rio Tinto and BHP made strong gains at the start of trading
By Saxo Capital Markets Australia
Overnight and early trading
- The S&P/ASX 200 opened lower; it was down 0.47% to 4,957.00 at 1045 AEST (2345 GMT). However top miners including BHP and Rio Tinto defied the gloom with share price rises.
- We saw gains across US markets last night as buyers moved into those sectors that bore the brunt of the selling this year: Banks, materials and industrials companies were the biggest gainers Thursday. U.S.-traded crude started to fall, down 1.7% to $31.72 however, this did not affect the mood of the buyers.
- The KBW Nasdaq Bank index of US banks rallied 1.4%, however is still down by 15% this year. Materials companies in the S&P 500 rose 2.8%, taking their weekly positive performance to close to 6%. Material stocks are now down just over 5% in 2016.
- The Dow Jones Industrial Average climbed 79.92 points, or 0.5%, to 16416.58. The S&P 500 added 2.92 points, or 0.15%, to 1915.45 and the Nasdaq Composite rose 5.32 points, or 0.1%, to 4509.56. Traders attributed the cap on gains to the jobs release tonight in the US.
- In corporate news, Kohl’s share price was smashed, down $9.61, or 19%, to $41.52 after the retailer posted lower-than-expected overall sales for the fourth quarter and cut its full-year earnings guidance.
- GoPro shares fell $0.93, or 8.7%, to $9.78 after the company’s Q4 earnings missed expectations and the maker of wearable cameras reduced its financial forecast.
- The Dow Transports index gained 3.17%, posting its best one-day performance since August 1, 2013.
- The CBOE Volatility Index (VIX) traded below 22.
- Stocks in Europe were mixed with the Stoxx Europe 600 down 0.2%. The FTSE outperformed its counterparts, rallying 1.06% as mining companies lifted heavy. The CAC closed virtually unchanged and the Dax slipped 0.44%
- Mining stocks staged their biggest rebound since the global financial crisis: Anglo American finishing the day almost 20% higher at £3.28. BHP Billiton was up 11%, Rio Tinto closed 10% higher and Glencore rose 16% as metals such as zinc, lead and copper posted solid gains.
- The markets shrugged off a downgrade to Glencore by S&P which announced that Glencore’s credit rating had been cut to the lowest investment grade. Glencore's rating was cut to BBB- from BBB by S&P because of "the very challenging market outlook and the increased uncertainty about demand", S&P said, adding that the outlook on Glencore's rating was stable.
- Several oil companies reported earnings before the market open with the overall sector trading over 4% up. Finnish refiner Neste closed up over 2% after it reported expectation-beating fourth-quarter profits.
- Norway's Statoil followed its peers in slashing spending plans amid the low oil price and also posted fourth-quarter earnings that beat expectations, sending shares surging to close up 9.1%. Shell shares closed up 4.7% despite reporting 2015 income that fell 87%.
- Credit Suisse Group reported a large fourth-quarter loss which saw their shares fall 11% in Switzerland.
- Bank of New York Australia ADR Index +3.9%, poised for biggest one-day gain since September 8. BHP Billiton ADR +6.5%. Rio Tinto ADR +6.6%
- Spot gold continues to perform well, up another 1.6% to $1,157. Gold is now looking at its October highs of $1,183 as the next ceiling of resistance. A weakening of the USD is helpful to golds lift, although signs are showing a change of sentiment in this space. Gold has been out of favour with the markets of late and as regular readers will know, we have been watching the weekly descending wedge to break. We feel the time may be approaching where investors will realise its ‘undervalued’ and will get on board. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR
- Crude oil gave up some of yesterday’s gains, with WTI and Brent off 2.6% and 2.3% to $31.63 and $34.38 respectfully. Saudi Arabia has cut its sales price on light crude for March contracts in Asia in an effort to gain more share from its OPEC members. Iran too are increasingly focusing on the Asian markets. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore has now hit a two month high following a 2% rise in prices. This now puts iron ore's four day rally at about 9%. Iron ore shipments were down 2% in January. Cyclone Stan looks to keep exports from Port Hedland lower than average for the time, contributing to the slight supply cut. However with Chinese steel producers still operating at losses, a sustained lift is not likely. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
- Base metals gains were in favour on a weaker USD. Aluminium rose 0.9% and now clearly above $1,500/t at $1,535. India is looking to create trade barriers of 10% to protect domestic industry against the onslaught of Chinese supply. China is supplying its own aluminium industry with subsidies through cheaper power which contributes to 40% of total production cost. A depreciating yuan will only provide an additional advantage to these local Chinese producers over the next 12 months. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
- AiG January Performance of Construction Index due 0930 AEST.
- Australian December. retail sales to show a rise of 0.4%, according to median est. of 27 economists in a Bloomberg survey; due 1130 AEST.
- RBA to release qtrly statement on monetary policy 11:30 a.m. and Jan. foreign reserves data 1630 AEST.
- Genworth Mortgage Insurance Australia (GMA): Scheduled to release FY results; NOTE: Adj. net income est. A$257m (5 analysts)
- National Australia Bank (NAB): Moody’s downgrades Clydesdale Bank’s deposit rating to Baa2
- Qantas (QAN), Virgin Australia (VAH): Air traffic jumps most in 5 yrs as fares follow oil lower; NOTE: Yday VAH flags 1H profit improving eightfold on yields
- REA Group (REA): Scheduled to release 1H results; NOTE: 2- analyst rev. est. A$314m; Nov. 6: 1Q Ebitda from core ops rises 30% to A$82m
- Whitehaven Coal (WHC): Scheduled to release 1H results; NOTE: Jan. 12: Co. sees 1H Ebitda $A100mln-$A105mln.
- Woodside (WPL), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin (ORG), Santos (STO): Oil seen “lower for longer” by Morgan Stanley as forecasts cut; Crude falls as global oil supply glut outweighs USD weakness.
Stock to watch: JB Hi-Fi (JBH)
JBH is now right on its prior level of resistance and how it reports on Monday will dictate whether the market is ready to break up for new levels or retrace below $20 after a strong recent rally.
Retailer JB Hi-Fi sets a record high
JB Hi-Fi's long term trend
- AGL Energy (AGL): Cut to sell vs hold at Shaw & Partners
- Greencross (GXL): Rated new buy at UBS; PT A$7.70
AUDUSD rallies and slips
There is retail sales and RBA monetary policy at 1130 AEST (0030 GMT), but we expect little reaction to these releases. The US dollar index continued decline to break the long term uptrend while the US 10 year treasury also broke the key downtrend
We had shorted AUS200.I in 2015 and locked in some decent profits but we still remain bearish on our market and the recent rally near 5,000 provides a good opportunity again to sell. We believe the seven year uptrend is broken and we are anticipating a material sell off in the next coming weeks.
Long-term S&P/ASX200 trend
Charts: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more.
Sources: AFR, SMH, CNBC, BBG, WSJ, The Australian, Reuters
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– Edited by Robert Ryan
Today's Trade is compiled by the Sydney trading desk at Saxo Capital Markets. Watch our daily morning call on Periscope at 0945am: #SaxoAPAC