Today's Trade: Waiting for the Japanese
- Plenty of numbers coming out in Asia and in Europe later today
- Traders in Australia nervous as they await the size and content of BoJ stimulus
- AUD trading at US75.04c this morning, down from US75.31c yesterday
- ASX on track for best July for six years despite weak start to today’s session
By Saxo Capital Markets
Early trading and overnight
The ASX/S&P 200 is lacking any direction in early trade ahead of the Bank of Japan announcement today. The benchmark top 200 index is flat at 5560.
The AUD has fallen against its US counterpart as the greenback staged a minor rebound.
Stimulus bets influenced currency markets ahead of the Bank of Japan’s policy meeting.
Google parent Alphabet surged almost 5% after its profit topped estimates. Amazon.com
The GBP slid on bets the Bank of England will lower rates next week. Oil slipped toward $41/barrel, approaching a bear market.
Since the S&P 500 Index hit the fourth straight all-time high on July 14, the benchmark gauge has alternated between gains and losses, finishing every day less than 0.5% from the previous close. The 10-day streak is the longest since data began in 1927.
The gauge posted seven records in 10 days in a mid-month stretch, and it’s rebounded 18% since its low in February. It’s up 6% this year - one of the best gains in developed world equities.
The Stoxx Europe 600 slid 1%. The gauge is 2% from its June 23 level, the day of the UK’s EU referendum, while US and Asian shares have already recovered from their losses. Banks fell the most among Stoxx 600 industry groups.
West Texas Intermediate crude decreased 1.9% to settle at $41.14 a barrel and Brent slipped 1.8% to $42.70.
The default rate for leveraged loans in the energy sector could spike close to 18% if Templar Energy and Stallion Oilfield Services are unable to make interest payments on their debt, Fitch Ratings said.
Local markets and commodities
- S&P/ASX 200 Index futures climb 0.2%; futures relative to estimated fair value suggest an early gain of 0.5%.
- Bank of New York Australia ADR Index -0.3%, BHP Billiton ADR -0.6% to A$19.69 equivalent, 1.4% discount to last Sydney close, Rio Tinto ADR +0.1% to A$43.75 equivalent, 14% discount to last Sydney close.
- Gold prices rose on Thursday, buoyed by the Federal Reserve’s decision to keep interest rates unchanged. Gold for December delivery settled up 0.5% at $1,341.20/oz on Comex, after rising as high as $1,352.60/oz and hitting its highest level since July 14. Goldies in Toronto dropped close to 1% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, SAR, SLR.
- Oil fell to a three-month low, edging closer to a bear market, after US crude supplies unexpectedly rose from what was already the highest seasonal level in at least two decades. West Texas Intermediate for September delivery fell 78 cents to settle at $41.14 a barrel on the New York Mercantile Exchange. It’s the lowest close since April 19. Total volume traded was 24% below the 100-day average.
- Brent for September settlement, which expires Friday, fell 77 cents, or 1.8%, to $42.70 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close for a front-month futures contract since April 8. The more-active October contract dropped 68 cents to $43.23. September Brent closed at a $1.56 premium to WTI. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY.
- Iron ore rallied again overnight up 3.5% to $60.70/tonne. Iron ore is continuing to make a comeback with futures in China reaching their highest since the peaks hit during the speculative frenzy in April that drew global attention, and benchmark spot prices are on course for the fourth weekly gain in five.
- On the Dalian Commodity Exchange, the September contract closed 1.4% higher at 472.5 yuan ($70.9/t). Iron ore is rallying again after the boom-bust seen in April and May as steel prices climb, Chinese mills hit record daily rates of production and investors zero in on short-term supply disruptions in China, including floods.
- Most recently Goldman Sachs raised its three- and six-month iron ore forecasts in a report this week, saying steel prices were expected to remain volatile during a period of low inventories. Iron ore will trade at $50/ton in three months and $40 in six months, up from $45 and $35 previously, the bank said. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL.
- Benchmark copper on the London Metal Exchange ended up 1% at $4896.5/t after touching a two-week low of $4830/t on Wednesday. Nickel ended up 3.2% at $10,695/t on worries about ore supplies from the Philippines and a pollution-related crackdown in China's nickel pig iron smelters in Linyi city, Shandong.
- Three-month aluminium rose 1.1% to $1609/t, zinc was up 1.3% to $2205/t, lead rose 0.2% to $1803/t and tin added 0.4% to $17,775/t. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
- In other news: Aristocrat (ALL): Outlook revised to positive by S&P on operating performance; Crossland Strategic Metals (CUX): To buy remaining interest in Charley Creek JV; OceanaGold (OGC): 1H net profit $63.2m, says it’s on track to achieve FY output and cost guidance; Redscape (RPF): Set to hire Goldman Sachs to manage sale, Australian reports.
US500 continues to trade side ways within a range between the resistance level 2,175 and support level 2,158, while NASDAQ100 is extending the gains to test the 2015 high as some of the major tech companies are releasing positive earnings.
The US500 has been showing almost identical price actions in the last five trading sessions, as they sold off in the opening then rally into the close. Until there is a clear break out of the current rectangle formation, it would be sensible to trade the range.
US 500 daily chart
The price actions of USDJPY have already been volatile this week, while the resistance level remains at 106.30 and 107.50 for now but the upside risk still remains depending on the announcement from Bank of Japan today.
The focus would be on the details of the package and if there is any disappointment, sharp sell off is also possible.
USDJPY daily chart