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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 27 March 2018 at 23:29 GMT

Today's Trade: Wall St dives on tech selloff, Asian bourses to follow

Trading Desk / Saxo Capital Markets
Australia
  • Tech stocks are under selling pressure from US-China trade tensions
  • The rising tensions have added to other woes affecting the US tech sector
  • Negative sentiment towards tech shares have spilled over into the wider market
  • European stocks rebounded from a slide, with the Stoxx Europe 600 up 1.2%

By Saxo Capital Markets Australia

Overnight and early trading

  • The S&P/ASX 200 retreated in early trading; it was down 0.61% to 5,796.80 at 1023 AEDT (0023 GMT).
  • Asia faces declines in equities after a selloff in technology shares sent U.S. stocks lower as investors assessed an escalation of trade tensions between the U.S. and China.
  • The Dow Jones Industrial Average fell 345 points Tuesday as U.S. stocks experienced a sharp selloff in afternoon trading, led by a downturn in tech and financial stocks. The Dow Jones Industrial Average had swung between small gains and losses for much of the session before turning firmly lower in the final hour of trading as losses accelerated in the tech sector.
  • The blue-chip index fell about 345 points, or 1.4%, to 23858, while the S&P 500 slipped 1.7%, and the tech-focused Nasdaq Composite declined 2.9%. The session was volatile with the Dow up as much as 243 points and down as much as 494.


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The tech sector's woes were not confined to US-China trade frictions ... Shares in Nvidia fell after the company decided to suspend its tests of driverless technology. Photo: Shutterstock

  • The S&P 500’s technology sector earlier dropped 3.4%, suffering the biggest losses of the index’s 11 major segments. Nvidia, which has made a broad push to bring its computing platform into self-driving cars, was the worst performer in the broad index after the chip company said it would temporarily halt testing of its driverless technology on public roads following the fatal crash of an Uber Technologies autonomous vehicle. Nvidia shares fell 9.4%.
  • Meanwhile, shares of Facebook declined 5.2% as chief executive Mark Zuckerberg said he expects he will have to testify about the social media company’s privacy and data-use standards. Facebook shares are down 15% this month over concerns about its handling of user data. Pressure in the tech sector spilled over into the broader market last week when the Dow and S&P 500 dropped nearly 6% to long their biggest weekly declines since October 2008.
  • Bank shares also came under fresh selling pressure on Tuesday. The KBW Nasdaq Bank Index of large lenders fell 2.8%, on course for its third decline in five trading sessions, as a fresh wave of buying in government bonds sent the yield on the 10-year Treasury note to its lowest settlement since early February. Lower interest rates tend to hurt banks by weighing on their net interest margins, a key measure of lending profitability. Bank of America lost 3.3%, while Goldman Sachs Group lost 3%.
  • Defensive sectors were among the best performers as investors sought safety in the shares of companies that pay steady dividends. Utility companies in the S&P 500 added 1.6% as shares of WEC Energy Group and DTE Energy rose 2%. The real-estate sector climbed 0.2%, and shares of telecommunications firms added 0.7%.
  • European stocks rebounded Tuesday, with the Stoxx Europe 600 closing up 1.2%, ending a four-day losing period, which came amid rising tensions between multiple EU nations and Russia.
  • Upbeat trading in Europe echoed the sharp resurgence in equities markets in Asia-Pacific. That recovery began Monday as the U.S. and China appeared to soften their stances over trade, after tensions between the two superpowers ratcheted up last week.
  • Source: Bloomberg, TradingFloor.com, WSJ.com, CNBC

Local markets                                                                                    

  • Bank of New York Australia ADR Index is down 1.7% to 262.8, BHP Billiton ADRs are down 1.6% to $A28.73 equivalent, a 0.9% discount to last Sydney close, Rio Tinto ADRs are down 1.5% to $A66.04 equivalent, a 11.0% discount to last Sydney close.
  • Gold prices fell for the first time in five sessions Tuesday, hurt by a rebounding dollar and placid stock moves as worries about a global trade war eased. Front-month gold for March delivery fell 1% to $1,341.30/oz on the Comex—its largest one-day drop in a month. Prices have traded between roughly $1,305 and $1,360 this year, moving within that range based on moves in the dollar, interest-rate expectations and safe-haven demand. The weakness in gold also dragged down gold stocks in Toronto by close to 1.3%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
  • Oil extended its slide following an industry report that American crude storage surged. Light, sweet crude settled down 30 cents, or 0.5%, at $65.25 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 1 cent to $70.11/barrel.
  • Oil neared the $66.66/b reached earlier this year as President Donald Trump appointed John Bolton for national security adviser last week, signaling the U.S. may pursue a more hawkish approach against Iran and disrupt outflows from the Opec member nation. While global stockpiles are tightening with Opec’s production cuts, fears remain that surging American production could thwart those efforts. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
  • Iron ore prices were weak, despite steel prices rebounding. Steel rebar futures in China rose as much as 2% as trade frictions eased. However, this didn’t flow through into the iron ore market, with traders reluctant to aggressively bid for cargoes amid a healthy level of inventories at the steel mill level. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
  • Copper lead a recovery in base metals from their lowest level in more than three months amid speculation that trade tensions between the U.S. and China are beginning to ease. Front-month copper for March delivery added 1% to $2.9915 a pound in its second day of gains in the last nine sessions. The industrial metal has fallen 8.8% so far this year after hitting a roughly four-year high late in December, hurt by weak economic data out of China, the world’s largest copper consumer, and worries about trade policies. Nickel rallied 1.2% along with zinc which rose 0.9%. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
  • Ex-Dividend: Arena REIT, Cabcharge, Charter Hall Long Wale REIT, Cromwell Property, HT&E, Meridian Energy, PWR, Virtus Health.
  • ANZ Bank (ANZ), Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac (WBC): Aussie Banks Face Squeeze as Conduct Probe Crimps Pricing Power;
  • BHP (BHP): Shell Stock Lags Market on Fear of $10b BHP Shale Bid: Bernstein
  • Charter Hall (CHC): Among Bidders for 50% Stake in Sydney CBD Office Block Worth  about $A800mln: AFR.
  • Rio Tinto (RIO LN): Rio Exits Coal Business With $4 Billion of Deals in Just a Week
  • Adelaide Brighton (ABC): Among APAC Stocks That Are Forming Major Technical Chart Patterns.
  • AGL Energy (AGL): Face Pressure From Shell’s Australian Push, MS Says.
  • Costa Group (CGC), Nufarm (NUF AU), Graincorp (GNC AU): Among Companies Scheduled to appear at Macquarie Agricultural Forum.
  • Link Administration (LNK): Property Exchange Pexa Aims to Double Online Transactions: CEO.
  • Qantas (QAN): Qantas Eyes Chicago Direct as Next Step in Ultra-Long-Haul Push.
  • Star Entertainment (SGR): Seeks to Amend, Extend A$650m Revolver.
  • Woolworths Group (WOW): Queensland State Regulator Widens Probe Into Slot Machine Venues: SMH.

Broker upgrades, downgrades

  • CSR (CSR): Upgraded to Equal-weight at Morgan Stanley;  price target $A5.
  • OZ Minerals (OZL): Upgraded to Hold at Canaccord; PT $A8.60.

Financial Select Sector SPDR Fund under pressure


After just one day in recovery, sellers returned last night as the Financial Select Sector SPDR Fund (XLF) formed a bearish engulfing candlestick.  While tech stocks seem to be under severe selling pressure, financial stocks are also on the verge of breaking the intersection of two-year uptrend and 200 day moving average. 

The key support level would be $A26.70, which needs to hold in order to maintain a bullish bias.  


Financial Select Sector SPDR Fund chart1

























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– Edited by Robert Ryan

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

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