Playlist: BHP Billiton

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Video / 21 February 2017 at 8:19 GMT

From the Floor: Cheer seen extending from Asia to Europe— #SaxoStrats

  • Asian equity markets generally positive, Korean Kospi the best performer
  • European stocks also seen up, assuming European PMI data don't disappoint
  • DAX seen likely to push towards 12,000 points
  • BHP first-half profit soars on commodity price rally
  • HSBC shares fall in HK as profit misses estimates and revenue hit by weak Asia
  • Opec vs US producer battle shows no sign of fading
  • Opec compliance and Asia demand offset by rising US inventories and exports
  • Speculative gross long in WTI and Brent hit 1 billion barrels for first time
  • Gold in $1,220-1,245/oz range
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By John Acher

A wave of good sentiment rolled across Asian equity markets on Tuesday and was seen also lifting European bourses, where traders were looking to fresh PMI data for a check-up on the health of industry. 

“Asian equity markets are generally up, with South Korea’s Kospi being the best performer,” says Saxo Bank’s Ryan Wu in Singapore. The Kospi rose 0.9% — hitting a 19-month high on the back of increased exports — while Japan’s Nikkei 225 gained 0.7%, and the Shanghai Composite added 0.4%.

The good vibes in Asia were stoked by a rebound in first-half profits at mining giant BHP Billiton, which rewarded investors with a bigger-than-expected 40-cent dividend, reflecting confidence that the rally in commodity prices might last.

BHP Billiton was helped by an unexpectedly robust surge in commodity prices in 2016 on the back of renewed demand from China.

Iron ore prices have extended a rally as steel demand surges in China.

Iron ore and steel
“Iron ore and China steel prices have gone hand in hand for the past year [...] there is a risk of a pullback,” says Wu.

The Reserve Bank of Australia issued another upbeat assessment of the economy in minutes of its latest meeting. “The RBA has said inflation could accelerate faster than expected if wage rises are on the table,” Wu says.

“Today it’s PMI day in Europe,” says Saxo Bank’s equities strategy chief Peter Garnry before PMI data were released for France, Germany and the Eurozone. “Unless the data really surprises to the negative side, we should see robust equity markets [in Europe].”

Garnry says that as long as those PMI data do not disappoint, stocks in Europe looked set to rise on Tuesday with help from the Asian gains.

But shares in banking group HSBC fell in Hong Kong after the bank posted profits that missed estimates, and Garnry says “revenue looks ugly driven by weak Asia.”

HSBC Holdings reported a 62% plunge in annual pre-tax profit that fell farr short of analysts' estimates as the Britain-based bank took big writedowns from restructuring and signalled slower revenue growth.

Germany’s Dax index is likely to continue to push towards 12,000 points, despite recent political turmoil in Europe, including momentum in polls for the populist candidate Marine Le Pen in France’s presidential race.

Crude oil is still stuck in the midst of the opposing forces of oil producers’ compliance with Opec’s agreed cuts and rising inventories in the US, says Saxo Bank’s commodities strategy chief Ole Hansen.

“The Opec versus US producer battle not showing any signs of fading,” Hansen says.
The combined speculative gross long in WTI and Brent crude reached 1 billion barrels for the first time ever in the week to February 14, Hansen says.

Crude oil long reaches 1-billion-barrel record

Gold, meanwhile, hovered in a $1,220 to $1,245/oz range, with lower US yields offsetting the strong dollar, and funds remain unconvinced, with selling seen ahead of last week’s rally, Hansen says.

High-grade copper prices remain supported by supply disruptions, and Citi sees 15% upside from here, Hansen says.

Seoul street
 Seoul street view. South Korea's stockmarket was the best Asian 
performer on Tuesday. Photo: Shutterstock

John Acher is a consulting editor at TradingFloor

Trax Trax
Is it possible to set this up so you are emailed when the report comes online?
Martin O'Rourke Martin O'Rourke
Hi Trax, do you follow the SaxoStrats page? I think you will get a notification every time we publish which means you will then have the recording (and the follow up an hour or so later) into your inbox. You just have to make sure you are enabled for notifications.


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