Overnight and early trading
It's a mixed start on the local markets, although largely a positive one. The ASX 200 was up 8 points to 5733 in the first 20 minutes of trading. Mining shares are choppy while banks and healthcare stocks are up.
Stocks bounced back overnight with the Nasdaq Composite rising to a new record close, as technology companies led major benchmarks higher one day after their biggest losses in weeks.
The Nasdaq Composite Index closed up 73.84 points, or 1.5%, at 5106.59. So far this year the Nasdaq Composite is up 7.8%.
The Dow Jones Industrial Average gained 121.45 points, or 0.7%, to 18162.99, rebounding from a tumble of 1% on Tuesday, its biggest one-day rout since April 30. The S&P 500 added 19.28 points, or 0.9%, to 2123.48.
Technology stocks in the S&P 500 rose 1.8%, making information technology the best-performing sector in the index. Broadcom (NASDAQ:BRCM)’s shares ended up 22%, while Avago added 7.8%.
Developments in Greece also calmed investors with news that Greece and its creditors started to draft a final agreement on Wednesday, sending European stocks higher. Germany’s DAX gained 1.3% and France’s CAC 40 added 2%. UK’s FTSE rose 1.21%.
As trading for the month of May winds down this week, investors will have even more data to focus on, including Friday’s revised reading of first-quarter gross domestic product in the US. The initial reading of first-quarter GDP showed the US economy slowed dramatically, growing at a sluggish 0.2%. Economists surveyed by The Wall Street Journal expect that to be revised downward to a 1% contraction.
Volatility, which has been muted throughout the past week, could pick up heading into the summer months in the US. Volumes have dried up already this month and with fewer investors expected to be buying and selling shares in the US, swings in the market could be more exaggerated.
In commodity markets, gold futures slipped 0.1% to $1185.90/oz. Crude-oil futures fell 0.9% to $57.51 a barrel.
Local Markets
- The S&P/ASX 200 Index futures contract rose 0.2% to 5,751 with futures relative to estimated fair value suggesting an early gain of 0.4%
- Bank of New York Australia ADR Index little changed with BHP Billiton (LONDON:BLT) ADR little changed and Rio Tinto (LONDON:RIO) ADR up just 0.3%
- Spot gold remained near on flat, up just 0.1% to $1,188 as it fought back from its lows of $1,183.The precious metal is now back to its two-week lows and in the lower range of its two-month levels. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
- Crude oil was smacked again, with WTI and Brent down 1.8% and 2.7% to $57.60 and $62.40 respectively. The market had been expecting inventories in the US to fall by 1 million barrels, only to have the figure rise 1.3m barrels. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore continues its upwards momentum for the time, rising 0.5% to $63.10 as indications that Chinese producers are cutting their volume and leaving buyers needing to demand more seaborne stock. We look forward to seeing Port Hedland’s next monthly shipping figures. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
- Base metals continue to be mixed with the same aluminium and copper both down again. Aluminium has lost another 1.1% to trade at $1,738 after Norwegian producer Norsk Hydro plans for an additional 35,000 tonnes per year in output. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC, AA:xnys
- AGL (AGL): Hires Macquarie for sale of Macarthur wind farm stake; China Huaneng among potential buyers
- ALS (ALQ): FY results expected
- Atlas Iron (AGO): Sees impairment charges of AUD 130m – AUD $160m on ore price drop
- Fortescue (FMG): Founder Andrew Forrest has no intention of selling down his 33% share in FMG and will not issue new shares unless the price reflects the companies high-asset value. He has been quoted in the AFR this morning as saying: "We are here to build this company up, not sell out of it." Forrest then went on to say: "I would never deny shareholders a premium for control if it was adequate, but it won’t happen by stealth." It is believed that with support from his followers, Forrest controls 50% of Fortescue.
- QBE Insurance (QBE): Outlook revised to stable at S&P; ratings affirmed
- South32 (S32): Pressured at spot prices, relies on cost cuts: Liberum
- Ex-dividend: Orica (ORI)
Data points
Thursday
- G7 Meetings: all day
- JPN: Retail Sales y/y (9:50am)
- AUS: Private Capital Expenditure q/q (11:30am)
- EUR: German Import Prices m/m
- FOMC Member Williams Speaks (4:20pm EST): Due to speak about banking supervision at the Monetary Authority of Singapore Banking Supervision and Regulation Joint Conference, in Singapore
- GBP: Second Estimate GDP q/q, BBA Mortgage Approvals, Index of Services 3m/3m
- Italian 10-y Bond Auction
- US Unemployment Claims, Pending Home Sales m/m, Crude Oil Inventories
Friday
- G7 Meetings: all day
- JPN: Household Spending y/y, Tokyo Core CPI y/y, National Core CPI y/y, Unemployment Rate, Preliminary Industrial Production m/m
- AUS: Private Sector Credit m/m (11:30am)
- EUR: German Retail Sales m/m, French Consumer Spending m/m, Spanish Flash CPI y/y, M3 Money Supply y/y, Private Loans y/y, Italian Preliminary CPI m/m
- US Preliminary GDP q/q, Preliminary GDP Price Index q/q, Chicago PMI, Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations
Current ASX trades
- Alumina (Ticker: AWC.xasx): Entered short position on May 27 at AUD 1.70. Stop loss is set at AUD 1.80 with profit target at AUD 1.42.
- Aurizon Holdings: Entered long position on May 23, at AUD 5.29. Stop loss is set at AUD 5.17 with first profit target at AUD 5.58 and final profit target at AUD 5.91.
- AMP Limited: Entered long position on February 6 at AUD 6.10. First profit target was reached on February 18 at AUD 6.49 (+6.4%) and second profit target is at AUD 7.12 (+16.7%). Third and final profit target is at AUD 8.00 (+31%) which remains in place. Stop loss trailed to entry price of AUD 6.10.
Broker Upgrades
- Ten Network (TEN): Raised to hold vs sell at Morningstar
Broker Downgrades
- GUD Holdings (GUD): Cut to hold vs buy at Wilson HTM
ASXSP200.I
E-mini S&P 500 futures made a solid rebound making back the majority of the losses from the previous session on optimistic comments by Greek Prime Minister Tsipras that an agreement is being drafted to avoid defaulting on its debt.
ASXSP200 rose back up towards the pivot level 5,749 following this positive reaction from the overnight markets. This week’s price actions of ASXSP200 suggest that the upside momentum remains and we expect this resilience to continue with the support level at 5,725 for today. Break below this support level would trigger further fall towards 5,681. 
AUDUSD
We finally saw a turnaround of the recent rally in the US dollar on the back of the positive headlines of the Greece bailout negotiations.
EURUSD failed to test 1.0800, while AUDUSD briefly broke 0.7700 and bounced back up. USDJPY broke through 124.00 but fell short of the pre-GFC 2007 high of 124.13. The second-profit target (123.73) of our buy stop trade (122.18) on USDJPY was reached and we are moving up the stop loss to 123.18. USDJPY needs a clear breakout above the key resistance level 124.13 in order to achieve the third target at 125.33.
The private capital expenditure numbers are released at 11:30am, and this will have a significant impact on the near-term direction of AUDUSD. We expect another soft figure as investment in non-mining companies remains low, but if it comes out better than the previous number (-2.2%), then AUDUSD is likely to rebound as US dollar strength is starting to fade and AUDUSD has been sold off more than 400 pips in the past two weeks.
The support level is at 0.7690 and the resistance level is at 0.7765.
