Overnight
US stocks posted gains of 5% or more in February, despite closing modestly lower on the last trading day of the month on Friday amid lacklustre data and oil gains. US Stocks performed much better during the second month of the year than in January. Both the S&P 500 and Dow Jones industrial average hit new records for the first time in 2015 in February and the major indices are up about 2% or more for the year.
Stocks however extended losses in afternoon trade on Friday, after holding closer to the flatline earlier in the day. The Dow Jones Industrial Average closed down 82 points, or 0.45%, at 18,132.38, the S&P 500 closed down 6.24 points, or 0.30%, at 2,104.49, while the NASDAQ closed down 24.3 points, or 0.49%, at 4,963.53.
Meanwhile European equities seesawed before finishing higher on Friday, breaking multi-year records ahead of the launch of the European Central Bank's quantitative easing program. The ECB is set to launch its EUR 60 billion a month money-printing program in March, with details of the scheme to be discussed at its planned meeting next week. The FTSE 100 trimmed 0.04%; the CAC 40 rallied 0.83% and the DAX added 0.66%.
Over the weekend China’s central bank surprised the market with a rate cut shaving a quarter of a percentage point off benchmark lending and deposit rates. China's Manufacturing PMI came in at 49.9 versus 49.7 forecast.
China's Manufacturing PMI came in at 49.9, slightly more than the forecast.
Local Markets
- S&P/ASX 200 Index futures contract rose 0.1% to 5,918; futures relative to estimated fair value suggest an early gain of 0.2%.
- Bank of New York Australia ADR Index +1.2% on February 27; Bhp Billiton (LONDON:BLT), ADR +1.3%, Rio Tinto (LONDON:RIO) ADR +0.1%
- Spot gold rose 0.3% to $1,213 on slightly better than expected US GDP data. Gold stocks: Newcrest Mining Ltd (ASX:NCM), Northern Star Resources Ltd (ASX:NST), Alacer Gold Corp. (ASX:AQG), Evolution Mining Ltd (ASX:EVN), Kingsgate Consolidated Ltd. (ASX:KCN), Ramelius Resources Ltd (ASX:RMS), Silver Lake Resources Ltd (ASX:SLR)
- Brent oil lifted 2.6% to $62.58 after more US rigs closed despite output being up. Oil stocks: Woodside Petroleum Ltd (ASX:WPL), Santos Ltd (ASX:STO), Sundance Energy Australia Ltd (ASX:SEA), Beach Energy Ltd (ASX:BPT), Oil Search Ltd (ASX:OSH), Horizon Oil Ltd (ASX:HZN), Drillsearch Energy Ltd (ASX:DLS), AWE Ltd (ASX:AWE), Karoon Gas Australia Ltd (ASX:KAR), Origin Energy Ltd (ASX:ORG), Senex Energy Ltd (ASX:SXY)
- Iron ore closed on Friday up 0.3% to $62.56. Iron ore stocks: Atlas Iron Ltd (ASX:AGO), Fortescue Metals Group Ltd (ASX:FMG), BHP Billiton Ltd (ASX:BHP), Gindalbie Metals Ltd (ASX:GBG), Grange Resources Ltd. (ASX:GRR), Mount Gibson Iron Ltd (ASX:MGX), Rio Alto Mining Limited (TO:RIO), Arrium Ltd (ASX:ARI), BC Iron Ltd (ASX:BCI), Sundance Resources Ltd (ASX:SDL)
- Copper shaved 0.2% to $5,895 over concerns relating to Chinese weather following the end of CNY. Copper stocks: Panaust Ltd (ASX:PNA), OZ Minerals Ltd (ASX:OZL), Sandfire Resources NL (ASX:SFR)
- Nickel was the biggest loser on base metals, down 2.1% to $14,095. Nickel stocks: Western Areas Ltd (ASX:WSA), Sirius Resources NL (ASX:SIR)
- Vocation will release its half-year results
Data points
Monday
- Australia: AIG Manufacturing Index (9:30am), MI Inflation Gauge m/m (10:30am), HIA New Home Sales m/m (11am), Company Operating Profits q/q (11:30am)
- Japan: Capital Spending q/y (10:50am), Final Manufacturing PMI (12:35pm)
- China: HSBC Final Manufacturing PMI (12:45pm)
- UK: Nationwide HPI m/m, Manufacturing PMI, Net Lending to Individuals m/m, M4 Money Supply m/m, Mortgage Approvals
- Europe: Spanish Manufacturing PMI, CHF Manufacturing PMI, Italian Manufacturing PMI, EUR Final Manufacturing PMI, Italian Quarterly Unemployment Rate, EUR CPI Flash Estimate y/y, Unemployment Rate
- US: Core PCE Price Index m/m, Personal Spending m/m, Personal Income m/m, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending m/m
Tuesday
- Australia: Building Approvals m/m + Current Account (11:30am), Cash Rate + RBA Rate Statement (2:30pm)
- Japan: Average Cash Earnings y/y
- Europe: German Retail Sales m/m, Spanish Unemployment Change, EUR PPI m/m
- UK: Construction PMI, BoE Governor Mark Carney Speaks: Due to testify on currency probe before the Treasury Select Committee, in London
Wednesday
- Australia: GDP q/q (11:30am)
- Fed Chair Janet Yellen Speaks (12:15pm): Due to speak about bank regulation and supervision at the Citizens Budget Commission's Annual Awards Dinner in New York
- China: HSBC Services PMI (12:45pm)
- Europe: Spanish Services PMI, Italian Services PMI, Final Services PMI, Retail Sales m/m
- UK: Services PMI
- US: ADP Non-Farm Employment Change, FOMC Member Charles Evans speaks: Due to speak about the economic outlook and monetary policy at the Lake Forest-Lake Bluff Rotary Club 2015 Economic Breakfast in Lake Forest. Audience questions expected, ISM Non-Manufacturing PMI, Crude Oil Inventories, Beige Book
Thursday
- Australia: Retail Sales m/m, Trade Balance, RBA Deputy Governor Philip Lowe speaks: Due to speak at the Goldman Sachs (NYSE:GS) Annual Global Macroeconomics Conference in Sydney
- Europe: German Factory Orders m/m, Retail PMI, French 10-year Bond Auction, Minimum Bid Rate and ECB Press Conference
- UK: Official Bank Rate, Asset Purchase Facility, MPC Rate Statement
- US: Unemployment Claims, Revised Nonfarm Productivity q/q, Revised Unit Labor Costs q/q, FOMC Member John Williams speaks: Due to speak about the economic outlook at the Chartered Financial Analysts Society Hawaii 10th Annual Economic Forecast Dinner in Honolulu. Audience questions expected, Factory Orders m/m
Friday
- Europe: German Industrial Production m/m, French Goverment Budget Balance, French Trade Balance
- US: Non-Farm Employment Change, Trade Balance, Unemployment Rate, Average Hourly Earnings m/m
Also see this week's Macro Take by our Asia Macro Strategist, Kay Van-Petersen.
Current trades
- Amp Limited OTC (OTC:AMLTF: 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 AUD $7.12 (+16.7%). Third and final profit target at AUD 8.00 (+31%) remains in place. Stop loss trailed to entry price of AUD 6.10.
- (January 21) Accumulation of the big four banks. Buying is coming back in the past couple of days and it appears as if our dividend-yielding banks are back on investor radars: ANZ, CBA, NAB, WBC.
Broker upgrades
NRW Holdings Ltd (ASX:NWH): Raised to hold vs sell at Credit Suisse Emerging with PT AUD0.30
Broker downgrades
- Aristocrat Leisure Ltd (ASX:ALL): Cut to underperform vs neutral at Credit Suisse
- Brambles Ltd (ASX:BXB): Cut to hold vs buy at Morningstar
- Graincorp Ltd (ASX:GNC): Cut to sell from hold at Bell Potter with PT AUD 8.40; cut to underweight vs neutral at Commonwealth Bank
- Harvey Norman Holdings Ltd (ASX:HVN): Cut to neutral vs outperform at Credit Suisse
- Japara Fpo (ASX:JHC): Cut to hold vs buy at Wilson HTM
- OZ Minerals Ltd (ASX:OZL): Cut to hold vs buy at Morningstar
- Transfield Services Ltd (ASX:TSE): Cut to hold vs buy at Shaw Stockbroking
- Virtus Health Ltd (ASX:VRT): Cut to hold vs buy at Morningstar
- Woolworths Ltd (ASX:WOW): Cut to neutral vs outperform at Credit Suisse
AUD/USD
Over the weekend, Chinese manufacturing PMI came out better than expected but indicated a contraction for two months in a row and the People's Bank of China cut both the deposit and lending rates by 25bps to 2.5% and 5.35% respectively. These data points pushed AUD/USD higher on the open up to 0.7843 but it quickly faded off to pull back down to 0.7800. Ahead of tomorrow’s RBA decision, we expect choppy price actions between ranges of 0.7800 and 0.7900.
Buy AUD/USD
Entry: Limit 0.7790 Target: 0.7847 Stop loss: 0.7777
AUD/USD
S&P/ASX
S&P/ASX200 seems to have found some strength at the end of last week and on the back of the weekend China rate cut and oil rebound, we expect ASX200 continue the upward momentum led by the material and energy sectors, although there is strong resistance at 5,955. We expect a weak open this morning as the US market had a soft session last Friday, but it should grind up throughout the day.
Buy S&P/ASX200
Entry: Limit 5,883 Target: 5,933 Stop loss: 5,872 
Source: Saxo Bank