Overnight
Greek fears continued to dominate market sentiment last night with Greek stocks tumbling up to 5% and bond yields spiking after Greek Prime Minister Alexis Tsipras said his election pledge to restructure Greece's debt was "irrevocable" in his inaugural speech late on Sunday.
The Stoxx Europe 600 index dropped 0.7% to close at 370.56, as banks led the sell-off. Banking shares such as BNP, BBVA & Intesa Sanpaolo all fell around 3%. Germany’s DAX 30 index slumped 1.7% to 10,663.51, while France’s CAC 40 index lost 0.9% to 4,651.08. The UK’s FTSE 100 index closed 0.2% lower to 6,837.15 after falling as much as 1% at its peak.
Miners, which are usually sensitive to data out of China, bucked the negative trend in the rest of the London index. FTSE 100-listed miners like Randgold Resources Fresnillo, Glencore, Rio Tinto and Antofagasta were the best performers after Randgold said it would increase its final dividend for 2014 by 20%.
Oil firms also rose, as crude continued to climb. BG Group picked up 3%, BP PLC gained 1.4% and Royal Dutch Shell PLC added 1%.
In commodities markets, in afternoon trade in New York, Brent crude was up 1.1%, WTI crude was up 2.8%, spot gold was up 0.6%. Copper edged up 0.4% in London; nickel slipped 0.3%.
In the US, the Dow Jones was at 17,726.45, down 97.84 points (0.55%). The broad-based S&P 500 fell 8.92 (0.43%) to 2,046.55, while the tech-rich Nasdaq Composite Index dropped 18.39 (0.39%) to 4,726.01.
The energy sector was the only sector closing higher on the S&P 500 as Chevron and Exxon Mobil traded higher. Year-to-date, the S&P 500 is now down 0.4%, following last year’s 11% gain.
Local Markets
- S&P/ASX 200 Index futures contract fell 0.2% to 5,750 with concerns over Greece weighing on the European indices
- Bank of New York Australia ADR Index was up 1.1%, with BHP Billiton ADR climbing 2% and Rio Tinto ADR not far behind, up 1.5%
- Spot gold saw an upward lift of 0.6% to USD 1,242, as Greek political uncertainty weighed on investors’ minds. Stocks to watch: NCM, NST, AQG, EVN, KCN, RMS, SLR
- Brent oil was pushed higher after OPEC’s monthly report showed an increase in demand for 2015 at 29.2 mil b/d, while non-OPEC output was expected to fall: Stocks to watch: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore fell (dropping the most in two weeks) as expected after Chinese data was published over the weekend showing weak import data: Stocks to watch: AGO, FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
- The transportation index fell more than 1% with the airlines leading the decline. Stocks to watch: QAN, VAH
- Regressive analysis by Wunderlich Securities showed that since crude began its plunge last year, the S&P 500 has had a 0.70 correlation with crude, up from the low 0.03 correlation the two have had for the last 25 years.
Data points
Tuesday
- Japan: Tertiary Industry Activity m/m (10:50am)
- Australia: NAB Business Confidence + HPI q/q (11:30am)
- China: CPI y/y + PPI (12:30pm)
- Europe: GBP Manufacturing Production m/m
- US: US wholesale inventories
Wednesday
- Bank Holiday in Japan
- Australia: Home Loans m/m figures for Australia (11:30am)
- Europe: Eurogroup meetings
- US: Crude oil inventories; Federal budget balance
Thursday
- Australia: RBA assistant governor Guy Debelle speaks at the FX week Australia Conference, in Sydney (9am); Employment Change and Unemployment Rate (11:30am)
- Japan: Core Machinery Orders m/m, PPI y/y
- Europe: EU Economic Summit
- UK: Bank of England Governor Mark Carney speaks. Due to hold a press conference, along with other MPC members, about the Inflation Report, in London; BOE Inflation Report
- US: Core Retail Sales m/m; Unemployment Claims
Friday
- Australia: RBA Governor Glenn Stevens speaks: Due to testify before the House of Representatives' Standing Committee on Economics, in Canberra (9:30am)
- Europe: French, German, Italian and Europe Preliminary GDP q/q
- US: Preliminary UoM Consumer Sentiment
Corporate news out this week and ex-dividend stocks
Tuesday
- Cochlear, and Slater and Gordon half-year results
- RMD ex-dividend
Wednesday
- Half-year numbers: Commonwealth Bank, Suncorp Group, AGL Energy, CSL, Boral, Stockland, Skilled Group, Goodman Fielder, Domino's Pizza, OZ Minerals, Computershare, BWP Trust
- Genworth Mortgage Insurance full-year results
- COO, JBH,MGP
Thursday
- Half-year numbers: Telstra, Mirvac, Transurban, ASX, Tassal, Perth Paladin Energy
- Rio Tinto full-year results
- ARG, BKI, MLT
Friday
- Half-year numbers: Newcrest, Sims Metal Management, Perth Automotive Holdings
Current Trades
- AMP Limited (Ticker: AMP:xasx): Entered long position on February 6 at $6.10. First profit target is at $6.49 (+6.4%) and second profit target at $7.12 (+16.7%) and third and final profit target at $8.00 (+31%). Stop loss set at $5.79 (- 5.1%).
- (22/1) Bluescope Steel: BSL is heading back up to its resistance level of ~$5.37 where there has been quite a lot of noise since January 14. Should it fail to push higher above this level, a head and shoulders pattern will be completed where a quick and swift sell off is expected. Sell limit: $5.33 ~ $5.37 with a stop loss above $5.62 (Loss: 5.4%). First profit target: $4.70 [December 14 low] (Profit: 11.8%), Second profit final target: $4.04 (Profit: 24%).
- (21/1) 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.
- NOTE: JB Hi-Fi (Ticker: JBH:xasx): Yesterday our second and last profit target was reached on JB Hi-Fi where we were able to unwind our entire long position for a 6.9% return. For those that wish to hold onto their long positions, the next level to watch out for is $18.84.
Broker downgrades / upgrades
- Ansell (ANN): Raised to overweight vs neutral at Commonwealth Bank. Cut to underperform vs neutral at Credit Suisse
- Alumina (AWC): Cut to neutral vs outperform at Credit Suisse
- Boral (BLD): Raised to outperform vs neutral at Credit Suisse
- Cochlear (COH): Cut to sell vs hold at Morningstar
- Cromwell Property (CMW): Rated new underperform at Credit Suisse
- MyState (MYS): Rated new neutral at Macquarie; PT $5.08
- Recall (REC): Cut to neutral vs overweight at Commonwealth Bank
- Suncorp (SUN): Cut to underweight vs neutral at JPMorgan
AUDUSD
Unfortunately our buy entry on yesterday’s trade was not reached as the limit buy level of 0.7740 came 7 pips short of the low for the day. The Aussie dollar recovered early losses as a rally in oil prices supported commodity currencies such as the NZDUSD and USDCAD and overcame the sell-off seen earlier in the day.
From observations in recent price actions, it appears that the sellers are waiting for an entry whenever there is a retracement towards the 0.7852 resistance level, which is limiting further upside strength.
As oil and copper prices rebound from oversold areas, we expect AUDUSD to show resilience as the tug of war between shorts and longs continues along with choppy ranging price actions. We remain near-term bullish and medium-long term bearish.
Buy: AUDUSD Entry: Limit 0.7778 Target: 0.7833 Stop loss: 0.7754
Source: Saxo Bank
S&P/ASX200
S&P/ASX200 showed the first sign of weakness after 13 consecutive positive sessions as US markets struggled to climb higher and as Greece continued to add to uncertainties. However, our big four banks are still carrying the upward momentum along with the big miners (BHP and Rio ADR up strong overnight – see above) and as the uptrend channel has not been broken yet, buying the dip would be an ideal set-up.
Today’s NAB business confidence will not be a significant factor, but Chinese CPI may have some influence on our market as this would provide some indication of the current condition of the Chinese economy.
Buy: S&P/ASX200Entry: Limit 5768 Target: 5810 Stop loss: 5855
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