Overnight and early trading
The Australian sharemarket opened little changed despite strong gains in the US, where upbeat earnings helped propel the Nasdaq to a fresh closing record. BHP was leading the market lower.
At the 1015 (AEST) official market open, the benchmark S&P/ASX200 lost 0.5 points, or 0.01%to 5,669.1.
Stocks in Europe advanced on the back of positive Greek news. Greek Prime Minister Alexis Tsipras has pulled off the seemingly impossible as Athens has approved steep spending cuts and tax increases.
These new austerity measures are key for Greece’s survival in the Eurozone. Mario Draghi and the European Central Bank have given Greek banks the best chance of reopening next week, as they increased emergency lending, raising the ceiling by EUR 900 million, with Draghi stating that the response was due to “several positive things that are happening”.
US stocks ended higher on Thursday as Greece fears ebb and a mixed bag of second-quarter profits were released. Strong second-quarter earnings has seen the Nasdaq close at a record high, the first since June.
Germany’s DAX rallied 1.53% to 11716.76, France’s CAC-40 and was not far behind lifting 1.47% to 5121.50 and the FTSE advanced 0.63% to 6796.45.
European banks, which have come under a lot of pressure over the past few weeks over concerns about their exposure to the Greece crisis, rebounded last night with the Stoxx 600 banking sector up 1.4% by the close. Banca Popolare Di Milano and Unicredit (MILAN:CRDI) were top performers, finishing 2.8% and 2% higher respectively.
The Dow Jones Industrial Average rose 0.39% or 70 points to 18,120 and the S&P 500 rallied 0.80% or 16.9 points to 2124.29. The Nasdaq Composite Index outperformed rising 1.26% to 5163.18. Shares of Netflix (NASDAQ:NFLX) soared 18% while eBay shares jumped 3.4%, both making strides on better-than-expected quarterly profits.
The financial sector was also strong for the US as shares of Citigroup (NYSE:C) rallied 3.8%. The bank said quarterly profit jumped after cutting spending on litigation. Goldman Sachs (NYSE:GS) fell 0.8% after the investment bank said profit fell sharply in the second quarter, weighed down by a big provision for mortgage-related litigation.
Crude-oil futures fell 1% to $50.91 a barrel while gold lost 0.3% to $1143.80 an ounce.There will be earnings today for General Electric (NYSE:GE), Honeywell, Kansas City Southern (NYSE:KSU), JB Hunt, Synchrony Financial, WW Grainger (NYSE:GWW).
Local markets
- Spot gold has given up 0.4% to $1,145 to set new lows since early November 2014. Trading in a tight range, gold saw highs of nearly $1,150 while a new low of $1,142 was set. We are now on a knife's edge as to whether gold will bounce off this strong floor or resistance although the technical suggest the price will continue to slide. Gold stocks: NCM, NST, AQG, EVN, KCN, RMS, SLR
- Crude oil has seen a widening of spreads between WTI and Brent. WTI fell 1.6% to $50.92 against Brent's rise of 0.2% to $57.51. The widening of spreads has in part come from an unplanned halt of production at the Buzzard oil fields (in the north sea) and maintenance at the North Sea field. Oil stocks: WPL, STO, SEA, BPT, OSH, HZN, DLS, AWE, KAR, ORG, SXY
- Iron ore continues to hover around the $50/tonne mark, trading up just 0.2% to $50.66. Rio Tinto (LONDON:RIO) reported on its second-quarter output yesterday. Abnormally poor weather conditions have adjusted Rio’s expectations of annual production of iron ore, downwards by 10 million tonnes. The completion of their capital investment to produce 360 million tonnes of iron ore annually will see price pressure on the market. Clearing more bottlenecks in production will also reduce its production costs. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, ARI, BCI, SDL
- Base metals were mixed with copper and nickel rising while aluminium and zinc fell. Concerns over nickel have risen after production in May rose to 170.7k tonnes against 164.5k tonnes in April. Copper stocks: PNA, OZL, SFR; Nickel stocks: WSA, SIR; Aluminium stocks: AWC
- Other stock news: Atlas Iron (AGO): Turns to fund managers for AUD180m raising; CSL: Novartis’s Fluad seasonal flu vaccine gets FDA panel review – in October CSL announced buy of Novartis influenza vaccines unit for $275m; Regis Resources (RRL): Board intends to recommence dividend payments in fiscal year 2015; Santos (STO): Q2 output expected.
Broker upgrades
- Sigma Pharmaceuticals (SIP): Raised to outperform from neutral at Credit Suisse (SIX:CSGN)
Broker downgrades
- AMP (AMP): Cut to hold vs buy at Morningstar
- Sonic Healthcare (SHL): Cut to underperform from neutral at Credit Suisse; cut to underweight vs neutral at Commonwealth Bank
Data points
Friday
- US Building Permits, CPI m/m, Core CPI m/m, Housing Starts, Prelim UoM Consumer Sentiment
- Federal Open Market Committee member Fischer due to speak about the Federal Reserve's near-term and long-term priorities and challenges at the US Chamber of Commerce Center for Capital Markets Competitiveness, in Washington DC
Pending trade
The CAD fell to its lowest level since 2009 as the Bank of Canada cut its interest rate by 25 basis points for the second time in 2015 to stimulate the economy which is struggling with the declining price of oil, which makes up 25% of its merchandise export.
This caused a breakout above the triple top at 1.28 handle and it is now looking to test 1.3000 which has been the major resistance level back in 2008 and 2009.
USDCAD rallied more than 1,000 pips in just over two months as WTI crude oil started to show some weakness after finding resistance at $62.50. Although the current bullish momentum still looks strong as it is forming an uptrend channel, we see a good shorting opportunity at 1.3000 as we believe the recent surging price actions in USDCAD were driven by the anticipation of the rate cut.
Hence we expect a retracement towards the previous resistance level of the 1.2800 area which may act as interim support.
Sell USDCAD
Entry: 1.3000
Target 1: 1.2785
Target 2: 1.2455
Stop loss: 1.3070
Time horizon: Two weeks
