Overnight
It was a fairly quiet trading session last night following the uneventful testimony from Federal Reserve Chair Janet Yellen. Traders watched for Yellen’s congressional testimony, parsing it for clues about when and how fast interest rates will rise, but her comments did not include any surprises.
The Dow Jones Industrial Average eked out a fresh record high on Wednesday rising 15.38 points, or 0.1%, to 18224.57 while the S&P 500 slipped 1.62 points, or 0.1%, to 2113.86. The Nasdaq Composite declined 0.98 points, or 0.02%, to 4967.14, snapping a 10-session streak of gains. The index remains within striking distance of 5000, a level last hit roughly 15 years ago.
European stocks fell modestly. France’s CAC 40 slipped 0.1% and Germany’s DAXclosed roughly flat. The UK’s FTSE 100 declined 0.2%, pulling back from a record high.
Local Markets
- The S&P/ASX 200 Index futures contract fell 0.3% to 5,903; futures relative to estimated fair value suggest an early decline of 0.3%.
- Bank of New York Australia ADR Index +0.1%; BHP Billiton ADR +0.2%, Rio Tinto (LONDON:RIO) ADR -0.7%.
- Spot gold was up 0.3% with a little support from a weaker USD. Gold stocks: NCM, NST, Alacer Gold Corp. (ASX:AQG), Evolution Mining Ltd (ASX:EVN), Kingsgate Consolidated Ltd. (ASX:KCN), Ramelius Resources Ltd (ASX:RMS), Solitario Exploration&Royalty Corp (TO:SLR).
- Brent oil rallied 4.5% to $61.54 following strong demand from a freezing winter in the US. These conditions outweighed the rising US inventories that were up 8.7m barrels. Supportive comments came from the Saudi Arabia’s Oil Minister who stated oil demand had picked up and that the oil nation wants to see calmer markets. Oil stocks: Woodside Petroleum Ltd (ASX:WPL), STO, Seabridge Gold Inc. (TO:SEA), 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 fell 1.7% to $62.94 after weaker orders first day back from Chinese New Year. Our expectations are for iron ore to lift from Monday. The reason being that after a seven-day holiday no one is in a rush to do serious business and are easing back in to the working year. Think ASX market volumes in the first week of January. 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 Tinto Ltd (ASX:RIO), Arrium Ltd (ASX:ARI), BC Iron Ltd (ASX:BCI), Sundance Resources Ltd (ASX:SDL).
- Copper rose modestly, up 0.3% to $5,804 after HSBC’s better-than-expected Chinese Manufacturing PMI yesterday. PMI rose from 49.7 to 50.1. Copper stocks: Panaust Ltd (ASX:PNA), OZ Minerals Ltd (ASX:OZL), Sandfire Resources NL (ASX:SFR)
- Nickel and Aluminium fell 0.2% and 0.6% to $14,305 and $1,800 respectively. Nickel stocks: Western Areas Ltd (ASX:WSA), Sirius Resources NL (ASX:SIR); Aluminium stocks: Alumina Ltd (ASX:AWC).
- Companies trading ex-dividend: Bega Cheese (BGA), Lend Lease (LLC), OceanaGold (OGC), Super Retail (SUL).
Iron ore fell 1.7% after weaker orders following the first day back from Chinese New Year.
Data points
Thursday:
- Australia: Private Capital Expenditure q/q (11:30am)
- Europe: GfK German Consumer Climate, M3 Money Supply y/y, Private Loans y/y, Italian Retail Sales m/m, Italian 10-y Bond Auction, EUR Targeted LTRO
- UK Nationwide HPI m/m, Second Estimate GDP q/q, Preliminary Business Investment q/q, Index of Services 3m/3m
- German Unemployment Change
- US: CPI m/m, Unemployment Claims, Core Durable Goods Orders m/m, FOMC Member Lockhart Speaks on economic outlook and monetary policy at the Federal Reserve's 2015 Banking Outlook Conference, in Atlanta
Friday:
- Japan: Household Spending y/y, Tokyo Core CPI y/y, National Core CPI y/y, Unemployment Rate, Prelim Industrial Production m/m, Retail Sales y/y
- Australia: Private Sector Credit m/m (11:30am)
- Europe: German Preliminary CPI m/m, French Consumer Spending m/m, Spanish Flash CPI y/y, Italian Prelim CPI m/m
- US: Prelim GDP q/q, Preliminary GDP Price Index q/q, Chicago PMI, Pending Home Sales m/m, Revised UoM Consumer Sentiment
Corporate news out this week Thursday:
- Half-year results: Perpetual Ltd (ASX:PPT), Ausdrill Ltd (ASX:ASL), Ramsay Health Care Ltd (ASX:RHC),Transfield Services Ltd (ASX:TSE), Qantas Airways Ltd (ASX:QAN), Nine Entertainment, Billabong International Ltd (ASX:BBG)
- 1H results: Blackmores Ltd (ASX:BKL)
- Full-year results Sydney Airport
- Goodman Fielder extraordinary meeting on takeover proposal
Friday:
- Half-year results: Woolworths Ltd (ASX:WOW),Harvey Norman Holdings Ltd (ASX:HVN), Treasury Wine Estates Ltd (ASX:TWE), Cabcharge Australia Ltd (ASX:CAB)
- Aristocrat Leisure Ltd (ASX:ALL) annual general meeting
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 Banking Group (ASX:ANZ), Commonwealth Bank Of Australia. (ASX:CBA), National Australia Bank Ltd (ASX:NAB), Westpac Banking Corporation (ASX:WBC).
Broker Upgrades
- No upgrades for today
Broker Downgrades
- Pact (PGH): Cut to neutral vs buy at UBS
- Worleyparsons Ltd (ASX:WOR): Cut to neutral vs outperform at Credit Suisse
AUD/USD
After the upside break out of a three-week range yesterday, the AUD/USD managed to touch 0.7900 briefly followed by quiet and subdued price actions. The previous resistance of 0.7850 would now act as a support level and the new interim resistance would be 0.7900 and 0.7933 (this is where downtrend line is expected to meet).
Today’s Australian private capital expenditure data would be crucial to determine whether the Aussie dollar should continue the upside momentum or whether it would reverse the current rally. We are more leaning towards a not so good figure so we believe there is better risk reward ratio to the downside at the current level 0.7886.
Sell AUD/USD
Entry: Limit 0.7893 Target: 0.7833 Stop loss: 0.7905
S&P/ASX200
Yesterday’s trade on S&P/ASX200 was a profitable one. It was interesting to note that our profit target of 5,953 was two points short of the intraday high of 5,955, while the intraday low was one point short of our stop loss.
We had a relatively quiet night in the overseas markets and we do not see any clear trading setup, therefore we do not have any trades today. 