Overnight
US stocks fell on Thursday, pulling back a day after the Federal Reserve’s cautious stance on interest rates spurred strong gains.
The Dow Jones Industrial Average dropped 117.16 points, or 0.65%, to 17,959.03, while the S&P 500 Index lost 10.23 points, or 0.5%, to 2089.27. Shares of energy companies posted some of the sharpest losses as oil prices retreated, with the S&P 500 Energy Index shedding 1.7%. Apple shares (NASDAQ:AAPL) fell 0.8% on its first day of trading as a Dow component. Shares of AT&T (NYSE:T), replaced by Apple in the Dow, fell 1.2%.
The Nasdaq Composite Index rose 9.55 points, or 0.2%, to 4992.38. The Russell 2000 index, which tracks shares of small-capitalisation companies, rose 2.72 points, or 0.2%, to 1254.86 – its second straight record high.
European markets were mixed. Germany’s DAX slipped 0.2% while France’s CAC 40 gained 0.1%, and the FTSE 100 added 0.25%.
In commodity markets, crude-oil futures declined 1.6% to $43.96 a barrel. Gold for immediate delivery climbed 0.3% to settle at $1,171.18 an ounce.
Treasury prices fell, lifting the U.S. 10-Year yield to 1.977%, compared with 1.945% on Wednesday.
Local Markets
- S&P/ASX 200 Index futures contract fell 0.2% to 5,945; futures relative to estimated fair value suggest index little changed
- Bank of New York Australia ADR Index -0.7%; Bhp Billiton (LONDON:BLT) ADR -1.4%; Rio Tinto (LONDON:RIO) ADR -2%, biggest fall in almost two weeks
- Gold for immediate delivery climbed 0.3% to settle at $1,171.18 an ounce. Gold stocks: (ASX:NCM), NST, (ASX:AQG), (ASX:EVN), (ASX:KCN), (ASX:RMS), (ASX:SLR)
- China import iron ore benchmark extends decline a third day falling 0.87% on Thursday to $55 a dry metric ton, according to Metal Bulletin. Iron ore stocks: (ASX:AGO), (ASX:FMG), (ASX:BHP),(ASX:GBG), (ASX:GRR), (ASX:MGX), (LONDON:RIO), (ASX:ARI), (ASX:BCI), (ASX:SDL)
- West Texas Intermediate crude fell 3.5% to $43.08 a barrel after rallying 2.8% on Wednesday from a six-year low. WTI lost 13% in the six days to March 17 and almost fell back into a bear market as record US crude stockpiles stoked concern over a global glut. Brent crude, the benchmark contract for more than half the world's oil, was 2.7% weaker at $54.35. Oil stocks: (ASX:WPL), (ASX:STO), (ASX:SEA), (ASX:BPT), (ASX:OSH), (ASX:HZN), (ASX:DLS), (ASX:AWE), (ASX:KAR), (ASX:ORG), (ASX:SXY)
- Copper futures jumped the most in six weeks after Freeport-McMoran (NYSE:FCX) halted production at Indonesia’s Grasberg, the world’s second-largest mine for the metal by capacity. Copper for delivery in three months advanced 3.2% to $5,853 a metric ton ($2.65 a pound) on the London Metal Exchange. Aluminum, nickel, lead, tin and zinc climbed amid speculation that global stimulus measures will bolster economic growth and spur metal demand. Copper stocks: (ASX:PNA), (ASX:OZL), (ASX:SFR); Nickel stocks: (ASX:WSA), (TO:SIR); Aluminium stocks: (ASX:AWC)
- BHP (BHP): Sells AUD 1 billion of March 2020 bonds
- Fortescue (ASX:FMG): MMK Chairman Rashnikov not planning to sell 5% stake, says iron ore prices may recover in 2-3 years; issuer rating unaffected by debt plan withdrawal: S&P
- Toll (NYSE:TOL): Welcomes FIRB approval for Japan Post bid; NOTE: Toll on February 18 accepts Japan Post AUD9.04/share cash offer
- Ex-dividend: Macquarie Atlas (MQA)
Data points
Friday
- JPN: Monetary Policy Meeting Minutes
- AUS: RBA Governor Glenn Stevens Speaks: Due to speak at the American Chamber of Commerce in Australia luncheon, in Melbourne
- EUR: Current Account, EU Economic Summit
- GBP: Public Sector Net Borrowing
- FOMC Member Lockhart Speaks: Due to speak about monetary policy and the economic outlook at the Georgia Law Review Symposium, in Athens. Audience questions expected
Current ASX Trades
- Flight Centre Ltd (ASX:FLT): Entered short position March 9 at AUD 43.05. Stop loss has been trailed now to our open price of AUD 43.05 (-0.0%). First profit target was reached on March 11 at AUD 40.56 (+5.8%), second profit target is AUD 39.74 (+7.6%) and final profit target is AUD 38.40 (+10.8%). [NOTE: Flight Centre goes ex-dividend on March 25 for 55¢ and a short position over this ex date will result in the shorter paying this dividend amount multiplied by the number of shares shorted]
- AMP (ASX:AMP): 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 at AUD 7.12 (+16.7%) and third and final profit target at AUD 8.00 (+31%) remains in place. Stop loss trailed to entry price of AUD 6.10
Broker Upgrades
- Bendigo & Adelaide (ASX:BEN): Raised to buy versus hold at Bell Potter
- Senex Energy Ltd (ASX:SXY): Raised to neutral versus underperform at Credit Suisse (SIX:CSGN)
Broker Downgrades
- Bank Of Queensland Ltd. (ASX:BOQ): Cut to hold versus buy at Bell Potter
- Myer Holdings Ltd (ASX:MYR): Cut to underweight versus neutral at Commonwealth Bank; cut to hold versus buy at Morningstar
AUD/USD
The Aussie dollar pulled back all of the gains from yesterday’s morning rally confirming that its rise was an overreaction to the FOMC statement. The resistance level 0.7850 once again proved to be a major level that limits any further upside, while 0.7611 remains a key support level. Weakening iron ore prices would continue to put downward pressure on AUD/USD.
Buy AUD/USD
Entry: Limit 0.7612
Target: 0.7693
Stop loss: 0.7589
Source: Saxo Bank
S&P/ASX200
S&P/ASX200 found a strong resistance level at 5,955 overnight and this level has been a key resistance level three times in the past. We do not see any major catalyst for our market to break through this level, therefore we prefer shorting just below this resistance level and expect some profit taking as falling iron ore and oil prices should drag down our mining and energy sectors.
Sell S&P/ASX200
Entry: Limit 5,946
Target: 5,905
Stop loss: 5,963
