Day Trading Pre Open - 12 February 2018

Good Morning Fellow Traders,

Australian shares have closed lower in the wake of another overnight collapse on Wall Street but local losses were relatively contained as many Asian markets tumbled steeply.

The benchmark S&P/ASX200 index ended Friday down 0.9 per cent at 5,838.0 points, leaving it down 4.6 per cent for the week.

In late trading Japan's Nikkei was down about three per cent, Hong Kong's Hang Seng was 3.6 per cent lower and the Shanghai Composite Index had retreated 4.5 per cent.

Bell Direct equities strategist Julia Lee said the relatively modest losses on the ASX were not surprising considering the recent rise in local shares has been more subdued than the soaring gains in US indices ahead of the rout that set in on January 26.

"The Australian market is being a little more rational, a little less panicked," she said.
Ms Lee said in the midst of the Australian earnings season, stocks with strong fundamentals such as National Australia Bank, were still delivering results despite the surrounding volatility.

National Australia Bank closed one cent higher at $28.91, a day after returning a three per cent improvement on first-quarter cash earnings, while Westpac, Commonwealth Bank and the ANZ all lost between 0.2 per cent and 0.4 per cent.

Elsewhere, oil prices continued to lose ground, pushing Woodside down 1.6 per cent and Santos down 2.2 per cent.
Origin Energy ended 4.1 per cent lower at $8.41, after flagging a $533 million first-half hit from impairment charges at its Ironbark gas field and its recently sold Lattice Energy business.

Iron ore players BHP Billiton and Rio Tinto were both around one per cent lower at $29.13 and $76.86 respectively despite a rising ore price, while Fortescue gained 0.6 per cent to $5.03.

As investors looked to safe haven assets, the gold miner Evolution gained 4.5 per cent

Consumer companies had some of the worst losses with China-facing vitamins supplier Blackmores down 4.3 per cent to $154.01 and infant formula maker Bellamy's down 5.5 per cent to $13.67.

Shares in Myer hit a fresh all-time low, dropping 9.3 per cent to 58.5 cents after the department store chain warned of more writedowns, poor holiday sales and dire trading conditions.

At the close of Australian trading US futures were higher as government went into technical shutdown after Congress failed to pass a funding bill by a midnight deadline.

Meanwhile, the Australian dollar has slipped against the US dollar as traders seek safe havens such as the Japanese Yen
The Aussie was trading at 77.76 US cents at 1700, from 78.25 US cents on Thursday.

ON THE ASX:
* The benchmark S&P/ASX200 index closed down 52.7 points, or 0.89 per cent, at 5,838.0.
* The broader All Ordinaries index was down 57.7 points, or 0.96 per cent, at 5,937.5 points.
* The SPI200 futures contract was down 60 points or 1.0 per cent at 5,752 points.
* National turnover was 3.5 billion securities traded worth $8.0 billion

CURRENCY SNAPSHOT AT 1700 AEDT:
One Australian dollar buys:
* 77.76 US cents, from 78.25 on Thursday
* 84.78 Japanese yen, from 85.81 yen
* 63.43 euro cents, from 63.76 euro cents
* 55.76 British pence, from 56.27 pence
* 107.87 NZ cents, from 108.72 cents

GOLD:
The spot price of gold in Sydney at 1700 AEDT was $US1,317.60 per fine ounce, from $US1,311.66 per fine ounce on Thursday.

BOND SNAPSHOT AT 1630 AEDT:
* CGS 4.50 per cent April 2020, 1.977pct, from 2.0116pct
* CGS 4.75pct April 2027, 2.8082pct, from 2.8392pct
Sydney Futures Exchange prices:
* March 2018 10-year bond futures contract at 97.145 (implying a yield of 2.855pct), from 97.115 (implying a yield of 2.885pct) on Thursday
* March 2018 3-year bond futures contract at 97.87 (2.13pct), from 97.82 (2.18pct)
(*Bond market closes taken at 1630 AEDT previous local session; currency closes taken from 1700 AEDT previous local session)

Traders are preparing for another week of volatility when the Australian share market resumes with investors adjusting their portfolios in the wake of official corrections in the United States.

A late rally in the US on Friday saw the Dow Jones finish 330 points higher - almost 1.4 per cent - but experts suggest the mining and energy sectors could be a drag on the local market on Monday's open.

The expectation on the futures market is for a decline of up to 0.5 per cent but CommSec chief economist Craig James says given the US rally that could be slightly pessimistic.

"We may be a little bit softer at the start of trade on the back of the resources but overall I think it's going to be a choppy session," he told AAP on Sunday.
"The volatility is still going to be with us for most of the week."

In the US, even with Friday's gains, the benchmark S&P 500 fell 5.2 per cent for the week, its biggest weekly percentage drop since January 2016.

The S&P 500 and the Dow industrials late last week confirmed they were in correction territory with both falling more than 10 per cent from January 26 record highs.

Mr James says investors in Australia won't get too carried away on Monday given labour force figures are out on Thursday and RBA governor Philip Lowe gives testimony to a lower house committee on Friday.
It's also the major fortnight for earnings results.

In the US there's concern the economy is doing too well which could lead to higher inflation and hence higher interest rates.
But Mr James says consumer and producer prices data out in the US this week will give a real measure of inflation and if the readings are weak many investors might decide "they are jumping at shadows".

The sharp falls of the week confirmed the market was in a correction, down more than 10 percent from a Jan. 26 record high, and throwing the nearly nine-year bull market off course. The newly volatile market was shaken in part by rising bond yields, which led stock investors to rethink their positions after months of steady gains.

The S&P 500 ended the week nearly 9 percent below the all-time high set just two weeks ago.

“I don’t see any reason to think that we’re setting a pattern for next week or the rest of the year,” said Rob Stein, chief executive officer of Astor Investment Management in Chicago. “The only pattern we’re setting is more volatility.”

On Friday alone, the S&P 500 swung from gains of up to 2.2 percent to declines of 1.9 percent, echoing the big swings of the past week. The Dow moved in a range of more than 1,000 points, a more modest change than on Monday when the Dow fell as much as nearly 1,600 points.

The Dow Jones Industrial Average .DJI rose 330.44 points, or 1.38 percent, to 24,190.9, the S&P 500 .SPX gained 38.55 points, or 1.49 percent, to 2,619.55, and the Nasdaq Composite .IXIC added 97.33 points, or 1.44 percent, to 6,874.49.

Technology .SPLRCT was the best-performing group on Friday, with Microsoft Corp (MSFT.O), Alphabet Inc (GOOGL.O) and Facebook Inc (FB.O) giving the biggest individual boosts to the S&P 500. Energy .SPNY was the lone major S&P sector to end negative as oil prices tumbled.

Equities for years have looked relatively attractive compared to the low yields offered by bonds, but the rise in Treasury yields has diminished the allure of stocks, especially with stock valuations at historically expensive levels.
The yield on benchmark 10-year U.S. Treasuries US10YT=RR hovered around 2.85 percent after touching a four-year peak of 2.885 percent on Monday.

“That’s part of this recalculation that has gone on in the market: How do we factor in higher bond yields?” said Willie Delwiche, investment strategist at Baird in Milwaukee. “And that is a process that is playing out.”
U.S. fund investors sucked $23.9 billion out of the stock market in the latest week, marking the largest withdrawals from those funds on record, but bulls were still encouraged by strength in the global economy and solid U.S. corporate earnings.

Also, the percentage of Main Street investors expecting stocks to fall reached a three-month high in the American Association of Individual Investors’ weekly survey.

During Friday’s session, the S&P 500 briefly broke below its 200-day moving average, a closely watched technical level, before rising.

“You will often see bounces off those levels,” said Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments in Boston.
The S&P 500 lost $2.49 trillion in market value from Jan. 26 through Thursday, according to S&P Dow Jones Indices.

Volatility remained high compared to recent months. The market’s main gauge of volatility, the CBOE Volatility Index .VIX, fell 4.4 to 29.06 on Friday but was still nearly three times the average level of the past year.
In the latest day of strong trading volume, about 12 billion shares changed hands in U.S. exchanges on Friday, well above the 8.5 billion daily average over the last 20 sessions. It was the first time weekly volume eclipsed 50 billion since August 2015.

Advancing issues outnumbered declining ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.36-to-1 ratio favored advancers.
The S&P 500 posted no new 52-week highs and 47 new lows; the Nasdaq Composite recorded 17 new highs and 208 new lows.

Source: Netwealth Morning Business Roundup

Phew - power has been restored after being out much of the night due to wild weather. Breakfast has been prepared. Eggs Florentine with Blueberry Juice.





Happy trading, play nicely and make informed decisions.