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8@eight: Searching for a catalyst

The local sharemarket is due to open lower on the back of light trading in international markets and a lack of positive developments. 

The local sharemarket is due to open lower on the back of light trading in international markets to start the week.

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1. Volatile times:  Market volatility as measured by the volatility index (VIX) is continuing to record historic lows and that has more than a few market strategist's working to define the next major move for equities and commodities. While the VIX volatility index may be recording record lows the longer dated costs of the protective PUT options has reached 6 times the historical average.

We have not seen this type of high level skew since the Brexit vote and only suggests the market is attempting to define a large future event. The PUT option offers traders and investors a method of protecting portfolio's against large market moves, but they have a limited life by way of an expiry date, this skew towards longer dated positions clearly suggests the market is unsure of the longer term path. Recent volatility events like Brexit and the election of Donald Trump have seen markets melt up into higher levels, traders are concerned the next "event" may not be so well supported by money managers and traders.

2. Oil: Along with the recent volatility event in Oil saw the commodity fall below the key $US50 level for the first time in 2017. Oil futures fell again overnight on the news that Libya is set to resume shipments. Drilling activity in the US has increased for the ninth straight week, both events seem to be undermining the efforts of OPEC to bring the surplus back to the 5 year average. Overnight net long positions were reduced bringing the May settlement price back to $US48.91. Traders reducing the net long positions signal the market may be vulnerable to further weakness in the short term, something the OPEC ministers will be very concerned about going into the next meeting scheduled for the 25th of May in Vienna.

3. ASX: For our market today the futures suggest a flat to weaker open with the futures index down 10 points following a flat session in the US. Our market has found resistance again below the 5800 point level, traders are looking for a catalyst to move the market higher. Our market is trading on very light volume flow in our own low volatility equities space, and is showing a lack of commitment in the short term.

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4. Currencies: Quite surprising as the AUD/USD now trading at 0.7732 seems determined to hold above the key 77 cent level, this level has been a place of consistent resistance since March 2016. A solid breakout over these levels will place pressure on companies with overseas earnings and adds to the uncertainty of our Aussie 200 and its ability to cross the key 5800 level. 

5. Stocks to watch: The  American depository receipt (ADR) for BHP also suggests a flat open along with the ADR for CBA looks to have CBA at yesterday's trading level of $84.34

6. Commodities: In our commodities space we may see the Oilers come under some selling pressure today and gold stocks  find further support with gold trading $US4.80 higher at $US1234.11.  

7. What's on today: RBA minutes for the March meeting, Residential House Prices for the December quarter 

8. Market watch: 

SPI futures down 11 points or -0.2% to 5755

AUD +0.4% to 77.33 US cents (overnight range: 76.86 - 77.48)

On Wall St, Dow flat, S&P 500 -0.2%, Nasdaq flat

In New York, BHP +0.7%, Rio +0.5%

Shares in Apple reach record $US141.50 (closed at 141.43)

In Europe, Stoxx 50 -0.3%, FTSE +0.1%, CAC -0.3%, DAX -0.4%

Spot gold +0.4% to $US1234.01 an ounce

Brent crude -0.3% to $US51.63 a barrel (overnight low 51.01)

Spot iron ore -0.9% to $US91.49 a tonne

Dalian iron ore -2% to 702 yuan

Steam coal -0.5% to $US80.90, Met coal -0.5% to $US157.50

LME aluminium +0.4% to $US1922 a tonne

LME copper -0.9% to $US5880 a tonne

10-year bond yield: US 2.46%; Germany 0.44%, Australia 2.82%

Description  This column was produced in commercial partnership
   between Fairfax Media and IG