Overnight trends point to a positive day for mining and energy stocks

Published at Apr 5, 2017, in Equities

All major global markets gained ground last night with small increases in the Dow and the NASDAQ, while positive sentiment in Europe resulted in more material gains across the FTSE 100 and mainland Europe indices.

Once again, it was a lack of news flow that saw markets lacking direction. If anything, investors tended to sit on the sidelines in the US ahead of the meeting between President Trump and China’s President Xi Jinping.

From a stock specific perspective Caterpillar Inc and Boeing Co. were the main movers in the US, gaining circa 2%. Caterpillar appeared to benefit from a positive research note from Goldman Sachs which highlighted the group’s exposure to the heavy machinery market which the broker views as being in the early stages of recovery.

The news regarding Caterpillar could flow onto Seven Group Holdings (ASX: SVW) which through its WesTrac Group is the sole authorised Caterpillar dealer in Western Australia, New South Wales and the Australian Capital Territory in Australia, as well as north-eastern China territories. WesTrac is one of Caterpillar’s top five dealers globally by sales value.

Looking at the hard data from overseas, the Dow increased less than 0.2% to close at 20,689 points. The NASDAQ only put on three points to close at 5898 points.

The best performer in the European region was the FTSE 100 as it gained 0.5% to close at 7321 points. The index surged on the open and maintained those gains throughout the day, boosted by good performances from mining and energy stocks, suggesting that sector could be poised to perform well on the ASX today.

The DAX gained 0.2% to close at 12,282 points. The Paris CAC 40 continued to perform well, gaining 0.3% to pass the 5100 point mark, and not too far shy of its circa 18 month intraday high of 5133 points claimed at the start of the week.

On the commodities front, oil was the big mover as it increased from the previous day’s close of US$50.24 per barrel to hit a high of US$51.30 per barrel before closing at US$51.13 per barrel, representing a gain of 1.8%.

Gold continued to find support around the US$1250 per ounce level, closing at US$1258 per ounce after hitting an intraday high of US$1264 per ounce.

There was little movement in the iron ore price as it continued to trade just below US$80 per tonne.

Base metals finished in good shape with increases of more than 1% in nickel and zinc while copper and lead made nominal gains.

The Australian dollar slipped below the US$0.76 mark for the first time since mid-March. This downward trend should also provide support for miners with projects in Australia.

Gold in particular could come under the microscope as the circa US$1265 per ounce level emerged as a retracement point in November, late February and towards the end of March.

A break above this level could see technical analysts become interested, and with the Australian dollar gold price remaining robust at $1660 per ounce stocks Australian producers such as Regis Resources, Northern Star, Evolution Mining, Saracen Mineral Holdings and Metals X could find support.

The precious metal’s safe haven appeal could also be a factor should the upcoming US earnings season deliver some disappointments.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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