US equities flat, Europe higher, gold & silver firm, AUDUSD breaks lower, ASX futures 8 points higher

Yesterday's big news for the Australian market was the listing of private health insurer Medibank Private Limited (MPL). The stock came on at $2.22 and hovered between there and $2.20 for the first couple of hours before selling off into the close. Clearly there were many institutional and retail investors who were determined to lock in a profit on day one, and this led to some heavy selling down to $2.15 at the close and then $2.14 on the closing rotation. The $2.15 mark (institutional offer price) is no doubt a significant price point at which one would think will act as a support for traders over coming days; however, this stock does need to find its feet and I would imagine ongoing buying interest will remain latent in this market for MPL due to the enormous scale-backs. Rivkin Local's Model Portfolio, which applied for stock in the float, will attempt to sell shares at $2.19 this morning; however, we must remind investors and traders that this is because the trade (post-IPO) does not have a home in Rivkin's trade philosophy and process.

Investors will be familiar that the Rivkin Local advice product holds stocks that appeal to our Events (where a clear price and time horizon allows us to make a judgement on whether to risk capital), Income (where the yield from a security provides investors with reliable income) or Blue Chip (where a blend of yield and capital growth potential combines to create solid returns) strategies. MPL, while no doubt an attractive long-term investment for many, simply doesn't fit our investment philosophy, so to remain disciplined we are obliged to sell it, given the 'Event' that is the IPO has now passed.

Elsewhere in markets there are two things jumping out at me this morning: oil and the Australian dollar. Oil, under pressure recently from excessive supply relative to demand, is weaker again this morning, with the WTI crude price now trading at US$73.75 and Brent crude at US$78.10. Rumblings have been published that the Saudis will likely agree to maintaining a ceiling of production but not to outright cuts of production. This has been enough to shake out long bets in crude markets and shave off another couple of percent from the price of oil. In today's first chart I have plotted the price of WTI and Brent since the GCF sell-off, and you can see that 2010 levels provide some evidence of buying support at US$67 and US$68 for WTI and Brent respectively, which could be a target region for those taking the short side of this trade.

The Australian dollar (AUDUSD), featured on today's second chart, has broken down through its US$0.8538 November lows. I'll repeat, this FX pair remains vulnerable and Australia's trade deficit, with our import values rising due to the weakening currency and our export values falling due to falling commodity prices, means we remain firmly-reliant upon an Asian region hungry for oil, gas, base metals and food - uncertainty surrounding the Japanese and Chinese economies are proving problematic for Australia's current attraction to foreign investors.

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Base metals mixed overnight: aluminium +0.43%; copper -0.75%; nickel +0.11%; zinc -0.20%, iron ore -1.2% to US$69.58 per tonne

Overnight

  • Dow up 6.13 points/0.03%
  • S&P 500 down 0.82 points/0.04%
  • NASDAQ up 4.88 points/0.10%
  • German DAX up 75.67 points/0.77%
  • WTI and Brent crude lower, US$73.75 and US$78.10 
  • Gold and silver firm, US$1,200.40 & US$16.72
AU Market Preview
  • AUDUSD softer at US$0.8526
  • SPI 200 futures 8 points higher
  • UK GDP out at 8:30pm, US durable goods orders out at 12:30am, all Sydney time.


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