Futures Interest-rate speculators nervously await trend

Press, 8 February 1986, Page 23

Futures Interest-rate speculators nervously await trend

The futures market is nervous about the in-terest-rate contracts, PCPs. This and the strength of the New Zealand dollar have been the dominant factors of the market this week. Mr Geoff McDonnell, futures manager of Mair Astley, said that market conjecture about shortterm liquidity changed this week once it was announced that the Government was seeking S4OOM for stock tender No. 28, due for settlement in early March. “One could read from the market move downwards on Friday that sentiment is now for short-term rates to rise as industry and commerce faces up to the cost of wage round settlement and declining business conditions putting a squeeze on working capital,” Mr McDonnell said. Prices rose sharply last Friday and on Monday, but met strong resistance around 7700 in the nearer traded months and declined subsequently, said Dr Layton, of Marshall’s. The announcement on Friday that the February Government stock tender would be for SIOOM more than the market expected led to a brief spate of selling.

“The market is very nervous at present as most traders do not have a definite view of how easily the March tax drain will be handled. Waves of optimism and pessimism are resulting in prices fluctuating between 7700 and 7550 in the nearer two traded months. A break out from these bounds should trigger covering and is likely

to see prices move sharply.” Mr Knutson and Mr Morgan, of Marac International Futures, Auckland, said the PCP contract had formed a large triangle. “We anticipate that it will break to the down, but would rather wait for the break before initiating positions.” U.S. dollar

The N.Z. dollar strengthened during the week, said Mr McDonnell, of Mair’s. It reached a low point of 5U50.5195 in London on Tuesday night, but finished the week at 5U50.5350 yesterday. An increase in the value of Eurokiwi draw-downs over the next four weeks has been noted by the market, and with the U.S. dollar itself looking weak it may be ad-

vantageous to gear one’s activity to a stronger kiwi dollar. Dr Brent Layton, of Marshall Futures, Christchurch, said the kiwi dollar was slightly weaker early in the week when the U.S. dollar firmed against major currencies, but strengthened on Friday when the U.S. dollar eased against major currencies. “Short-term, the level of interest rates in New Zealand and exporter buying interest should keep the kiwi firm, and we favour the short-side in futures,” Dr Layton said. Mr Barry Knutson and Mr Guy Morgan, of Marac International Futures, Ltd, Auckland, said softening interest rates induced the U.S. dollar contract to test minor resistance at 1.9100 early in the week. The kiwi fell to 51.95/ 10 U.S. cents overnight but

on the local market largescale exporter buying soon saw it firm.

“We expect a build up in exporter activity, and the kiwi remaining on target for our objective of 55.50. It was encouraging therefore to see the lack of follow-through on the domestic market to the sell-off in London.”

Support on the contract is at 1.8050. Several gaps on the charts make its short term direction rather uncertain, and the placement of stops difficult On yesterday morning the contract opened up gapping down from a minor triangle formation, so the contract should test support soon. Wool

Wool auctions remained firm and trade houses reported reasonable offshore inquiry for New Zealand wool, said Mr McDonnell, of Mair Astley. “Futures prices have traded over a 5c . range this week, with the kiwi dollar regaining its strength it may be advantageous to open short positions for a quick profit” Wool futures prices jumped sharply on Wednesday because of strong buying interest from some traders who expected the kiwi to tumble, but when the kiwi failed to fall and actually rose, prices eased on Friday, said Dr Layton, of Marshall’s. Turnover on Wednesday was heavy at 176 lots. "The possibility of firmness in the wool market for reasons unrelated to currencies should see prices well supported at current levels unless the kiwi rises sharply,” he said. Australia

. The Australian dollar contract had broken through its resistance line and as of Friday morning had failed an attempt to regain previous support “It looks a good short again,” said Mr Knutson and Mr Morgan, of Marac

International. The all-ordinaries share index contract remained within a narrow upwards channel and should yet see 1100 and more, especially if the U.S. sharemarket’s strength continued. The Australian bill contract’s rally of the previous week failed to continue through major resistance and headed towards support this week of the triangle within which it has been constrained. One could look to play the range or wait for the break, the Marac International spokesman said. Details of yesterday's trading:

Contracts traded: 199 Open positions at February 5: Feb 357, Mar 1116, Apr 303, Jun 114, Sep 72, Dec 17, total 1979 (down 29). JUS CONTRACTS Mth Open H/L Last Vol Feb 1.8800 .8800/630 .8790 30 Contracts sold: 30 Open positions at February 5: Feb 301, Mar 11, Jun 3, Sep 2, total, 317 (up 21).

Contracts traded: 41 Open positions at February 5: Mar 152, May 365, Aug 195, Oct 210, Dec 214, Jan 211, Mar 309, May 208, Aug 19, total 1883 (down 56).

N.Z. FUTURES MARKET WEEK ENDED February 7 Trading months Traded prices Total this Open cont’s This week To date JUS High Low Last High Low week Feb ’86 1.9120 1.8630 1.8790 2.07801.8125 175 301 Mar '86 1.9050 1.8916 1.9000 2.05101.8315 11 11 Apr ’86 1.96501.9650 Jun ’86 1.9720 1.9720 1.9720 2.10051.9350 2 3 Sep ’86 2.0450 2.0450 2.0450 2.18902.0000 4 2 Dec ’86 2.0880 2.0830 2.0880 2.0880 2.0215 2 Totals 194 317 PCP Feb ’86 7725 7625 7635 8143 7485 260 357 Mar ’86 7725 7620 7628 8120 7490 484 1116 Apr ’86 7765 7685 7700 7790 7630 160 303 Jun ’86 8225 7800 114 Sep ’86 7975 7975 7975 8219 7890 1 72 Dec '86 8110 8110 8110 8299 8100 1 17 Totals 906 1979 WOOL Mar ’86 500 494 497 565 450 43 152 May '86 519 502 510 571 456 27 365 Aug ’86 532 522 526 576 474 67 195 Oct '86 532 520 526 571 474 36 210 Dec ’86 532 520 526 571 475 32 214 Jan ’87 534 521 529 568 474 27 211 Mar ’87 538 528 533 555 480 30 309 May '87 541 533 537 562 486 22 208 Aug ’87 553 547 549 553 547 28 19 Totals 312 1883 Tenderable stock: 644 bales. 35F2D quotes — 488 in Napier and Dunedin yesterday.

COMMERCIAL BILLS Mth Open H/L Last Vol Feb 7645 652/625 635 63 Mar 7630 645/620 628 80 Apr 7705 712/685 700 56

WOOL FUTURES Mth Open H/L Last Vol Mar 497 497/497 497 2 May 510 510/510 510 1 Aug 528 528/526 526 14 Oct 526 526/526 526 1 Dec 527 527/526 526 9 Jan 530 530/528 529 4 Mar 533 533/533 533 1 May 533 537/533 537 3 Aug 548 549/548 549 6