Futures withstand barrage

Press, 20 February 1988, Page 30

Futures withstand barrage

All markets, the wool futures, interest rate futures and Barclays share index futures have stood up to an incessant barrage of selling over the last few weeks, and have failed to collapse, said Mr Stuart Auld, a dealer for Mair Astley Futures. All sorts of confusing political statements and statistical aberrations have been thrown at the market and still bullish sentiment overrules gloom and doom, Mr Auld said.

"Does someone know something? The arrest of the projected financial market collapse is an indication that a strong perception exists that the benefits of ’Rogernomics’ are starting to appear slowly but surely,” he said.

The upward trend in N.Z. Government stock futures continued this week.

More positive comments about falling interest rates from Mr Douglas towards weeks end, combined with his statement that the new tax package should bring in another $5OO million in the 1988-89 financial year, were reacted favourably to by the money market, Mr Auld said.

“further evidence seems to be coming through that the need for Government stock tenders will be reduced in the 1988-89 year, and this is now causing buying interest of N.Z. Government

stock on the secondary market while the yields remain high,” he said. The manager of Egden Wignall Futures, Dr Brent Layton, said GSK futures consolidated just below the 8600 level.

“The long term upward trend is unbroken, but prices are near the topedge of the channel they have recently been travelling within, so a small correction is expected by many,” he said.

The fundamentals of falling inflation and a slowing economy still suggest that long term interest rates will slide, he said.

“A break outside the channel with March going above 8605 or below 8550 during the coming week would be viewed by chartists as significant.” In bank accepted bill futures, the call rate moved up this week as the lagging effect of the February tax take took its toll on the money market. “We see a steady upward movement in the March 88 contract continuing,” Mr Auld said. “There could be some volatility as we approach March 7, but the success of the Reserve Bank’s open market operations and the subsequent call rate will be the underlying fundamentals for traders to consider,” he said.

Dr Layton said bank bill futures were firm.

especially in the more distant months, despite tight liquidity due to the effects of the February tax payments pushing call interest rates to close to 20 per cent. The bulls once .again showed their heads early in the Barclays share index week. Prices rose to as high at 1818 on Tuesday following the Petrocorp announcement. The premium over physicals was unsustainable and futures ended the day below the Barclays index. Futures traded around 1700 for the rest of the week. “We still think that a sustained rally in share price index futures is unlikely before longer term bond rates are one to one and a half per cent below current levels,” Dr Layton said.

“Until then, institutions will be happy to push any surplus funds into bonds rather than equities. In terms of time, this may be three to six months away,” he said.

Mr Auld said 1650 is proving to be the support level for the March 88 contract, and believes there will have to be a significant drop in the N.Z. wholesale rates. This may bring buyers back into the sharemarket once investors get the benefit of the fall in retail interest rates, he said. Wool prices firmed during the week with May rising roughly 10 cents.

Several factors contributed. JUS CONTRACTS Mth Open H/L Last Vol Mar 15300 300/212 230 72 Dec 16050 050/050 050 2 Contracts traded: 74 Open positions at February 18: Mar 100, May 1, Jun 1, Sep 2, Dec 4, total 108 (up 16). COMMERCIAL BILLS Mth Open H/L Last Vol Contracts traded: nil Open positions at February 18: Mar 1, Jun 10, total II (same). GOVERNMENT STOCK Mth Open H/L Last Vol Mar 8589 597/583 393 1108 Apr 8395 595/595 595 1 Jun 8621 626/621 626 102 Contracts traded: 1211 Open positions at February 18: Mar 4595, Jun 524, Sep 116, total 5235 (up 339). WOOL Mth Open H/L Last Vol Mar 620 620/620 620 4 May 643 645/643 645 7 Aug 677 677/677 677 2 Dec 700 700/700 700 5 Contracts traded: 18 Open positions at February 18: Mar 303, May 326, Aug 116, Oct 44, Dec 35, Jan 1, Mar 1, total 826 (same). 90-DAY BANK BILLS Mth Open H/L Last Vol Mar 8375 380/367 380 106 Apr 8450 465/450 460 25 Contracts traded: 1031 Open positions at February 18: Mar 1003, Apr 111, Jun 237, Sep 206, Dec 183, Mar 33, Jun 19, Sep 7, total 1799 (down 27). SYDNEY ALL-ORDS (half-points omitted) Prev. Mth close H/L Last Vol Mar 1231 232/212 232 1070 Contracts traded: 1070 Open positions at February 18: 5069 (down 27). BARCLAY’S SHARE INDEX Mth Open H/L Last Vol Mar 1676 712/676 709 51 Contracts traded: 51 Open positions at February 18: Mar 484, Jun 12, Sep 52, total 548 (down 7).

N.Z. FUTURES MARKET WEEK ENDED February 19 Trading Traded prices Total Open months This week To date this cont’s SUS High Low Last High Low week Mar ’88 15387 15013 15230 — — 456 100 1 May *88 15380 15380 15380 — — 3 Jun *88 — — — 15525 15475 1 Sep '88 16005 16005 16005 — —. 2 2 Dec ’88 Totals PCP 16208 15960 16050 — — 5 466 4 108 Mar '88 — — — 8500 7800 , Jun ’88 — — Totals GOVERNMENT STOCK — 8430 7815 — 10 11 Mar '88 8597 8573 8593 8597 8390 7730 4595 Apr '88 8595 8595 8595 8595 8595 1 Jun ’88 8626 8606 8626 8626 8400 549 524 Sep ’88 — — — 8605 8520 116 Dec ’88 Totals WOOL 8660 8660 8660 8660 8640 2 8282 0 5253 Mar ’88 620 620 620 770 551 4 303 May '88 675 640 645 780 575 13 326 Aug ’88 677 670 677 785 635 8 116 Oct ’88 680 675 680 735 660 7 44 Dec '88 700 685 700 789 680 7 35 Jan ’89 — — — 800 800 1 Mar ’89 — — — — Totals Tenderable stock: bales. 35F2D quotes ■ 90-DAY BANK ACCEPTED BILLS — 39 825 Mar ’88 8385 8342 8380 8450 8000 874 1003 Apr ’88 8465 8430 8460 8435 8300 122 111 May ’88 — — — 8495 8495 Jun ’88 8545 8530 8530 8510 8100 56 237 Sep ’88 8545 8545 8545 8500 8100 37 206 Dec '88 8515 8515 8515 8550 8100 30 183 Mar ’89 — — — 8500 8200 33 Jun ’89 — — — 8500 8320 19 Sep '89 Totals BARCLAY’S SHARE INDEX 8500 8470 1119 7 1799 Mar ’88 1818 1656 1709 4290 1645 276 484 Jun ’88 Totals — — — 2055 1700 276 12 496