IG Markets: Morning Prices

Overnight, US markets gave up impressive earlier gains to finish mixed ahead of tomorrow’s mid-term elections, the mid week FOMC meeting and Friday’s non-farm payrolls report.

By day’s end the Dow Jones Industrial Average was a mere 6 points higher, the S&P 500 was up 0.1% while the NASDAQ slid 0.1%.

Stocks jumped out of the gates after better-than-expected Chinese PMI data and were further boosted by stronger-than-forecast ISM manufacturing and construction reads out of the US. While the market’s initial reaction to this economic data was positive, it again raised concerns about the need and the likelihood for a large QE program from the Fed. Strangely, it seems the market is undecided which it wants more – an independently stronger economy or a Fed-injected pump-primed economy. The paring of gains over the course of the day suggests most still see the Fed as the necessary saviour.

Given the late day sell off on Wall Street we are calling the market to open marginally lower. Expect volumes to be shocking today and the market to trade in a relatively narrow range.

It was an interesting night in the currency markets with the USD gaining ground against all major currencies except the Australian and Canadian dollar. In the early part of US trade risk was clearly visible after strong PMI manufacturing numbers in China which helped the commodity currencies to outperform, UK PMI numbers also came in better helping extend gains.

However, it was not long before we saw a reversal in the USD with stronger than expected US ISM manufacturing, printing 56.9 vs 54 eyed. This was the best level in 6 months and rather than push risk assets higher instead created flows back into the USD. Given there are continued worries about periphery Eurozone yields (Greece, Spain, Portugal, Ireland) the Euro’s gains were caped and pulled back from an overnight high of 1.4011 to a session low of 1.3864, with some analysts suggesting that post QE2 currency traders will focus on a potential default or restructuring of debt in this region which could put pressure on the Euro in the future.

Whilst most major currencies gave back initial gains against the USD the Australian dollar was relatively resilient. Given it is the proxy of global growth the strong ISM numbers across the world saw it outperform, although it still pulled back to a session low of 98.33. All eyes will be on the Australian dollar today as the RBA rate decision at 14.30 could certainly create some volatility. As it stands the credit markets are pricing in a 26% chance the RBA could raise rate by 25bp although some analysts suggest there is a greater chance of a raise by the RBA. If we do see the central bank raise unexpectedly, remembering that the recent minutes suggested the October meeting was ‘finely balanced’ we could see the Australian dollar push back above 99c. However if we see rates on hold traders will focus on the statement that accompanies to get a sense whether the RBA will look to raise in December instead.

Potential trifecta – Rates on hold, Maluckyday, So you think!!

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9874 -0.0011 -0.11%
ASX (cash) 4689 -10 -0.21%
US DOW (cash) 11135 -55 -0.49%
US S&P (cash) 1185.7 -6 -0.53%
UK FTSE (cash) 5681 -29 -0.51%
German DAX (cash) 6590 -51 -0.77%
Japan 225 (cash) 9116 -72 -0.78%
Rio Tinto Plc (London) 40.80 0.44 1.09%
BHP Billiton Plc (London) 22.35 0.22 0.99%
BHP Billiton Ltd. ADR (US) (AUD) 42.20 -0.10 -0.23%
US Light Crude Oil (Dec) 82.94 1.11 1.36%
Gold (spot) 1353.4 -8.6 -0.63%
Aluminium (London) 2371 27 1.15%
Copper (London) 8300 100 1.22%
Nickel (London) 23245 255 1.11%
Zinc (London) 2449 26 1.07%
RBA Cash Rate to be raised by 25bp (Nov) (%) 26.00 2 2.00%

IG Markets provides round-the-clock CFD trading on currencies, indices and commodities. The levels quoted in this email are the latest tradeable price for each market. The net change for each market is referenced from the corresponding tradeable level at yesterday’s close of the ASX. These levels are specifically tailored for the Australian trader and take into account the 24hr nature of global markets.

© Scoop Media