IG Markets: Morning Prices

Overnight, US stocks finished the session in positive territory after wavering for most of the day after the US dollar rose, although it came off its highs late. Stronger-than-expected initial jobless claims also helped boost sentiment.

The tech heavy NASDAQ was the top performer, rising 0.6% while the broad-based S&P 500 added 0.4% and Dow Jones Industrial Average gained 0.1%.

Domestically, the local bourse is called to open the session 0.7% firmer at 4732, back above the psychologically important 4700 level.

In terms of sectors, the energy and financials were the strongest performers in US trade, rising 1.3% and 1.1% respectively. We would expect to see some buying across the local energy names after crude oil futures surged 2% to be trading around the US$88.18 level after news of a big drop in crude oil inventories. Chevron and ConocoPhillips both gained 1.9%

Among financials, Bank of America, JP Morgan, Citigroup and Wells Fargo all had a strong night, up between 1.6% and 2.8%. This should have some sort of positive effect on local names although there could be some negative attention after ANZ followed CBA’s lead last week, hiking variable interest rates by 39 basis points, more than the official rate hike.

Materials had a solid session and should help support the local market. Leads from London were pretty rubbish with base metals on the LME all down between 0.2% and 0.5% while in normal trade, Rio and BHP fell 2.7% and 2.4% respectively. However, material names rallied during the US session, with BHP’s ADR now calling the stock 1% firmer at $44.57

In summary, it looks like a fairly positive open to the session, with traders quickly turning their attention to the unemployment reports due at 11.30am.

In forex news, yesterdays move lower by risk currencies followed reports by Reuters that China had lifted their required reserve ratio for the banks by 0.5% in an attempt to curb rampant lending. There were also speculation that today’s Chinese CPI print could come in higher than the expected 4%, which would certainly give the PBOC scope to be more aggressive with its tightening measures.

Overnight, the USD had mixed fortunes. In early US trade, the AUD and EUR traded to lows of 99.76 and 1.3671 as traders focused on a weak Portuguese bond auction and US initial jobless claims which came out stronger-than-expected. The jobless numbers should have been seen as a positive for the USD as signs of a recovery in employment could see the Federal Reserve hold back on its full $600b asset purchase program.

However, instead we saw traders step in and buy the weakness, pushing risk currencies higher throughout the session with the AUD reclaiming parity.

Today could certainly see some volatility in the AUD and other commodity currencies given the tier one data due. In Australia, the market will focus on the employment data with the unemployment rate expected to fall to 5% and economists expecting 20,000 jobs to be created.

In China we also have CPI, PPI, Industrial production, fixed asset investment and retail sales. It will be interesting to see how the market reacts to these as we have seen just how sensitive both the equity and currency markets are to further worries that China may be putting on the brakes.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0062 0.0024 0.24%
ASX (cash) 4732 32 0.68%
US DOW (cash) 11348 -11 -0.10%
US S&P (cash) 1218.0 3 0.28%
UK FTSE (cash) 5838 -18 -0.30%
German DAX (cash) 6755 -15 -0.21%
Japan 225 (cash) 9866 53 0.54%
Rio Tinto Plc (London) 43.33 -1.21 -2.72%
BHP Billiton Plc (London) 24.10 -0.59 -2.39%
BHP Billiton Ltd. ADR (US) (AUD) 44.57 0.43 0.98%
US Light Crude Oil (Dec) 88.18 1.69 1.96%
Gold (spot) 1404.5 7.4 0.53%
Aluminium (London) 2445 -5 -0.20%
Copper (London) 8740 -33 -0.38%
Nickel (London) 24185 -128 -0.53%
Zinc (London) 2528 -5 -0.20%
RBA Cash Rate to be raised by 25bp (Dec) (%) 11.00 3 3.00%

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