IG Markets: Morning Report

In the US overnight, stocks continued their push higher, closing the session modestly firmer and at new highs, seemingly ignoring the complete lack of volume. In fact, it’s less than half of what is normally transacted.

The tech-heavy NASDAQ was the top performer, adding 0.2% while both the broad-based S&P 500 and Dow Jones Industrial Average could only manage gains of 0.1%.

Locally, the ASX 200 is called to open the session 0.1% higher at 4779 following the positive overnight session.

We should see some support for local energy names after the sector was the top performer in US trade, gaining 1%. Crude Oil futures took a slight breather, hovering just above the US$91 per barrel level. Nonetheless, it was enough for the likes of ExxonMobil, Chevron, ConocoPhillips and Marathon Oil to all trade to fresh 52-week highs.

The materials sector had a pretty solid session too, shrugging off concerns over the Chinese rate hike to finish the session with gains of 0.4%. On the London Metals Exchange, base metals were mostly higher, with zinc the leader up 3.7% while in normal equities trade, Rio Tinto and BHP Billiton finished mixed, down 0.5% and up 0.2% respectively. BHP Billiton’s ADR is calling the locally listed name 0.3% stronger at the open.

Elsewhere, there should be some buying among industrial names while on the downside, the financials may detract a few points after modest declines in US trade.

All in all, it looks like the market is set to recover some of yesterday’s falls, with strength likely to come from energy and resources names. In the currency market, where volumes are still suppressed, although slightly improved given the return of some European trader’s, moves were certainly exaggerated, with market chatter suggesting position squaring ahead of year end.

One of the key drivers of the USD, which lost ground across the board was the overnight falls in treasury yields. A strong auction of 7 year treasuries saw good buying interest and a resulting sharp drop in yields, which ultimately makes the USD less attractive for overseas investors searching for higher returns. USD/JPY traded from 82.07 (16:00) to 81.65 at the time of writing with some focus on Japanese exporters repatriating funds back to their homeland, as well as concerns about US finances and how it could weigh on the USD in 2011. USD/CHF hit a record low as traders continued to benefit from leveraged exposure to the strong Swiss economy.

With the bulk of commodities having a strong night, the associated currencies pushed higher, notably the NZD. The AUD rose to a new post float trading high of 1.0184 (Bloomberg), a gain of 0.7% from the Australian equity close. Traders today will be focusing on HSBC PMI data out of China, which could be a driver toward resistance at 1.20.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0174 0.0068 0.67%
ASX (cash) 4779 4 0.09%
US DOW (cash) 11590 17 0.15%
US S&P (cash) 1260.1 1 0.05%
UK FTSE (cash) 5984 4 0.07%
German DAX (cash) 6989 14 0.20%
Japan 225 (cash) 10300 -28 -0.27%
Rio Tinto Plc (London) 45.53 -0.20 -0.45%
BHP Billiton Plc (London) 26.16 0.06 0.23%
BHP Billiton Ltd. ADR (US) (AUD) 45.61 0.16 0.34%
US Light Crude Oil (Feb) 91.08 -0.22 -0.24%
Gold (spot) 1410.9 5.5 0.39%
Aluminium (London) 2459.00 49 2.03%
Copper (London) 9411.00 51 0.54%
Nickel (London) 23905.00 -295 -1.22%
Zinc (London) 2405.00 85 3.66%
RBA Cash Rate to be raised by 25bp (Feb) (%) 9.00 2.7 2.70%

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