IG Markets: Morning Prices

In the US overnight, most stocks finished at fresh two-year highs as investors cheered the stronger-than-expected ADP jobs report and the ISM Non-manufacturing index. In a very encouraging sign, the jobs report showed 297,000 new jobs had been added to the private sector, nearly three times what analysts had been expecting. Commodities also turned higher late in the session, giving an extra boost.

The tech-heavy NASDAQ was the best performer, rising 0.8% while the broad-based S&P 500 and Dow Jones Industrial Average added 0.5% and 0.3% respectively.

Locally, the ASX 200 is called to open the session 0.5% higher at 4739 following yesterday’s weakness. However, given a number of uncertainties hanging over our market, we may indeed see the trend of underperformance continue as buyers are unwilling to step into the market.

In terms of sectors, we could see some strength among financial names today after the US sector was the best performer, rising 1.2%. The likes of JPMorgan, Citigroup, Bank of America and Wells Fargo were all up more than 1.2%. Whilst this could help support the major banks, the insurers could still be under pressure due to the uncertainty over the Qld floods.

The consumer discretionary names could also see some support after the US sector added 0.8%. Elsewhere, industrial (0.5%) and energy (0.4%) names should be reasonably well supported following the overseas leads. Those stocks exposed to oil will likely be buoyed by the 1.3% gain in Crude Oil to US$90.35/barrel.

Materials should put in another reasonable session too after the US basic materials space added 0.2%. During European trade, base metals were mostly mixed on the London Metals Exchange while in equities trade, both Rio Tinto and BHP Billiton slipped 0.6% and 0.8% respectively. Nonetheless, commodities turned higher late in the US session, with BHP Billiton’s ADR now pointing towards a rise of 0.5% to $45.25 on the open. Gold and silver finished modestly weaker after rallying strongly off session lows.

In summary, it looks like the local market is set for another solid open on the back of buoyant US lead. Building approvals data due at 11.30 will be the major economic focus in what’s expected to be another relatively light day’s trade in terms of volume.

Turning to currencies and it was another good night for the USD as the aforementioned US economic data helped push up treasury yields making the USD more attractive to investors. The USD rallied throughout the session against all G10 currencies except the Canadian dollar and most notable against the Yen and Swiss franc.

Both the Yen and the Swiss franc have performed extremely well against the dollar in 2010 and as we see improving US data traders are starting back the recovery by bidding up the USD, it is interesting because January is also the best month to be holding US dollars.

The Euro fared slightly better trading from 1.3277 at 16:00 to 1.3151 at the time of writing. Aiding the pullback was news that the Swiss National bank are no longer accepting Irish sovereign debt as collateral for its main repo operations, this should be taken a negative and could have larger ramifications further down the line. Interestingly the Australian dollar pulled back to an overnight low of 0.9961 but has found buying support and pushed back up to near the parity level.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9999 -0.0019 -0.19%
ASX (cash) 4739 24 0.51%
US DOW (cash) 11716 59 0.51%
US S&P (cash) 1275.9 9 0.71%
UK FTSE (cash) 6047 46 0.76%
German DAX (cash) 6952 -3 -0.04%
Japan 225 (cash) 10495 128 1.23%
Rio Tinto Plc (London) 44.77 -0.26 -0.57%
BHP Billiton Plc (London) 25.34 -0.20 -0.76%
BHP Billiton Ltd. ADR (US) (AUD) 45.25 0.24 0.54%
US Light Crude Oil (Feb) 90.35 1.18 1.32%
Gold (spot) 1377.2 -6.14 -0.44%
Aluminium (London) 2467.00 -5 -0.20%
Copper (London) 9611.00 71 0.74%
Nickel (London) 24750.00 -50 -0.20%
Zinc (London) 2464.00 42 1.73%
RBA Cash Rate to be raised by 25bp (Feb) (%) 9.00 0.0 0.00%

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