IG Markets - Morning thoughts and opening prices

Overnight, US markets resumed their surge higher on the back of strong earnings news, positive housing data and confirmation that the Fed would complete its current QE program.

The Dow Jones Industrial Average added 0.5% to end at 12288, the S&P jumped 0.6% to 1336, while the NASDAQ surged 0.7% to 2397. Among the key S&P sectors, energy, materials, industrials and financials were all firmer while telecoms fell.

The positive sentiment from yesterday’s Asian session spilled over into the European and US sessions last night and with the US market opening on the front. Strong corporate earnings from the likes of Dell, Comcast and BHP continued to see money come into the market while economic data also pleased with housing starts for January rising 14.6% to 520k annualised units, the highest level since September. The release of the Fed’s latest meeting minutes were also in focus. They revealed a healthy debate on whether the strengthening economy warranted the continuation of the current US$600b QE program. While there were some members who would like to see the program ceased, or least reduced, the predominant view was the economy was still too fragile to end this stimulus.

The minutes also revealed a slight upgrade to the Fed’s GDP expectations but a slight winding back of core inflation forecasts – surely another sign the Fed is in no hurry to raise rates.

On the back of this news the dollar weakened against a broad basket of currencies including the Euro and the Aussie, with metal price (excluding copper) all modestly higher from the close of our market yesterday. Simmering tensions in the middle-east, including Iranian plans to move warships through the Suez Canal to Syria, saw gold and crude prices edge higher to US$1375 and US$85 respectively.

Today we’re calling the ASX 200 to unwind 10 points or 0.2% firmer at 4940 with companies including Qantas, Wesfarmers, Santos and AXA featuring on today’s earning schedule.

ENDS

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