IG Markets Morning Prices 21/3/11

In the US on Friday, stocks finished the session higher despite a late pullback as investors continued to grapple with the huge amount of uncertainty clouding the macro environment. The situation in Japan seems to be stable, with temporary power reconnected to the plant and reports suggesting that two cooling systems are back up and running. However, in Libya the situation has become more volatile with UN led military strikes commencing after Gaddafi failed to follow through on his promise of a ceasefire.

The Dow Jones Industrial Average was the best performer, rising 0.7%. Elsewhere, the S&P 500 added 0.4% and the NASDAQ rose 0.3%.

Locally, the ASX 200 is called to open 01% lower at 4621. Whilst all offshore leads were bullish, it looks like we’re going to open the session largely unchanged. We’ve been leading markets recently so it looks like Friday’s rally means a lot of the bullishness is already factored in.

The macro factors dominating the world are going to be the major drivers of trade today and for the week. Japan is closed for a public holiday today so there will be no leads from the Nikkei 225 for traders to react to. Whilst the nuclear situation in Japan hasn’t changed very much, it’s encouraging to see that it has not deteriorated further in the last four to five days. In fact, you could argue that it is marginally better as they have been able to partially reconnect power and reports suggest two cooling systems are up and running. Nonetheless, it remains very serious and could turn on a dime.

It’s hard to know how the Libya situation will affect local trade; our view is that it probably won’t have too much impact. However, it will possibly push oil and gold prices higher; if oil prices surge then we may see the ‘higher oil prices will crimp the global economic recovery’ argument return.

In currency markets, the USDJPY pushed up to 81.99 in early European trade; however, hedge funds and other speculative accounts quickly sold the pair. Whilst central banks announced they had been in the market selling Yen, traders saw this as a one-off event and suggested that it will probably just be the BoJ going forward.

We suspect trade will be relatively range bound in the short term, with the pair supported below 80.00 and traders likely sell rallies above 82.00.

It was also interesting to see the AUDUSD shrug off another Chinese reserve requirement ratio hike on Friday night, the third one this year. There had been speculation in the market for a while that this was on the cards; it looks like it was already priced in as it had little to no impact on trade.

Price action this week will again centre on headlines coming out of Northern Africa and Japan; if we see positive news from these regions, expect the AUDUSD to re-test parity.

Market / Price at 7:30am AEST / Change Since Australian Market Close / Percentage Change
AUD/USD / 0.9959 / 0.0021 / 0.21%
ASX (cash) / 4621 / -6 / -0.13%
US DOW (cash) / 11867 / -2 / -0.01%
US S&P (cash) / 1279.4 / -5 / -0.40%
UK FTSE (cash) / 5716 / -2 / -0.03%
German DAX (cash) / 6644 / -87 / -1.30%
Japan 225 (cash) / 9318 / 175 / 1.92%
Rio Tinto Plc (London) / 40.16 / 0.17 / 0.44%
BHP Billiton Plc (London) / 23.05 / 0.24 / 1.03%
BHP Billiton Ltd. ADR (US) (AUD) / 44.46 / -0.10 / -0.21%
US Light Crude Oil (May) / 102.50 / -1.66 / -1.59%
Gold (spot) / 1418.6 / 7.57 / 0.54%
Aluminium (London) / 2559.00 / 29 / 1.15%
Copper (London) / 9548.00 / 5 / 0.05%
Nickel (London) / 26700.00 / 400 / 1.52%
Zinc (London) / 2335.00 / -7 / -0.30%
RBA Cash Rate to be raised by 25bp (Apr) (%) / 2.00 / 0 / 0.00%

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.

Please contact IG Markets if you require market commentary or the latest dealing price.

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