IG Markets Morning Prices

IG Markets Morning Prices

In the US overnight, stocks continued their rally higher, moving closer to their highs of the year and on track for the best quarterly gains since 1998. Markets were boosted by a strong ADP Non-farm Employment report that showed the jobs situation in the US was continuing to improve while traders also continued to ignore the myriad of macro concerns facing markets.

The NASDAQ and broad-based S&P 500 were the best performers, both advancing 0.7% while the Dow Jones Industrial Average finished 0.6% firmer for the session.

In Australia, the domestic market is called to open the session 0.4% firmer at 4841 following the positive overnight lead. Gains were broad-based in the US, with the consumer discretionary and materials sectors the best performers, rising 1.1% and 1% respectively.

Material names had a good session despite all base metals being weaker between 0.8% and 2% in London Metals Exchange trade. In London equities trade, Rio Tinto and BHP Billiton bucked that trend, rising 1% and 1.4% respectively. Across the Atlantic, BHP Billiton’s ADR is calling the locally listed stock to open 0.2% higher at $45.71. Gold stocks could see some buying interest too after gold futures added 0.4% overnight to trading around the US$1423.00/oz level.

Elsewhere, the US financial, energy and industrial sectors all contributed positively, rising between 0.4% and 0.8% Among financials, a number of investment firms including the likes of Fidelity and Blackrock are in talks to buy stakes of Spanish bank, Bankia. Traders welcomed the reports, bidding Blackrock’s shares more than 5% higher.

In summary, it looks like we’re set for another firmer open, with gains likely to be widespread.

In economic news, there is finally some important local data due in the coming hours. The market will be eagerly awaiting the latest readings on building approvals and retail sales, which have been two of the poorer performing data sets in recent times. Continued weakness could add to the argument for a rate cut in the coming months whilst strength would likely see the market price-out these chances.

In currency markets, the focus of the last few days has been on speeches by different Federal Reserve members and their views on QE2; last night it was outgoing Kansas City President Hoenig’s turn to speak and unsurprisingly, he maintained his hawkish stance, joining the likes of Philadelphia President Plosser and St Louis President Bullard in calling for US monetary policy to be tightened.

We are now getting a clearer idea of how the Fed are positioning themselves ahead of June, the end of QE2, with asset classes like the USD and bond yields reacting accordingly. What is interesting, however, is that whilst the market is expecting an end to excess liquidity, it is continuing to rally. It seems the fact the Fed see the economy as strong enough to stand on its own two feet without assistance is sending a positive message to the market.

With ADP private sector job numbers coming in broadly in-line with expectations at 201,000 jobs, the USDJPY firmed a touch to 83.18. All eyes are firmly fixed on Friday’s payroll report and a strong number is starting to be priced in. Traders need to be reactionary here and not anticipate the result, with expectations for 210,000 nonfarm payroll jobs created; a number lower than 150,000 and a jobless rate above 9% could see the USDJPY push back below 82.00 and equities head lower.

Overnight , the AUDUSD made a new high of 1.0338, although it could not hold that level and pulled back. The local currency has been buoyed by the positive sentiment flowing through markets; stronger-than-expected domestic data today would likely be taken positively, with a move through 1.0350 and onto 1.04 not out of the question.
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