IG Markets: Morning Prices

On Wall Street overnight, US stocks once again finished the session higher as the market hit new highs and gold and oil continued their push north. Whilst volumes continued to be on the low side, there was still good breadth to the rally as a broad array of names pushed higher.

The Dow Jones Industrial Average and NASDAQ were the top performers, both adding 0.3% while the broad-based S&P 500 jumped 0.2%.

The local market is called to open the session 0.3% stronger at 4927 following the positive overnight leads.

In terms of sectors, local financials should be well supported after the US financials sector was the standout performer, adding 1.2%. Citigroup, Bank of America, JPMorgan and Wells Fargo all had strong sessions, rising more than 1.3%. Goldman Sachs and Morgan Stanley also pressed higher, adding 1.9% and 2.1% respectively. Reports suggested the sector was boosted by the prospect of higher interest rates going forward.

Elsewhere, there were modest gains among the consumer staples, healthcare and industrial sectors of 0.5%, 0.2% and 0.1% respectively.

On the downside, the heavily weighted materials and energy sectors may see some pressure following poor sector leads from the US. Despite a higher crude oil price and stronger materials leads from London, the sectors were the worst performers, losing 1.1% and 0.8% respectively.

Base metal leads from the London Metals Exchange were all very positive, rising between 1.1% and 2.7%, with nickel the best performer. Rio Tinto and BHP were both well supported in London too, rising 0.4%. However, BHP’s ADR is calling the locally listed name to open 0.6% lower at $47.68, partly due to the surging AUD overnight. Nonetheless, we feel this is a far too bearish call, with the risk clearly for a higher open.

In summary, it looks like a modestly higher open for the Australian market, with gains likely to be driven by strength among the financials. However, the open could be boosted if in fact the materials open firmer than where they are called. In economic news, the latest reading on the employment change and unemployment rate is due at 11.30am; the market is expecting 22,700 jobs to have been created and the unemployment rate to be flat at 5%.

In currency markets, the AUDUSD surged to another record high overnight, hitting 1.0449 on the back of buoyant commodity prices and strong underlying demand for the high yielding currency. It is now not far away from the 1.05 level; a stronger-than-expected employment gain could see that important level hit today.

The EURUSD jumped through recent short-term resistance overnight to hit a 14-month high of 1.4348 ahead of a widely expected interest rate hike. Traders completely shrugged off concerns over Portugal after the Prime Minister said they would ask the European Union for financial help.

It’s likely to be an active day currency markets as the Bank of Japan, Bank of England and European Central Bank all deliver their latest interest rate decisions. The ECB is likely to hold the most interest as they are expected to raise rates this month. What might be of more interest is the accompanying statement, with traders keen to ascertain the likely timing of further policy moves.

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