IG Markets Morning Prices

Good morning,

In the US overnight, stocks finished the session modestly higher despite pretty ordinary economic releases; jobless claims were the only shining light, coming in slightly stronger but the latest reading on manufacturing slumped. The other major event to boost confidence was the stunning debut of LinkedIn, the social networking business that surged more than 100% on its first day of trade.

The Dow Jones Industrial Average was the best performer, adding 0.4% while the NASDAQ and S&P 500 rose 0.3% and 0.2% respectively.

Locally, the ASX 200 is actually called to open the session lower, down 0.3% at 4740 following yesterday strong performance and weakness in commodities and materials names overnight.

Despite a flat lead from the US basic materials sector, our local sector looks set to lead the market lower after base metal prices on the London Metals Exchange were all down between 0.9% and 3.1%. There was a bit of weakness in the London equities session too, with Rio Tinto and BHP Billiton falling 0.4% and 0.3% respectively. However, the biggest surprise is how much BHP’s ADR is calling the local names down. It’s called to open the session 1.8% weaker at $44.03, which if true will weigh heavily on the sector. The only possible explanation we can see is a recommendation from Goldman Sachs to switch from BHP to Vale based on the Brazilian miner’s underperformance of late. This call for BHP looks overly bearish to us; hence we see risk to the upside.

Weakness in energy prices could be another factor in BHP’s weakness and will likely weigh on the local energy sector. Crude oil futures fell 1.3% to US$98.95/bbl from our 4.30pm close yesterday.

Elsewhere, some positive sentiment may flow through to industrial names after the US sector was the best performer while financials aren’t likely to get much of a lead after the US sector was flat.

In summary, it looks like the local bourse may be set for a weaker end to the week, with selling among materials names likely to weigh the most. With the market up 1% so far this week, traders may look to lock in some gains ahead of the weekend, which will further pressure the index.

In currency markets overnight, the USD weakened against all G10 currencies as, once again economic data came out on the soft side. The GBP was the standout, logging solid gains after retail sales beat expectations with 1.2% growth on the quarter. The weekly US jobless claims were better-than-expected, heading back down towards the 400,000 mark, which suggested the April print was largely exaggerated. However, the Philadelphia Fed manufacturing index of leading indicators and existing home sales all disappointed; with US treasury yields heading lower this encouraged selling in the USD. Federal Reserve members Mr Dudley and Mr Evans re-iterated their dovish stance suggesting the US policy will remain accommodative through 2011.

The AUD/USD traded between 1.0595 and 1.0682, with commodity prices falling on the perception of lower demand not helping sentiment. Traders expressed their view by selling the AUD against EUR and GBP. Interestingly, Goldman Sachs who seem to have a big influence on so many asset classes right now revised their three, six and twelve month forecasts for AUD/USD to 1.05, 1.06 and 1.06 respectively (was 1.00, 1.02 and 1.02).
Data today is thin on the ground domestically although Japanese All industry activity at 14:30 and their subsequent rate statement (usually towards the back end of the day although no firm time is given) could be worth looking out for.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0673 0.0030 0.28%
ASX (cash) 4740 -16 -0.34%
US DOW (cash) 12612 67 0.53%
US S&P (cash) 1343.4 4 0.29%
UK FTSE (cash) 5980 28 0.48%
German DAX (cash) 7387 51 0.70%
Japan 225 (cash) 9610 -13 -0.13%
Rio Tinto Plc (London) 41.50 -0.13 -0.30%
BHP Billiton Plc (London) 23.71 -0.09 -0.36%
BHP Billiton Ltd. ADR (US) (AUD) 44.03 -0.79 -1.75%
US Light Crude Oil (Jul) 98.95 -1.29 -1.29%
Gold (spot) 1493.5 -1.05 -0.07%
Aluminium (London) 2511.00 -49.00 -1.91%
Copper (London) 8936.00 -84.00 -0.93%
Nickel (London) 23750.00 -750.00 -3.06%
Zinc (London) 2149.00 -31.00 -1.42%
RBA Cash Rate to be raised by 25bp (Jun) (%) 18.00 0.00 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.

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