IG Markets - Morning Prices Oct 24

Global markets rallied Friday night on optimism ahead of Sunday’s European summit. Sentiment was also lifted by some strong earnings reports, particularly from fast-food giant McDonalds. It seems investors were also encouraged by the better-than-expected economic data that came out of the US last week. Recent outperformance in the US financial sector could also be an indication that a resolution to the crisis is closer. Speculation of a QE3 also added a bit of colour to the rally.

European leaders are reported to be working on a comprehensive and ambitious response to the crisis, with the latest reports suggesting that European leaders have outlined plans to aid the banks to the tune of over EUR 100 billion. However, they have ruled out tapping the European Central Bank’s balance sheet to boost the rescue fund. Wednesday 26 October is now the key day for policy makers to table a concrete solution. According to an article in the telegraph, so pointless was the gathering that Didier Reynders, the Belgian Finance Minister, left early to attend the world premiere of the new Tintin film, ‘The Secret of the Unicorn’.

Among the major averages, the Dow Jones Industrial Average climbed 2.3% to end at 11809, while the S&P added 1.9% to 1238.The NASDAQ jumped 1.5% to 2637, propelled by gains in Seagate Technology, SanDisk Corp and Altear Corp.

Europe also saw strong gains as the DAX surged 3.6%, the CAC soared 2.8% and the FTSE tacked on 1.9%. There were some big moves in the commodities space with solid gains in copper, oil and gold.

The Aussie and the euro both had a strong Friday night, but have declined this morning after leaders ruled out tapping the ECB’s balance sheet to boost a rescue fund. This announcement is likely to see risk come off from Friday night’s high.

However, the mood of trading is generally optimistic that eurozone policy makers will announce significant measures on Wednesday to bolster the bailout fund and resolve Greece’s debt crisis, while also supporting the region’s banks. The tight ranges that markets have been trading in are likely to continue until a resolution is reached.

We were calling an open of 4206 (+1.5%) for the Aussie market based on Friday night’s close. However, we were expecting some downside to this figure given the fact that risk currencies have lost ground this morning. The futures are now open and we have revised the figure down to 4184 (+1%). Mining giant BHP is pointing to a 1.3% gain. It is likely to be an exciting session as traders react to some of the comments that have come out of Europe.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0328 0.0111 1.09%
ASX (cash) 4184 42 1.01%
US DOW (cash) 11761 202 1.75%
US S&P (cash) 1226.0 10 0.78%
UK FTSE (cash) 5470 61 1.13%
German DAX (cash) 5960 181 3.13%
Japan 225 (cash) 8700 28 0.32%
Rio Tinto Plc (London) 30.55 0.40 1.33%
BHP Billiton Plc (London) 18.97 0.64 3.49%
BHP Billiton Ltd. ADR (US) (AUD) 36.34 0.64 1.79%
US Light Crude Oil (Dec) 87.30 0.96 1.11%
Gold (spot) 1640.0 15 0.92%
Aluminium (London) 2125.00 40 1.92%
Copper (London) 7145.00 410 6.09%
Nickel (London) 18800.00 795 4.42%
Zinc (London) 1805.00 65 3.74%
RBA Cash Rate to be decreased by 25bp (Nov) (%) 39.00 2 2.00%

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