IG Markets: Morning Thoughts for 03/01/2012

Today the Australian market kicks off its first trading day of 2012 having finished 2011 down 689 points or 14.5%, a dismal performance in a year dominated by Europe’s sovereign debt crisis.

With US markets closing out 2011 with declines in the vicinity of 0.5%, the tone heading into the new year is still one of extreme pessimism about the prospects for Europe and continuing frustration about European leaders’ inability to come up with a meaningful solution to solve the region’s many issues

While most of the world’s major equity indices were closed overnight, the DAX and the CAC did manage to kick off the new year with healthy gains of 3% and 2% respectively. However, it is best not to read too much into this, with market participation extremely thin this time of the year. To use some sporting parlance, we are essentially in ’junk time‘ and it will not really be until mid January at the earliest (as market players and money managers return from their festive season holidays), that we will be able to garner a real assessment of the market’s mood for early 2012.

As things stand, we are currently looking at a negative start to 2012 trade with the ASX 200 set to open down 28 points or 0.7% at 4028, but this projection is based on where ASX futures finished on Saturday morning after the close of the US session, and does not factor in the positive but thin trading sessions in Germany and France overnight. As such, we can possibly expect a slight upwards revision to this opening call when ASX futures reopen at 9.50am.

ENDS

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