IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Overnight, US markets kicked off their first trading day of the new year on a positive note. This was courtesy of a synchronised improvement in global manufacturing data and a better-than-expected unemployment report out of Germany, which had some commentators hopeful that Europe could avoid a deep recession.

Among the major averages, the Dow Jones Industrial Average added 1.5% to end at 12397, the S&P surged 1.6% to 1277, while the NASDAQ jumped 1.7% to 2648. Among the major S&P sectors the financials, energy and materials sectors were all sharply higher, while utilities finished lower.

Last night was the US markets’ first opportunity to price in expansionary manufacturing data out of China announced over the weekend, with the last 24 hours also revealing better-than-expected manufacturing readings out of Australia, the UK and the US. Last night’s US ISM manufacturing reading came in at 53.9, up from a previous reading of 52.7, with construction spending also increasing by 1.2% in November to its highest level since June 2010.

This synchronised improvement in global manufacturing data had a profound impact on commodity markets, with the entire base metals complex seeing strong buying interest. Copper led the advance with a gain of 3%. The strong manufacturing data also set the scene for a ’risk on‘ bias across the currency markets, with risk currencies such as the AUD and the CAD rising sharply, along with the euro which recaptured the1.30 level. The resulting USD weakness was also welcomed by gold bulls, with the precious metal rising by more than $35 to move back above the US$1600 level for the first time in over a week. The weaker USD as well as heightened geopolitical tensions between the US and Iran saw oil prices spike more than US$3 barrel to above US$103.

Turning to the local market, the ASX 200 is set to open with a second consecutive day of gains, with the benchmark index called to unwind 22 points or 0.5% higher at 4123. With stronger manufacturing data and commodity prices in focus overnight, we would once again expect the growth-orientated materials and energy sectors to be among the day’s best performers. This view is supported by BHP’s ADR, suggesting the local heavyweight will open $1.23 or 3.5% higher at $36.03. Financials can also be expected to have a positive session.

Market

Price at 8:30am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

1.0372

0.0076

0.74%

ASX (cash)

4123

22

0.54%

US DOW (cash)

12401

closed

closed

US S&P (cash)

1277.0

closed

closed

UK FTSE (cash)

5690

34

0.60%

German DAX (cash)

6147

closed

closed

Japan 225 (cash)

8545

90

1.0%

Rio Tinto Plc (London)

31.25

closed

closed

BHP Billiton Plc (London)

18.78

closed

closed

BHP Billiton Ltd. ADR (US) (AUD)

36.03

1.23

3.53%

US Light Crude Oil (Feb)

102.98

2.44

2.43%

Gold (spot)

1603.0

17

1.07%

Aluminium (London)

2077.00

closed

closed

Copper (London)

7790.00

closed

closed

Nickel (London)

18900.00

closed

closed

Zinc (London)

1878.00

closed

closed

RBA Cash Rate to be decreased by 25bp (Feb) (%)

67.00

0

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.

ends

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