Risk assets had yet another volatile session, as headline risk remained rampant, particularly on the Greece issue.
Wednesday’s EU Summit produced no hard decisions on any substantive issues, as widely expected. The early part of US
trade was relatively steady, with risk assets posting some mild gains. However, reports that some of China’s biggest
banks may fall short of loan targets saw risk assets come off in the middle part of US trade. An economic slowdown in
China is reducing demand for credit, and we saw the Aussie dollar drop on the back of the news. AUD/USD traded as low as
0.97118 and seems to be stuck in a range between 0.97 and 0.98 at the moment. It wasn’t long before headlines that
Italian PM Mario Monti said he believed Greece would stay in the eurozone crossed the wires. This resulted in a broad
recovery in risk assets, with US markets posting modest gains.
Ahead of the open, we are calling the Aussie market up 0.3% at 4068 after US markets erased early losses to finish the
session higher. We expect to see the positive momentum into the close of US trade filter through to the ASX 200 at the
open. The market found support at the 4050 level yesterday after drifting lower in the afternoon session. There is no
local economic data to look out for, but we feel China will be in focus today. Reports suggesting that China's major
banks may miss their annual loan targets for the first time in seven years amid weak demand will not appease investors.
However, this could also pressure China to take action as soon as possible. With this in mind, we wouldn’t be surprised
to see China announce some new investment projects soon. Growth concerns will also be heightened by below-consensus
eurozone PMI and German IFO figures. Elsewhere in the region, Japan’s inflation will be in focus with CPI numbers due
On a stock level, we expect a strong start for BHP with its ADR pointing to a 0.6% gain to $32.17. The rest of the
resource space is also likely to benefit from the recovery in risk sentiment towards the end of US trade. Elsewhere in
the mining space, Aquarius Platinum is likely to remain under pressure after suffering a big sell-off in London and
Johannesburg due to a loss at its Mimosa Mine. AGL Energy has been downgraded to neutral (from buy) by Nomura after the
stock halted trading yesterday due to a 1-for-6 offer priced at $11.60 a share. We expect to see the banks recover today
after some of their European peers posted some solid gains yesterday. The recent sell-off has left several stocks at
very attractive valuations, and as soon as investors feel the slightest of confidence, we feel we will see a pickup in
MarketPrice at 6:30am AESTChange Since Australian Market ClosePercentage ChangeAUD/USD0.97610.0009 0.09%ASX (cash)406812 0.30%US DOW (cash)1258499 0.79%US S (cash)1326.210.4 0.79%UK FTSE (cash)536056 1.06%German DAX (cash)6304-24 -0.37%Japan 225 (cash)8563.3811 0.13%Rio Tinto Plc (London)28.400.49 1.76%BHP Billiton Plc (London)17.180.37 2.22%BHP Billiton Ltd. ADR (US) (AUD)32.170.18 0.56%US Light Crude Oil (July)90.870.60 0.67%Gold (spot)1559.32.3 0.14%Aluminium (London)2011-2 -0.09%Copper (London)7566-21 -0.28%Nickel (London)16957115 0.68%Zinc (London)19488 0.39%
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