IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Those hoping to cement their QE expectations were left disappointed by Fed Chairman Bernanke's testimony, which flagged the risks and kept all policy options open, yet failed to offer any real hints of impending action at the FOMC meeting on June 19-20. The Aussie dollar maintained its strong run, testing parity against the greenback as it fed off the better than expected domestic employment data for May and China's 25 basis point interest rate cut, the first reduction since 2008. However, Bernanke’s testimony and fears that May Chinese data will disappoint saw risk assets come off late in the US session.

Ahead of the open, we are calling the Aussie market up 0.4% at 4124. The risk rally lost steam towards the end of the US session and therefore it seems like the bulls are losing momentum. With the local market in for a long weekend, we could see some caution being exercised today. With China being a big trading partner for Australia, it will be interesting to see what the net impact of the China rate cut will be on the local market today. The resources are likely to get a lift from the news early but then fears that the Chinese economy is slowing significantly are likely to be amplified by this move. There is a swathe of economic data due out in China this weekend including CPI, PPI, fixed asset investment and industrial production. These significant data points are likely to be the key driver of price action early next week.

On a stock level, we expect a strong start for BHP Billiton, with its ADR pointing to a 3% rise to $32.52. However, gold miners are in for a tough session after gold prices fell the most in two months. We could see Newcrest and its peers give back some of the gains they made following the gold price rally earlier in the week. Cabcharge will be one to watch today after saying it will buy Yellow Cabs in Adelaide. The stock has been a quiet achiever this year and has had a pretty good run. Borrowers will continue to monitor the wires for any interest rate moves by the big banks. On the economic front, today we have trade balance and home loans data due out. RBA Governor Glen Stevens is also speaking and we may get some commentary on policy going forward.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9904 -0.0042 -0.42%
ASX (cash) 4124 15 0.36%
US DOW (cash) 12529 44 0.35%
US S&P (cash) 1320.2 -1.4 -0.10%
UK FTSE (cash) 5450 34 0.62%
German DAX (cash) 6133 7 0.11%
Japan 225 (cash) 8625 -15 -0.17%
Rio Tinto Plc (London) 30.15 1.16 3.99%
BHP Billiton Plc (London) 18.20 0.44 2.49%
BHP Billiton Ltd. ADR (US) (AUD) 32.52 0.94 2.98%
US Light Crude Oil (July) 84.07 -1.07 -1.25%
Gold (spot) 1591.2 -30.3 -1.87%
Aluminium (London) 1988 6 0.29%
Copper (London) 7479 61 0.83%
Nickel (London) 16627 545 3.39%
Zinc (London) 1924 7 0.35%

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.

Please contact IG Markets if you require market commentary or the latest dealing price.

www.igmarkets.com.au

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