IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk sentiment improved through European and US trade as Spanish debt markets calmed and there is optimism that the Fed will announce some form of easing. Greek coalition talks are also reported to be going well and we are likely to hear some news from Greece at some stage today. The euro and other risk currencies were well supported and pushed higher. AUD/USD rallied to as high as 1.02015 and is currently consolidating near that level. There was also some positive economic data out of the US as building permits beat consensus while housing starts matched expectations.

Ahead of the open, we are calling the Aussie market up 0.8% at 4156. This would see the market test a key resistance zone which could attract some selling in the near term. Following yesterday’s RBA minutes, the general consensus is that a cut in July is very unlikely, but many still call for 25 basis points of further easing at the August meeting. This is likely to keep the Aussie dollar well supported. Unless macro conditions deteriorate much further, the minutes suggest we are nearer the end of the cutting cycle than current market pricing suggests. On the local economic front, we have the CB leading index and MI leading index to look out for. There is also housing starts data due out at 11.30am.

On a stock level, we expect a strong start for BHP Billiton, with its ADR pointing to a 1.2% rise to $32.87. Junior player Sundance Resources has announced a 49% increase in mineral resource at its Mbalam project in Central Africa. Gold stocks will be one to watch ahead of Thursday’s FOMC meeting. There are several contradictory opinions of what the Fed will announce tomorrow. Paperlinx will be one to watch following reports that it may sell some assets and cut profit targets. Positive building permits data in the US could support James Hardie today. The stock has had a good run and defied tough market conditions. There is plenty of support at around $7.50 for the stock and a test of this level could attract some fresh buying.

Market

Price at 6:30am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

1.0188

0.0056

0.56%

ASX (cash)

4156

32

0.78%

US DOW (cash)

12813

80

0.63%

US S&P (cash)

1354.2

10.6

0.79%

UK FTSE (cash)

5579

77

1.39%

German DAX (cash)

6353

102

1.63%

Japan 225 (cash)

8710

54

0.63%

Rio Tinto Plc (London)

30.52

0.89

3.01%

BHP Billiton Plc (London)

18.64

0.35

1.90%

BHP Billiton Ltd. ADR (US) (AUD)

32.87

0.38

1.18%

US Light Crude Oil (August)

84.44

1.14

1.36%

Gold (spot)

1618.9

-10.7

-0.65%

Aluminium (London)

1927.25

-1

-0.03%

Copper (London)

7609.125

78

1.03%

Nickel (London)

17084

388

2.32%

Zinc (London)

1914.375

11

0.57%

ends

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