IG Markets - Morning thoughts and opening prices

Good morning,

With the 'no QE' hangover persisting after yesterday's FOMC meeting and the economic data flow continuing to disappoint, risk assets had a tough time. We saw soft manufacturing numbers from Germany, China and the US flagging economic growth concerns further. The US dollar rallied against its peers, as investors shunned risk. In the eurozone, a multi-tranche Spanish auction was well received, and the yields were inevitably higher, but as we have seen repeatedly this year the treasury managed to issue above its initial target. This was a slight positive, but failed to lift sentiment. The Aussie dollar was one of the biggest culprits, slipping from seven-month highs as commodities sold off significantly. AUD/USD dropped to around 1.002 and is pretty close to testing parity.

Ahead of the open, we are calling the Aussie market down 1.1% at 4042. Investors are likely to focus on Moody’s move to downgrade 15 major global banks. Moody’s has chosen to downgrade banks that it feels have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities. This could impact how some of the local banks trade today. On the local economic front, there is nothing to look out for today. Elsewhere in the region, a big move higher in USD/JPY could see Japan’s Nikkei outperform today. The Nikkei generally benefits from a weaker yen. USD/JPY gained on market speculation that the BoJ is likely to announce further easing at its July 11 to 12 meeting, reinforced by the appointment of two perceived 'doves' (Takahide Kiuchi and Takehiro Sato) to the Policy Board.

On a stock level, we expect a weak start for BHP Billiton, with its ADR pointing to a 2.3% drop to $31.48. Big falls in the commodities space are likely to result in some significant selling in resources. Oil (which dropped below $80) and gold (which fell below $1600) had another poor night, with both commodities declining over 2% each. Earlier this week we highlighted that gold stocks deserved some attention, as it was shaping up to be a big week for the precious metal. OZ Minerals has been downgraded to underweight by JP Morgan. Qantas will be one to watch after saying it could ‘go under’ if Etihad is allowed to buy enough of a share in Virgin Australia to allow it to start undercutting Qantas on domestic routes.

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.

Kind regards,
Stan Shamu
Market Strategist
IG Markets
www.igmarkets.com.au

ENDS

© Scoop Media