IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Friday’s session saw a massive rally across global equities after EU leaders surprised financial markets with set of initiatives designed to bring stability to the European banking system.

Some of the more pertinent headlines announced include: EFSF funds for the Spanish bank recapitalisation process will not be senior to Spanish debt; the ECB will take over as common banking supervisor by December, and after doing so the ESM will be permitted to recapitalise banks directly; a long-term eurozone integration roadmap will be laid out in October; the decisions taken during the summit will lay the groundwork for Eurobonds (not sure what Germany has to say on this point!).

While equities, risk currencies and commodities predictably rallied, it wasn’t long before discussion turned to whether this rally would fade and merely provide an elevated exit point for traders and investors. At the end of the day, while the announced initiatives will go some way to stabilising the European region’s financial system, it doesn’t address the bigger and more pressing problem – returning Europe to a sustainable growth trajectory.

Turning to today’s session, the local market is set to build on Friday afternoon’s rally, with the ASX 200 called to open approximately 42 points or 1% higher at 4137 on what is sure to be broad-based gains. Today also marks the start of a new financial year, so fund managers will be through with end of year tax loss selling and starting with a clean slate. As a result, investment decisions will be unencumbered from manipulation and will provide a true insight into how the investment community is positioning itself as we head into the second half of the year.

Today’s session promises to be one with a strong ‘risk on’ thematic. Weakness in the USD after the EU summit initiatives saw money flow into risk currencies and commodities. Gold jumped more than US$40 per ounce, crudes prices surged more than 9% (its 4th best single day rally ever) and base metals rose across the board. As a result we would expect the materials and energy sectors to be among the pace setters today.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0248 0.0067 0.65%
ASX (cash) 4137 42 1.04%
US DOW (cash) 12892 153 1.20%
US S&P (cash) 1362.8 19.0 1.41%
UK FTSE (cash) 5599 -4 -0.08%
German DAX (cash) 6454 143 2.27%
Japan 225 (cash) 9113 106 1.18%
Rio Tinto Plc (London) 30.21 1.08 3.69%
BHP Billiton Plc (London) 18.06 0.58 3.33%
BHP Billiton Ltd. ADR (US) (AUD) 31.86 0.41 1.30%
US Light Crude Oil (August) 84.86 5.14 6.45%
Gold (spot) 1597.9 28.8 1.84%
Aluminium (London) 1911 46 2.44%
Copper (London) 7685 162 2.16%
Nickel (London) 16730 274 1.67%
Zinc (London) 1877 77 4.27%

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.

www.igmarkets.com.au

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