IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Overnight, European and US markets both finished lower as the ECB and the BoE delivered on expectations with additional stimulus measures to bolster their ailing economies. The ECB’s 25 basis point rate cut was accompanied by some fairly bearish comments over the state of the European economy, while the BoE said it would expand the size of its asset purchase program by £50 billion. For good measure, and in a somewhat surprising move, China dropped its official cash rate by 31 basis points.

While these central bank decisions saw a weakening of the euro and the pound, the USD index had its biggest jump in seven months courtesy of these decisions, but also thanks to some stronger-than-expected employment data. The ADP private sector jobs report suggested private employers added some 176,000 jobs in June, well above the consensus of 105,000. Additionally, weekly jobless claims dropped by more than expected to 374,000. These improved employment figures have caused numerous brokers to upscale their expectations for tomorrow’s non-farm payrolls report to 100,000, from 90,000 previously. The downside to the elevated expectations is a watered down prospect of more quantitative easing from the Fed.

Locally, we’re calling the ASX 200 down approximately 13 points or 0.3% at 4157 on what is expected to be another day of very light volumes. Given the market moving/sentiment changing impact of tonight’s non-farms report, investors are likely to be very cautious today with many preferring to take the ‘wait and see’ approach. It certainly doesn’t make for an exciting day, but it is what it is.

Last night’s stronger dollar is also likely to influence money rotations today. Lowered expectations for Fed action are likely to cap gains across the commodities complex and see material and energy names under some moderate pressure.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0287 0.0018 0.18%
ASX (cash) 4157 -13 -0.30%
US DOW (cash) 12899 -4 -0.03%
US S&P (cash) 1366.4 -3.0 -0.22%
UK FTSE (cash) 5687 -3 -0.05%
German DAX (cash) 6522 -39 -0.59%
Japan 225 (cash) 9064 -16 -0.17%
Rio Tinto Plc (London) 31.56 0.13 0.41%
BHP Billiton Plc (London) 18.77 0.11 0.59%
BHP Billiton Ltd. ADR (US) (AUD) 32.17 -0.25 -0.77%
US Light Crude Oil (August) 86.83 -0.11 -0.13%
Gold (spot) 1603.9 -12.05 -0.75%
Aluminium (London) 1944.125 1.13 0.06%
Copper (London) 7683.5 -12 -0.15%
Nickel (London) 16728.5 29 0.17%
Zinc (London) 1885.75 32 1.71%

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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