IG Markets - Afternoon thoughts July 24

IG Markets - Afternoon thoughts
FTSE 5552 +18
DAX 6408 -11
CAC 3108 +6
IBEX 6177 0
DOW 12707 -14
NAS 2588 -2
S&P 1349 -2

Oil 88.71
Gold 1577

Across Asia, markets are mixed despite picking up some fairly negative leads from US and European trade. Most of the markets in the region are off their lows amid some encouraging data from China. Risk currencies have mostly stabilised in the Asian session after having been sold off yesterday. Although Spain is still the focal point in the face of a further jump in peripheral bond yields, Greece is likely to take centre stage today. The potential for nasty headlines remains high given the impending Troika review. Recent comments surrounding Greece have not been too encouraging with Germany's Vice-Chancellor claiming that the notion of a Greek exit had "lost" its fear factor.

Looking at the equity markets in the region, Japan’s Nikkei is 0.1% lower, the ASX 200 is relatively flat and the Shanghai Composite is down 0.2%. The Hang Seng was closed for the morning session due to a typhoon warning. China HSBC PMI came in at 495, a slight improvement from the previous reading of 48.2. This reading has helped support some of the risk assets in the region particularly in the resource space. Looking ahead to the European and US open, markets are facing a relatively flat to mildly firmer start. There is plenty to look out for with PMI numbers due out in France, Germany and the US. With growth concerns remaining one of the main issues in the global economic story, all this data will be closely watched.

After testing sub-1.21 levels, EUR/USD managed to regain its composure helped by the IMF's contention that it ‘is supporting Greece in overcoming its economic difficulties’ in an effort to defuse the earlier press reports saying that IMF funding would be cut off. The euro also found comfort in Russian President Putin's assertion that Russia has no plans to reduce the euro weighting in its reserves. Following a benign eurozone consumer confidence reading, it seems inflationary pressures are falling faster than was expected which means another rate cut could be on the cards by September.

The local market has had a pretty interesting day, oscillating between negative and positive territory through the session. Before the open, the futures were suggesting we were in for a significantly weaker start. However, the bulls managed to shrug off the negative leads and the local market has held steady today. We have seen a significant recovery in resource names helped by the improvement in China’s HSBC PMI number. BHP Billiton is leading the miners with a 1.1% gain while Fortescue Metals (-1.2%) continues to struggle and is trading at its lowest level since June 2010. The $4 mark seems to be the key level for the stock in the near term and we could see buyers accumulate FMG on dips below this level. Energy names have gained ground with Woodside Petroleum climbing 1.4%. Billabong has been the biggest mover of the day, jumping over 20% after receiving another takeover offer from private equity firm TPG. The $1.45 offer is subject to due diligence and conditional on a number of other matters including availability of financing.
www.igmarkets.com.au

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