IG Markets - Morning thoughts and opening prices

Good morning,

Risk assets received a boost from speculation that the ECB will purchase bonds to help lower borrowing costs and ease the debt crisis. This moved the Dow above 13,000 for the first time since May, while risk currencies like the euro and Aussie soared. Gains across equities came despite the 1.5% headline real GDP growth print in the US, which failed to cement the need for further easing. EUR/USD dipped briefly in response, only to be turned around on a joint statement from Merkel and Hollande saying they were prepared ‘to do everything’ to protect the single currency. Reports that Mario Draghi will meet with the Bundesbank's Weidmann soon to discuss such options as a rate cut, bond buying, a new LTRO, and the provision of a banking license for the ESM in the longer term also helped the pair.

Ahead of the open, we are calling the Aussie market up 0.9% at 4247. Optimism is certainly building that European leaders will have some sort of solution this week. With the ECB meeting looming on August 2, this has magnified hopes for bolder policy action. An open at around 4247 will leave the ASX facing resistance from previous support levels (4250) in March and April this year. There is a fairly big congestion zone all the way to 4300, which will likely present some difficulty to get through. On the local economic front, we only have new home sales data due out today. AUD/USD has had a bit of a slow start this morning, falling slightly, and will be closely watched after its recent ascent.

On a stock level, we expect a strong start for BHP Billiton, with its ADR pointing to a 1.9% rise to $32.02. BHP will be in focus following reports it will delay the Olympic Dam expansion by two years as China growth cools. China’s manufacturing PMI, due out on Wednesday, will be closely watched as growth remains a major concern. There will be plenty of production reports to look out for in the resource space this week, which could significantly influence price action. Westfield is reportedly planning a $4.5 billion UK investment in the next few years.

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
www.igmarkets.com.au

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