FTSE 5777 -
DAX 6973 +2
CAC 3433 0
IBEX 7326 +16
DOW 13170 +12
NAS 2785 +7
S 1413 +2
Oil 97.17
Gold 1675
Sentiment in Asia has been mixed as some investors gamble on speculation that governments around the world will do more
to support growth. Risk assets got off to a good start with most of the risk currencies holding their ground near
Saturday morning’s close. There were some comments from the ECB and the Fed which helped support risk sentiment into the
close of US trade on Friday. Headlines that the ECB is considering setting yield band targets under a new bond-buying
programme saw risk currencies recover late in the US session. Elsewhere, the Fed released a letter from Chairman Ben
Bernanke to a Republican Congressman, defending the Central Bank's policy actions and noting that there is ‘scope for
further action’ should the Fed deem it necessary ‘after weighing the cost and benefits’. Though this stance is not new,
it increased the market's expectations of further stimulus in September, in the backdrop of last week's FOMC minutes. Mr
Bernanke's annual speech at the Jackson Hole is expected to offer some clues on the Fed's next policy move on September
13.
Despite a fairly steady start, risk currencies have subsided and AUD/USD dropped below 1.04, while EUR/USD is just
holding on to 1.25. Chinese markets are struggling after a report showed profit at China’s industrial companies fell for
a fourth month. However, it seems the downside is being limited by Premier Wen Jiabao’s comments on exports. He said
China needs targeted measures to promote steady export growth, which will help the nation meet its annual economic
goals, including speedier payment of export tax rebates and an expansion in financial products used to hedge foreign
exchange risks. Hong Kong’s Hang Seng is down 0.1%, while the Shanghai Composite has dropped 1.3%. Japan’s Nikkei has
added 0.4%, while the ASX 200 is up 0.1%. Apart from the FTSE which is closed for a bank holiday, most of the major
European bourses are likely to open relatively flat. US markets are likely to open mildly higher.
Market participants will continue to monitor the headlines for any comments from European leaders. The rhetoric ramped
up over the weekend following meetings between Antonis Samaras and Francois Hollande and Angela Merkel, with all parties
re-iterating the Greek membership to the eurozone, but Mr Hollande and Ms Merkel require Mr Samaras to stand behind his
promises. Europe will then ’do its part‘ after the Troika report is presented at the European Summit in October. From Mr
Samaras' meetings last week, it appears that the risks of a Greek exit have subsided, which should support euro in the
near term.
The local market has given up most of its early gains and is now only a touch higher. Apart from the leads we received
from the US and Europe over the weekend, there hasn’t been much to drive sentiment in today’s session. Only a few major
companies reported and they mostly disappointed today. Reporting were Caltex (-1.5%), Toll holdings (-1.1%) and
Billabong (+0.5%). BBG shares reversed earlier losses amid reports that a block trade representing 1.29% of shares
outstanding crossed at 11.10am. The company is currently subject to a takeover offer of $1.45 by private equity firm
TPG. Some of the commentary we received on outlook from reporting companies wasn’t too encouraging. Caltex said medium-
to longer-term margins are likely to be challenged as significant new capacity outstrips demand while Toll doesn’t see
conditions any easier in short-medium term.