IG Markets - Morning Thoughts
Risk assets were mixed through Europe and US trade ahead of the ECB press conference later today. The euro spiked on
reports that the ECB will undertake an unlimited and sterilised buying of sovereign debt with maturities of up to three
years, but would refrain from setting yield caps. EUR/USD advanced to a high of 1.2625 and remains sidelined above 1.26.
German CDU lawmaker Norbert Barthle reported that Angela Merkel accepts a temporary ECB programme for short maturity
bonds, but stays opposed to ‘unlimited’ bond buying. The spreads on peripheral bonds narrowed further, Spanish 10-year
yields contracted by 16 basis points (bp), while German 10-year yields rose by 8 bp. Other risk currencies like AUD/USD
did not quite enjoy the same move as the euro. The pair seems to be settling into a new range around the 1.02 level.
Ahead of the open, we are calling the Aussie market up 0.4% at 4292. We are likely to see some ranging ahead of the ECB
press conference. Given most market participants already feel they have a good idea of what the ECB will announce, the
ECB meeting today might initially be viewed as a disappointment, since it may be slightly early for the presentation of
the finer details and modalities of the bond-buying programme. However, we might see this moderated as the market
realises that bond intervention is just a question of time. Locally, the jobs numbers will be the key event of the
session with the unemployment rate expected to creep up to 5.3% with 5100 jobs added. Should the data disappoint, we
could see AUD/USD take another leg lower with near-term support close to overnight lows at 1.0177.
On a stock level, we expect a firmer start for BHP Billiton with its ADR pointing to a 0.3% rise to $31.14. Once again
iron ore and gold miners will be in focus after the recent price action we’ve seen in both resources. Lynas Corp will
also be one to watch with a strong start tipped after saying it received a temporary operating license from the
Malaysian board and expects to reach full production rate by end-2013. Qantas is reported to have sealed a joint venture
alliance with Emirates and this will put the airline firmly in focus today. Billabong has just announced it has received
a proposal from another party.
MarketPrice at 6:30am AESTChange Since Australian Market ClosePercentage Change
AUD/USD 1.0194 -0.0003 -0.03%
ASX (cash) 4292 15 0.35%
US DOW (cash) 13063 45 0.35%
US S (cash) 1408.4 4.0 0.28%
UK FTSE (cash) 5664 -2 -0.03%
German DAX (cash) 6969 29 0.41%
Japan 225 (cash) 8683 3 0.04%
Rio Tinto Plc (London) 27.18 -0.04 -0.16%
BHP Billiton Plc (London) 17.79 -0.48 -2.63%
BHP Billiton Ltd. ADR (US) (AUD) 31.14 0.09 0.28%
US Light Crude Oil (October) 95.97 0.77 0.81%
Gold (spot) 1693.1 1.3 0.07%
Aluminium (London) 1964 31 1.60%
Copper (London) 7734 120 1.58%
Nickel (London) 16066 51 0.32%
Zinc (London) 2028 33 1.66%
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