Good afternoon,
FTSE 5779 -16
DAX 7214 -1
CAC 3517 -2
IBEX 7877 -6
DOW 13268 -39
NAS 2816 -9
S 1434 -4
Oil 96.33
Gold 1737
Asian markets are mostly positive on the back of hopes of further stimulus this week. Risk currencies rallied on Friday
after the US dollar was put on the back foot by a weak payrolls report. Non-farm payrolls rose by 96,000 in August,
falling considerably below the consensus call for a modest 130,000 rise. This increased hopes of a new QE announcement
in the FOMC meeting later this week on September 13. Risk sentiment in the Asian session has not remained quite as
buoyant as it was on Friday, with some subdued performances in the regional equity markets. EUR/USD has pulled back to a
touch below 1.28, while AUD/USD has dropped back to 1.0365. Investors have been digesting some data which was released
out of China over the past couple of days. Yesterday, China reported that its CPI ticked up to 2.0% year-on-year
(in-line with expectations), whilst industrial production came in a bit weaker than expected (8.9% versus 9.1%), the
lowest reading since May 2009. China President Hu Jintao was on the wires over the weekend at APEC summit, where he said
that a slowdown in exports has been putting downward pressure on growth, however he pledged to boost domestic demand and
promote more balanced growth.
Today, data showed China’s exports grew less than economists estimated from a year ago, while imports slumped,
dispelling forecasts of a rise, and suggesting weak domestic demand. This saw Chinese equities pare early gains and the
Hang Seng is now only up 0.1%, while the Shanghai Composite is up 0.3%. Japan’s Nikkei is underperforming the region
with a 0.3% drop on the back of a stronger yen. The steep fall in the 10-year Treasury yield after the US non-farm
payroll data coincided with a plunge in USD/JPY from 78.90 to 78.01. The China data which showed imports of iron ore
rose 7.9% in August failed to lift the resource-heavy ASX 200 which is currently flat. European markets are facing a
flat start, while US markets are likely to open mildly weaker.
The US dollar is likely to stay offered this week as it now seems consensus that the Fed will embark on a fresh round of
asset purchases. Whether this actually creates jobs is debatable, but equities and risk assets should like it and with
the added kicker of the fear of missing out, buying the dips here is probably the way to go. Of course the finer details
will need to be known, i.e. the size, duration and assets of choice (MBS/UST); will it give a full target or will it
announce it is unlimited and perform monthly purchases? European issues should get sorted out although there is a chance
of an upset at the Dutch elections and German constitutional ruling. Friday’s finance minister meeting may hold clues on
Greece’s next aid tranche, and it’s interesting to see the number of articles about Greece over weekend, potentially
becoming a sacrificial lamb.
The local market traded heavy for most of the session with only the resources sparking some buying interest after recent
falls. The gold miners are enjoying a day in the sun after the precious metal rallied and continues to hold near $1740.
Newcrest Mining has surged 4.5%, while Kingsgate and OceanaGold are both around 4% higher. Iron ore miners have also
been well bid today with Fortescue Metals advancing 5%. Consumer staples have lagged with Woolworths down 3.7% after
going ex-dividend.
Kind regards,
Stan Shamu
Market Strategist
IG Markets
ENDS