IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk appetite remained steady heading into the FOMC decision which is due in the early hours of tomorrow. The German Constitutional Court hearing offered little resistance for the bulls as the market risk-rally continued. As expected, the Court ruled the ESM ratifications as constitutional. This resulted in a modest rally in EUR/USD which traded above 1.29 and printed a high of 1.294. With another tail-risk event removed from the euro's path, buying the dips is likely to be the preferred strategy heading into the FOMC decision. Fed chief Ben Bernanke is widely expected to announce another round of quantitative easing. However, there is risk of disappointment in case the Fed surprises by not easing policy as much as the market expects.

Ahead of the open, we are calling the Aussie market down 0.1% at 4358. The main theme today will be positioning ahead of the FOMC meeting. It is clear that market participants are not sure how to play this event, but the general tone seems to suggest selling the fact might prevail. Looking at how our clients are positioned, 52% are short while 48% are long, which is a fairly even split and highlights the mixed opinions out there. AUD/USD briefly traded through 1.05 to a high of 1.05061 but has since retreated and is currently sidelined around the 1.046 level. There are a few economic events on the calendar, namely MI inflation expectations and the RBA bulletin. However, these two releases are unlikely to draw much attention with market participants mainly focusing on the Fed.

On a stock level, we expect a relatively flat start for some of the major resource names, with BHP Billiton’s ADR suggesting the stock will be unchanged at the open. If the moves in the commodities space are anything to go by, the resource sector is in for a quiet session. After the recent strong run, iron ore finally pulled back and closed at $98.10. Apart from the resources, Myer will be one to watch today with the retailer expected to post full-year earnings. Newscorp, Consolidated Media and Seven will be back in focus after the ACCC expressed its preliminary competition concerns about the proposed acquisition by Seven, arising from its review to date. The ACCC's final decision will be deferred until 11 October 2012.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0460 -0.0015 -0.14%
ASX (cash) 4358 -3 -0.07%
US DOW (cash) 13360 25 0.19%
US S&P (cash) 1442.4 4.6 0.32%
UK FTSE (cash) 5789 -2 -0.03%
German DAX (cash) 7349 24 0.32%
Japan 225 (cash) 8936 -24 -0.27%
Rio Tinto Plc (London) 30.78 0.07 0.24%
BHP Billiton Plc (London) 19.12 -0.07 -0.36%
BHP Billiton Ltd. ADR (US) (AUD) 32.85 -0.00 0.00%
US Light Crude Oil (October) 96.85 -0.36 -0.37%
Gold (spot) 1732.8 -4.5 -0.26%
Aluminium (London) 2080 6 0.28%
Copper (London) 8078 7 0.08%
Nickel (London) 16634 -174 -1.03%
Zinc (London) 2120 -9 -0.41%

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.

www.igmarkets.com.au

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