IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

After a big rally at the end of last week, we finally saw risk assets pull back. There was no specific reason for the subdued risk environment but it seems some concerns surrounding Europe were part of the reason why markets struggled. EUR/USD managed to hold above 1.31 during US trade even as Spanish yields continued to inch higher. Unfortunately, AUD/USD did not fare as well with the pair dropping to a low of 1.0455. This effectively erased all the gains the pair made on the QE announcement. Near-term support for the pair is at 1.045. German Chancellor Angela Merkel noted that it is unlikely that the single banking oversight will be functional by January 2013 and added that it is more important to take ’credible steps’ than ‘act quickly’. It appears that markets have to wait longer than expected to get clarity on Greece, Spain and the banking supervision. This continued delay could put downward pressure on the euro and other risk assets.

Ahead of the open, we are calling the Aussie market down 0.2% at 4396. The markets managed to close a touch above 4400 yesterday and no doubt this level will be in focus again today. The momentum is still to the upside, so we wouldn’t be surprised to see market participants buying the early dips. The materials and energy sectors are expected to contribute to the bulk of early losses. We saw some sharp moves in the commodities space with oil dropping around 3% without any concrete explanation as to why it happened. However, iron ore had another positive session with prices rising to $105.10. Today we have monetary policy meeting minutes and RBA Assistant Governor Debelle’s speech on the economic calendar.

On a stock level, we expect a softer start for BHP Billiton with its ADR suggesting it will be down 0.4% at the open to $34.02. Fortescue Metals is expected to return to trade today once it makes an announcement regarding its funding issues. The general consensus is that the issues will have been resolved and we could see the stock recover once it resumes trading. Macmahon Holdings is yet to update the market on its earnings forecast. The company went into a trading halt yesterday and flagged a profit warning due to a deteriorating construction business and uncertain outlook.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0472 -0.0064 -0.61%
ASX (cash) 4396 -6 -0.15%
US DOW (cash) 13545 -21 -0.15%
US S&P (cash) 1457.7 -8.6 -0.59%
UK FTSE (cash) 5871 -13 -0.21%
German DAX (cash) 7388 4 0.05%
Japan 225 (cash) 9215 55 0.60%
Rio Tinto Plc (London) 32.16 -0.66 -2.00%
BHP Billiton Plc (London) 20.28 -0.22 -1.05%
BHP Billiton Ltd. ADR (US) (AUD) 34.02 -0.13 -0.37%
US Light Crude Oil (October) 96.11 -2.97 -3.00%
Gold (spot) 1759.3 -14.7 -0.83%
Aluminium (London) 2157 -20 -0.92%
Copper (London) 8291 -31 -0.37%
Nickel (London) 18100 298 1.67%
Zinc (London) 2252 10 0.42%

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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