IG Markets - Afternoon thoughts Sept 19

FTSE 5884 +16
DAX 7399 +51
CAC 3527 +14
IBEX 8051 -7
DOW 13621 +56
NAS 2867 +10
S&P 1465 +6

Oil 95.90
Gold 1771

Asian markets are mostly higher after having been stuck in tight ranges in the morning session. Japan’s Nikkei 225 has surged 1.6% after the Bank of Japan (BoJ) expanded its asset-purchase program today. The BoJ held its target rate at 0.10% and boosted asset purchases by ¥10 trillion. The Central Bank increased its asset-purchase fund to 55 trillion yen from 45 trillion yen and its lending facility was kept at 25 trillion yen. The move is another effort to prevent a rising yen from undermining an economic recovery. This has resulted in a spike in USD/JPY which is now trading above 79. The moves in Japan have lifted the rest of the region, with the ASX 200 and Chinese markets also pushing higher. After having been flat all morning, the ASX 200 has climbed half a per cent and has broken out of the recent resistance zone at around 4400, which had held it back for a while. Over in China, the Hang Seng is 1% higher and the Shanghai Composite has added 0.2%.

Risk currencies have come off their lows of the Asian session, but still remain relatively range-bound. AUD/USD has drifted higher from around 1.046 to 1.044, while EUR/USD has climbed to 1.307. Japan’s announcement certainly seems like it was the catalyst market participants were looking for and has ignited sentiment in the Asian session. Following the move higher in Asia we are now expecting to see some modest gains for US and European markets at the open. There is nothing on the economic calendar in Europe today, but market participants will continue to monitor the wires for any comments by European leaders on Spain/Greece and other issues.

FOMC members William Dudley and Charles Evans were on wires yesterday backing the Fed's policy decision. Mr Evans noted that the unemployment rate will fall below 7% by the end of 2014 due to QE3. Mr Dudley acknowledged that Fed tools ’aren't perfect‘ for stimulating growth and the Central Bank is ’not out of ammunition‘ for more measures. Ahead today, Ben Bernanke is scheduled to meet with the Senate Finance Committee to discuss economy and 'fiscal cliff'. No major announcements are expected after the private meeting. Also on the calendar we have US building permits, housing starts, existing home sales and crude oil inventories.

The local market has printed 4421, its highest level since 4 May. This leaves it with the May 1 high of 4448.5 firmly in sight and previous resistance at 4400 providing some near-term support. Today’s recovery can be mainly attributed to the rise in major resource names which are now well off their lows of the session. BHP Billiton is up 0.4% and Rio Tinto has risen 0.8%. Fortescue Metals (+6.3%,) extending its gains from yesterday after also benefitting from a broker upgrade. Macmahon Holdings (-40%) resumed trading today and its shares got hammered after announcing it now expects its full-year profit after tax will be between $20 million and $40 million, down from its forecast last month that profit would grow by 20% to around $67 million. David Jones is down 0.5% after reporting earnings at the lower end of guidance.

www.igmarkets.com.au

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