IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

After a fairly positive European session, risk assets finally gave up their grip in US trade as investors focused on comments suggesting QE3 won’t work. Philadelphia Fed President Plosser suggested that QE3 is unlikely to be effective, with the labour market likely to improve only gradually. With markets appearing a bit toppy and investors looking for an excuse to sell after the recent run, it’s not too surprising that this headline resulted in a sell-off. AUD/USD slipped from around 1.046 down to 1.038, while EUR/USD declined from 1.297 to 1.29. Both currency pairs are now testing some key support levels, a break of which could result in a sharp pullback to the lows from around 11 September. The losses came despite some positive data from the US crossing the wires, including a better-than-expected CB consumer confidence reading and a significant improvement in the Richmond manufacturing index. Over in Europe ECB President Mario Draghi defended the OMT programme, but the negative tape continued to roll out of Spain.

Ahead of the open, we are calling the Aussie market down 0.6% at 4342. This leaves the market testing a key support range and we could see some buying kick in as investors capitalise on the dips. There is an uptrend support line from the late June lows and previous resistance which kicks in at around 4350. On the economic front, it is a fairly quiet day in the Asian region with no major releases on the calendar. However, over 150 Japanese stocks go ex-dividend today and this is likely to weigh on the Nikkei.

On a stock level, we expect a softer start for BHP Billiton with its ADR suggesting it will be down 1.3% at the open to $32.77. The resource space is likely to come under pressure early in the session with the Caterpillar profit warning from yesterday continuing to dampen sentiment. We could see profit taking accelerate on some of the industrial names like Monadelphous Group due to the vastly changing dynamics of the commodity markets. A story in the AFR suggesting Woolworths may complete the Dick Smith sale in the next week at a lower-than-expected price could weigh on the supermarket giant.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0384 -0.0040 -0.38%
ASX (cash) 4342 -28 -0.63%
US DOW (cash) 13489 -90 -0.66%
US S&P (cash) 1442.1 -14.8 -1.01%
UK FTSE (cash) 5819 -27 -0.46%
German DAX (cash) 7360 -61 -0.82%
Japan 225 (cash) 8949 -143 -1.57%
Rio Tinto Plc (London) 29.40 -0.40 -1.35%
BHP Billiton Plc (London) 19.54 0.05 0.26%
BHP Billiton Ltd. ADR (US) (AUD) 32.77 -0.43 -1.29%
US Light Crude Oil (November) 91.22 -0.75 -0.81%
Gold (spot) 1762.1 -1.0 -0.05%
Aluminium (London) 2101 13 0.63%
Copper (London) 8257 39 0.47%
Nickel (London) 18390 318 1.76%
Zinc (London) 2312 45 2.00%

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

ends

© Scoop Media