IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

The risk rally which emanated from the Asian session extended into European and US trade. This occurred on speculation that China will act on stimulus and after Spain’s budget appeased. Spain stuck to its deficit targets for 2012 and 2013 and presented reforms that would reduce overall spending by €40 billion. The idea was for Spain to present reforms that would receive the EU’s stamp of approval and pave the way for a bailout. It seems it achieved that and received some positive comments from EU leaders like Oli Rehn who felt it goes beyond EU recommendations. AUD/USD rallied from a low of 1.0328 to a high of around 1.046, while EUR/USD spiked from 1.283 to 1.293. Gains in risk assets came despite some mixed data releases from the US including worse-than-anticipated pending home sales, but above expectations unemployment claims.

Ahead of the open, we are calling the Aussie market relatively flat at 4384. The rally seen in yesterday’s afternoon session from the lows seems to have done enough to price in the gains we saw in European trade. However, the momentum still seems to be positive and we may see local equities bid up on the last trading day of the quarter. Based on this opening call, the ASX 200 is up 7.1% for the quarter. It was not all positive from China yesterday as Baosteel decided to close a loss-making steel mill in Shanghai and reports that a big number of Chinese iron ore mines have suspended operations.

On a stock level, we expect a flat open for BHP Billiton with its ADR suggesting it will be trading at $33. Gold rallied to around $1780 which is just below the recent high of $1787. As a result we could see gold miners well supported today and end the quarter on a strong note. On the local economic front, we have private sector credit data due out at 11.30am, and this could have some bearing on the banks. However, we feel this will be a minimal impact as investors continue to chase yields from the banks. Financials have been some of the best performers of the quarter.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0443 0.0028 0.27%
ASX (cash) 4384 -0 -0.01%
US DOW (cash) 13482 -2 -0.01%
US S&P (cash) 1445.2 6.4 0.44%
UK FTSE (cash) 5799 3 0.05%
German DAX (cash) 7326 -2 -0.03%
Japan 225 (cash) 8950 0 0.00%
Rio Tinto Plc (London) 28.84 0.43 1.52%
BHP Billiton Plc (London) 19.32 0.24 1.24%
BHP Billiton Ltd. ADR (US) (AUD) 33.00 -0.02 -0.06%
US Light Crude Oil (November) 92.10 1.68 1.85%
Gold (spot) 1777.8 19.7 1.12%
Aluminium (London) 2110 19 0.93%
Copper (London) 8208 25 0.30%
Nickel (London) 18378 231 1.27%
Zinc (London) 2284 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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