IG Markets - Morning thoughts and opening prices

Good morning,

Risk sentiment improved through European and US trade, helped by mostly positive PMI releases. Italian and European PMIs came in slightly ahead of expectations, but remained in contractionary territory. Over in the US, the ISM manufacturing PMI came in at 51.5 versus 49.8 expected. However, UK PMIs fell well short to be at 48.4 versus 49.5 expected. There have been reports making the rounds suggesting Spain is close to requesting a bailout. With the eurogroup meeting approaching, we could start hearing talk about Spain requesting a bailout ramp up. Fed chief Ben Bernanke was also on the wires and basically reiterated what he said following the QE3 announcement. EUR/USD spiked to 1.294 but has since retreated to around 1.289 while, AUD/USD has dropped back to 1.036 after a rejection at the 1.04 level. The Aussie is in for a big day with the RBA decision due out and it is looking like it will be a close call.

Ahead of the open, we are calling the Aussie market up 0.5% at 4408. Today is all about the RBA and its monetary policy decision. The RBA is still widely expected to keep rates on hold, but there has been a growing number of analysts in the 25 basis-point cut camp. There isn’t much in the RBA’s way preventing them from cutting, but a wait-and-see approach might be the route it decides to go with to see how the various stimulus packages around the world impact Australia. If the RBA doesn’t cut, it’ll be interesting to dissect the statement with comments on the impact of the high Aussie dollar and whether or not it might act on it. There might also be a revision of tone on capex spending by the miners after we’ve recently seen big project cuts in the sector.

On a stock level, we expect a mildly firmer start for BHP Billiton with its ADR suggesting it will be up 0.5% at $33.29. After a fairly positive night for risk, the resource names are likely to be in for a positive start. Gold hit a high of $1792 and this should see the gold miners well supported today. Some of the ones to keep an eye on are Medusa Mining, OceanaGold and Regis Resources. Investors will also continue to monitor developments on the Arrium takeover bid. Interest-rate sensitive stocks, particularly in the retail space, could be big movers today depending on the RBA’s rate decision.

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.

STAN SHAMU
Market Strategist
www.igmarkets.com.au

ENDS

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