IG Markets - Afternoon Thoughts

IG Markets - Afternoon Thoughts

FTSE 5842 +16

DAX 7363 +41

CAC 3423 +17

IBEX 7856 +29

DOW 13559 +64

NAS 2830 +5

S&P 1458 +7

Oil 88.28

Gold 1782

Asian markets have edged higher despite some mixed leads from European and US trade. Services PMI releases in Europe mostly disappointed, while investors also remained cautious on Spain and Greece. Prime Minister Mariano Rajoy’s stance that a bailout is not imminent continues to hold and the Troika review of Greece is still ongoing. Risk assets held a bit better in the US session after the ADP non-farm employment change and the ISM non-manufacturing PMI both exceeded expectations. Looking at the risk currencies, EUR/USD has managed to drift away from the 1.29 and is heading to yesterday’s high from the European session of 1.2937. AUD/USD has been quite choppy and even ventured below 1.02 before a minor recovery.

We have seen futures drift higher in Asian trade and some analysts have attributed this to the US presidential debate, which Republican candidate Mitt Romney reportedly edged. Japan’s Nikkei is leading the gains in the region after rising 1.4% on the back of a weaker yen. USD/JPY has been the biggest mover among the majors with the pair surging to a high of 78.72 ahead of some key economic releases tomorrow. It seems some of the USD/JPY sellers are a bit sceptical ahead of Friday’s monetary policy decision and statement. The recent appointment of Finance Minister Koriki Jojima has certainly seen some yen traders get back to the drawing board. Japan officials will be happy to see the current price action on the yen as its weakness is always a boost for Japan’s big export sector. Elsewhere in the region, the ASX 200 and Hang Seng are around 0.2% firmer. US and European markets are now pointing to modest gains at the open after having been flat earlier.

There is plenty of action later today with the ECB set to take centre stage yet again. Europe’s minimum bid rate is expected to remain on hold at 0.75% and this will be followed by the ECB’s press conference. There is also plenty of action in the UK with the BOE’s official bank rate and MPC rate statement due out. No change in policy is expected for the official bank rate. The MPC will also announce its asset purchase facility, where the consensus is for no change in size. Over in the US, we have unemployment claims and the FOMC meeting minutes as the main events on the calendar.

The ASX 200 is currently up 0.2% after printing a new high of 4455.4 which is only a touch higher than yesterday’s 4454.6 high. This zone is clearly now near term resistance. If it wasn’t for the weakness in the resource space today, then maybe we could have seen a more assertive challenge of this level. A sharp drop in oil prices set the tone for the resources today with BHP Billiton declining 1.5% and Woodside Petroleum shedding 1.2%. Financials have helped offset the weakness in the resource space with all the big four banks rising at least 1% each. There have been a few takeover stories to monitor today. Discovery Metals has been in a trading halt after receiving a $830 million takeover offer from Chinese private equity firm Cathay Fortune Corp. Billabong has dropped over 18% on speculation TPG is withdrawing its takeover bid.

www.igmarkets.com.au

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