IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Contrary to the positive momentum we saw in the Asian session, risk sentiment took a hit in European and US trade, with a lack of positive rhetoric from Europe mostly to blame. With various meetings taking place among European leaders and officials, market participants were hoping to get some market friendly news, particularly on the Spanish front. Heightening tension in the Middle East also contributed to the negative tone and resulted in a jump in crude oil prices. Elsewhere in the commodities space, iron ore prices put on another 6% to $117.20. EUR/USD came just shy of 1.3 before a big rejection took it below 1.29 to a low of 1.286. AUD/USD also experienced a sharp reversal from around 1.025 down to 1.0175.

Ahead of the open, we are calling the Aussie market down 0.7% at 4475. Of course, yesterday we charged through 4500 on the back of strength in China lifting the big resource names. A big liquidity injection into the country’s money markets was perhaps the main reason for the gains. It will be interesting to see if speculation of China stimulus will rescue equities in the region yet again today. We have seen this happen a little too often without any concrete announcements to support the motion. On the local economic front, we only have Westpac consumer sentiment. Elsewhere in the region, BoJ Governor Masaaki Shirakawa will be on the wires yet again today.

On a stock level, we expect a softer start for BHP Billiton, with its ADR suggesting the stock will be down 0.5% at $33.29. However, with iron ore and crude oil prices rising, we could see some buying kick in. Fortescue will be one to watch as it approaches the $4 mark following a big rally yesterday. Alcoa reported earnings and revenue that topped analysts’ expectations and this could have some positive bearing on Alumina’s stock today. Westpac has been downgraded to Underweight (from Neutral) by JPM. The stock was trading at its highest level since April 2010 yesterday. If we are to keep advancing from these levels, we would have to see a cyclicals-led rally as the defensive names just seem a bit toppish after the recent run. Of course, many investors had grown increasingly bearish on China and any action alleviating China concerns would be very market friendly.

Market Price at 7:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0208 -0.0021 -0.21%
ASX (cash) 4475 -30 -0.67%
US DOW (cash) 13487 -102 -0.75%
US S&P (cash) 1440.8 -15.0 -1.03%
UK FTSE (cash) 5798 -58 -0.99%
German DAX (cash) 7221 -89 -1.21%
Japan 225 (cash) 8678 -106 -1.21%
Rio Tinto Plc (London) 30.30 0.45 1.51%
BHP Billiton Plc (London) 19.35 0.12 0.62%
BHP Billiton Ltd. ADR (US) (AUD) 33.29 -0.18 -0.53%
US Light Crude Oil (November) 92.34 2.22 2.47%
Gold (spot) 1764.0 -14.1 -0.80%
Aluminium (London) 2049 -38 -1.83%
Copper (London) 8158 -69 -0.84%
Nickel (London) 17935 -306 -1.68%
Zinc (London) 2253 -17 -0.73%

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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