IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets were broadly risk-off through European and US trade with losses of around half a percent for major European bourses and the S&P. There was no dominant theme dampening sentiment, but rather a variety of factors that kept the bulls at bay. Alcoa’s move to cut its forecast for global aluminium demand revived some of the growth concerns markets have been facing. This weighed on several industrial and materials names, as well as some commodities. Chevron delivered a disappointing earnings report which saw its shares slump over 4% and helped fuel concerns over corporate earnings. The Fed’s Beige Book report showed consumer spending was flat to mildly higher, while conditions in manufacturing were ‘somewhat improved’. There was also some positive economic data in Europe as French and Italian industrial production came in better than expected. Moves in the risk currencies space were surprisingly more resilient than equities. AUD/USD spiked to 1.0263 before retreating to around 1.024, while EUR/USD was steady at 1.29. A headline just crossed the wires that Spain was cut to BBB- (from BBB+) by S&P - outlook negative. EUR/USD lost its hold of the 1.29 level and dropped to 1.288. Support is at the 200-day moving average at around 1.282.

Ahead of the open, we are calling the Aussie market down 0.7% at 4457. Traders will be eyeing previous resistance at 4448 as near-term support should we fall below this opening call. This is similar to what we were expecting yesterday when equities found buying support at the lows and managed to recover into the close. It just seems markets are in a holding pattern as they await a new catalyst. On the local economic front, we have jobs numbers due out and this is generally a high impact announcement. Any signs of a weakening in the jobs market are likely to weigh on the Aussie dollar further after having been sold off on the back of last week’s rate cut. The unemployment rate is expected to rise to 5.3% with 5100 jobs added. Should the data come in better than expected, we are still likely to see selling into strength as the preferred strategy by traders.

On a stock level, we expect a softer start for BHP Billiton with its ADR suggesting it will be down 0.6% at $33.26. Iron ore prices remained fairly stable and were marginally higher at $117.70. However, crude oil prices retreated from the previous day’s highs. Consumer staples (Woolworths and Wesfarmers) might get a lift after Costco’s earnings topped estimates. In the media space, the ACCC is set to rule on whether it would allow Seven Group to bid for Consolidated Media (CMJ). Newscorp already has a bid for CMJ.

Market Price at 7:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0231 0.0004 0.03%
ASX (cash) 4457 -33 -0.74%
US DOW (cash) 13314 -154 -1.14%
US S&P (cash) 1427.9 -12.4 -0.86%
UK FTSE (cash) 5768 -20 -0.35%
German DAX (cash) 7186 -27 -0.38%
Japan 225 (cash) 8530 -88 -1.02%
Rio Tinto Plc (London) 30.03 -0.27 -0.88%
BHP Billiton Plc (London) 19.20 -0.15 -0.79%
BHP Billiton Ltd. ADR (US) (AUD) 33.28 -0.20 -0.59%
US Light Crude Oil (November) 91.32 -0.79 -0.85%
Gold (spot) 1762.6 -1.6 -0.09%
Aluminium (London) 2008 -34 -1.68%
Copper (London) 8165 15 0.18%
Nickel (London) 17656 -253 -1.41%
Zinc (London) 2197 -41 -1.84%

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.

www.igmarkets.com.au

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