IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Markets were broadly risk-on through European and US trade on the back of some encouraging economic data and optimism about Spain requesting a bailout. The German ZEW economic sentiment index rose to -11.5 (from -18.2), beating a consensus of -14.6. European trade balance figures also exceeded expectations coming in at EUR9.9 billion versus EUR8.4 billion expected. Over in the US, core CPI remained unchanged at 0.1%, while industrial production rose a better-than-anticipated 0.4% (versus 0.2% consensus). These mostly positive data prints helped drive sentiment and lifted risk assets across the board. EUR/USD was a standout, as it charged through 1.3 and rallied to 1.31 early in the Asian session. Comments suggesting Germany is loosening its opposition to Spain requesting a bailout contributed to the euro’s gains. Moody’s decision to reaffirm Spain’s credit rating has given risk currencies an extra kicker this morning. AUD/USD is now trading just shy of 1.029 after having been as low as 1.025 in US trade.

Ahead of the open, we are calling the Aussie market up 0.7% at 4521. This would effectively see the ASX 200 fill the gap from 27 July last year. After a relatively poor showing by some of the resource names yesterday, we should see a strong rebound in some of the resource names after commodities firmed. On the local economic front, we do not have much on the calendar today except for the MI leading index. Tomorrow, day one of the EU Summit will be the headline and could be a source of caution by investors leading into it. We also have another US presidential debate early in the Asian session, which could have some bearing on the US dollar.

On a stock level, we expect a firmer start for BHP Billiton with its ADR suggesting it will rise 1.6% to $33.60. Investors will be focusing on production reports from the big iron ore miners. Both miners have seen iron ore production exceed analyst expectations but copper production has disappointed for both. However, copper is not quite as significant on the earnings front for both miners. Defensive names are likely to underperform today as investors play catch-up with some of the cyclical names.

Market Price at 7:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0276 0.0011 0.11%
ASX (cash) 4521 30 0.66%
US DOW (cash) 13535 98 0.73%
US S&P (cash) 1454.3 12.8 0.88%
UK FTSE (cash) 5882 46 0.79%
German DAX (cash) 7387 76 1.04%
Japan 225 (cash) 8778 93 1.07%
Rio Tinto Plc (London) 30.61 0.87 2.93%
BHP Billiton Plc (London) 19.50 0.23 1.21%
BHP Billiton Ltd. ADR (US) (AUD) 33.60 0.53 1.62%
US Light Crude Oil (November) 92.14 0.20 0.21%
Gold (spot) 1747.5 10.7 0.61%
Aluminium (London) 1960 -22 -1.13%
Copper (London) 8139 -23 -0.28%
Nickel (London) 16864 -343 -1.99%
Zinc (London) 2122 -2 -0.11%

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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