IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets declined in US trade, with limited data releases to encourage participants to keep driving markets higher. Corporate earnings continued to dictate the negative tone as equities were sold off through European and US trade. Facebook was one of the few bright spots; its shares surged after its sales exceeded estimates. Some reports are suggesting that Spain’s GDP continues to contract at a much faster rate than expected, and this means the country will probably miss its deficit targets. Once again, there wasn’t anything specific weighing on markets, but rather a variety of factors holding market participants back from buying. We are also approaching the business end of the week on the economic calendar and this may be prompting caution among some investors. Risk currencies broke below the bottom of the recent tight ranges as risk sentiment waned. AUD/USD dropped beneath 1.03 to print a low of 1.0236, while EUR/USD finally lost its grip on 1.3 and went to as low as 1.295.

Ahead of the open, we are calling the Aussie market down 1.1% at 4495. The local market hasn’t traded below 4500 since October 17 and this level also presents near-term support. As a result, we could see some buying from this level as some investors look to capitalise on the pullbacks. Today is a big day for markets, with plenty of PMI numbers on the calendar. On the local front we’ll have CPI data to look out for, while China’s HSBC Flash manufacturing PMI will also play a big role in sentiment. Third quarter CPI is expected to rise 0.9%, which is well within the RBA’s inflation targets. Near-term support for AUD/USD is at the overnight lows ahead of 1.02. Near-term resistance is at 1.03 which had held as support for a while. Selling into strength remains the preferred strategy.

On a stock level, we expect a softer start for BHP Billiton, with its ADR suggesting the stock will fall 1.9% to $34.13. Commodities were broadly weaker apart from iron ore, which was flat. As a result we’ll probably see resource names come off at the open in response to the risk-off tone. OZ Minerals will be an interesting one to watch as brokers continue to react to its quarterly report yesterday. We could see the positive momentum continue, with the outlook for its key projects showing signs of improvement.

Market Price at 7:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0263 -0.0059 -0.57%
ASX (cash) 4495 -48 -1.06%
US DOW (cash) 13097 -243 -1.82%
US S&P (cash) 1410.3 -22.0 -1.54%
UK FTSE (cash) 5789 -104 -1.77%
German DAX (cash) 7184 -156 -2.13%
Japan 225 (cash) 8913 -118 -1.30%
Rio Tinto Plc (London) 31.33 -0.61 -1.92%
BHP Billiton Plc (London) 19.81 -0.48 -2.38%
BHP Billiton Ltd. ADR (US) (AUD) 34.13 -0.66 -1.89%
US Light Crude Oil (December) 86.50 -2.33 -2.63%
Gold (spot) 1706.6 -18.2 -1.05%
Aluminium (London) 1950 -8 -0.41%
Copper (London) 7853 -100 -1.25%
Nickel (London) 16398 -177 -1.06%
Zinc (London) 2033 -30 -1.44%
Iron Ore 117.5 0.00 0.00%

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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