IG Markets - Afternoon Thoughts
FTSE 5933 +3
DAX 7601 +19
CAC 3647 +4
IBEX 8018 +1
DOW 13193 +22
NAS 2658 +4
S 1422 +3
Oil 86.49
Gold 1697
Risk sentiment has certainly picked up in Asian trade, helped by a strong reading for China’s HSBC flash manufacturing
PMI. Asian markets are mostly higher despite some negative leads from US trade. US markets lost ground on the back of
renewed fiscal cliff concerns. These negative leads fed through to regional equities at the open, but we have since seen
these losses reversed. The HSBC flash manufacturing PMI reading showed an improvement to 50.9 (from 50.5) and most
importantly remained in expansionary territory. There are definitely clear signs of stabilisation in China and this is
feeding the reversal we are seeing in risk assets. This has also helped regional markets brush off the disappointing
Japan Tankan manufacturing index reading released earlier. As it stands, Asian markets look set to finish the week on a
positive note. We are also seeing some positive moves in the forex space with EUR/USD approaching 1.31 and AUD/USD back
around 1.053. The yen crosses have been even more impressive, with USD/JPY breaking above yesterday’s high of 83.68 and
printing a high of 83.93. Unfortunately, yen weakness has not quite fuelled the Nikkei today as it is underperforming
and is relatively flat after having had a strong run higher yesterday. It seems investors have decided to exercise
caution on the back of weaker-than-expected Japan Tankan manufacturing index reading and also positioning ahead of the
elections.
Looking at the equities in the rest of region, China is well in front after getting a boost from the strong
manufacturing PMI reading. The Hang Seng is up 0.5% and the Shanghai Composite has surged 2.9%, while the ASX 200 has
only managed a 0.2% gain. Ahead of the European open, we are calling the major bourses mildly firmer. Market
participants will have to contend with a swathe of economic data set to be released later today. We have French, German
and European manufacturing and services PMI numbers due out as well as European employment change and CPI. These numbers
will be closely watched and will likely have a bearing on EUR/USD which is just nudging 1.31 at the time of writing. US
markets are also facing a firmer open with CPI, manufacturing PMI and industrial production in focus. With so many
economic performance/growth metrics set to be released, we are in for an interesting finish to the week. Apart from
this, all eyes fall on the Boehner/Obama meeting later today, although it’s hard to believe they are going to suddenly
find some common ground after detailing just how far apart they were yesterday.
The ASX 200 has risen 0.2% and is trading at 4596 despite some negative leads from Wall Street. For the week, the local
market has tacked on 0.9% at current levels. Local shares remain resilient with the materials sector taking charge. It
seems the recent strength in iron ore prices has encouraged investors to buy up the iron ore names. Some of the best
performers in the materials sector are Fortescue Metals (+1%), Newcrest Mining (+2.8%) and Atlas Iron (+4%). The big
banks are mostly higher with CBA rising 0.9% and NAB climbing 0.3%. APN has dropped 9.5% after releasing a 2012 trading
update today in which it highlighted some of the challenges the company is currently facing and issued a downgrade. APN
downgraded 2012 adjusted net income to $51-$54 million (from $59.5 million), well below consensus estimates of around
$61 million. Its earnings are being impacted by the deterioration of publishing revenue in Australia. Goldman Sachs
maintains a sell rating on the company and cut its price target to $0.28. Due to the disappointing update, we expect APN
shares to come under pressure today. Insurance Australia Group (IAG) is down 1.6% after announcing it will sell its UK
business to Aquiline Capital Partners. Although IAG is making a loss on the deal, analysts feel investors are likely to
look towards future growth with the ongoing loss issues of the UK business removed. Although the stock has retreated
today, this seems like a short-term pain long-term gain situation. Key near-term support for the stock is at the $4.70
level ahead of $4.50.
STAN SHAMU
Market Strategist
IG, 417 St Kilda Road, Melbourne, 3004
D: +6198601711 ext 81747 | M: | T: +61398601711
www.igmarkets.com
CREATING OPPORTUNITY
CFDs and FOREX TRADING
The information contained in this email is strictly confidential and for the use of the addressee only, unless otherwise
indicated. If you are not the intended recipient, please do not read, copy, use or disclose to others this message or
any attachment. Please also notify the sender by replying to this email or by telephone (+61 (3) 9860 1711) and then
delete the email and any copies of it. Opinions, conclusions (etc.) that do not relate to the official business of this
company shall be understood as neither given nor endorsed by it. IG Markets Limited, (ABN 84 099 019 851) is authorised
and regulated in Australia by the Australian Securities and Investments Commission (AFSL No. 220440). Authorised Futures
Dealer in New Zealand, Company No.2249573.
Any advice contained in this e-mail is general advice and has been prepared without taking into account your objectives,
financial situation or needs and IG Markets recommends that you consider whether it is appropriate for your
circumstances. If this e-mail contains reference to any financial products, IG Markets recommends you consider the
Product Disclosure Statement (PDS) before making any decisions regarding any products.