IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets were relatively mixed as investors weighed developments from the fiscal cliff negotiations and Japan following the elections. Newsflow from the weekend had been fairly positive, with the LDP super majority and House Speaker John Boehner offering to raise tax on households earning by more than a $1 million a year in exchange for containing the cost of federal entitlement programmes. However, European trade was mixed, but US markets managed to gain ground as some investors remained optimistic about the fiscal cliff negotiations. The optimism came despite some reports suggesting Democrats and Republicans are now starting to weigh the benefits of waiting until January to reach a budget deal. Looking at the risk currencies, EUR/USD remained subdued as European growth continues to be a concern. ECB president Mario Draghi was on the wires and reiterated that the medium-term outlook for the eurozone economy remained challenging. This saw EUR/USD sidelined at 1.316. AUD/USD managed to hold above 1.052 and printed a high of 1.0555 in US trade.

Ahead of the open, we are calling the Aussie market up 0.4% at 4593. It is difficult to see the local market challenge last week’s highs above 4600 until the fiscal cliff negotiations show more positive signs. As it stands, we are likely to maintain tight ranges below 4600 with a degree of caution being exercised by investors. On the local economic front, we have the monetary policy meeting minutes due out at 11.30am and these will be interesting to watch after the recent rate cut. We have seen some of the big banks say they expect more cuts next year and perhaps the minutes will give some clarity as to what we can expect next year. Japan will also remain in focus ahead of Thursday’s BoJ meeting. USD/JPY hasn’t done much and is hanging around 83.80 after having traded as high as 84.36 yesterday.

On a stock level, we expect to see a firmer start for BHP Billiton, with its ADR pointing to a 0.7% rise to $36.62. The big iron ore miners had a solid session yesterday and are likely to be in for yet another strong session after iron ore prices climbed to $132.20. They have been rising continuously since December 3 when it was trading at $115.30, and it certainly seems like confidence in that space is returning after the recent run of data from China. We will also continue to monitor Billabong after reports suggesting it received a takeover bid at $1.10 a share.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0549 0.0008 0.08%
ASX (cash) 4593 19 0.42%
US DOW (cash) 13238 62 0.47%
US S&P (cash) 1428.6 4.8 0.33%
UK FTSE (cash) 5916 -10 -0.17%
German DAX (cash) 7614 -9 -0.12%
Japan 225 (cash) 9893 52 0.53%
Rio Tinto Plc (London) 34.67 0.77 2.28%
BHP Billiton Plc (London) 21.24 0.29 1.38%
BHP Billiton Ltd. ADR (US) (AUD) 36.62 0.27 0.73%
US Light Crude Oil (January) 87.87 0.95 1.09%
Gold (spot) 1698.20 7.7 0.46%
Aluminium (London) 2108 -15 -0.71%
Copper (London) 8051 -41 -0.50%
Nickel (London) 17696 -178 -1.00%
Zinc (London) 2308 12 0.54%
Iron Ore 132.2 2.90 2.24%

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.

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