FTSE 6107 -1
DAX 7729 -1
CAC 3712 +4
IBEX 8600 -32
DOW 13496 -11
NAS 2734 -2
S 1469 -2
Oil 94.00
Gold 1671
Asian markets are mixed after Fed Chief Ben Bernanke’s speech failed to sway markets significantly in either direction.
Risk assets remained fairly steady through European and US trade, with consolidation being the main theme of the day.
Some equity markets lost ground with a decline in Apple shares being the main drag. Markets were eyeing Fed Chief Ben
Bernanke’s speech at 8:00 this morning (AEDT) just as US markets closed, and we were expecting comments regarding QE. In
typical fashion the Fed Chief didn’t give away much and remained fairly neutral on most key aspects. However, it
certainly doesn’t seem like the Fed is in any rush to withdraw QE given the relatively fragile recovery and slow
progress in the labour market. Mr Bernanke said he doesn’t see significant inflation from policy and wants to see a
stronger labour market. The FX space has remained relatively calm with no major reaction to his comments. EUR/USD is
just shy of 1.34, AUD/USD is at 1.055 and USD/JPY is trading at 89.
We have seen a big move lower in USD/JPY heading into the afternoon part of Asian trade. The pair has dropped below 89
to a low of around 88.60 on the back of comments by Japan’s economic Minister Amari suggesting the yen has corrected to
a level in-line with fundamentals. This knocked some of the wind in USD/JPY’s sails, but the pair has since recovered to
around 89. Traders were hoping to continue to hear rhetoric supporting further yen weakness as it approaches the top-end
of their target range at 90. Investors in Japan didn’t get a chance to react to moves in the yen yesterday as the index
was closed for a holiday. The Nikkei is up over 1% today with 11,000 in its sights and at a 32-month high. We still feel
this will be a key level to look out for as it is likely to attract some selling after the recent gains, particularly
following the drop in USD/JPY. CPI data set to be released in the US session might also have some bearing on USD/JPY.
Elsewhere in the region, the Hang Sang, Shanghai Composite and ASX 200 are flat to mildly firmer. Ahead of the European
session, we are calling the major bourses relatively flat. It will be a busy day on the UK data front with CPI, PPI, the
BOE inflation letter and a speech by BOE Governor King. As a result, GBP/USD might be in for some volatility after
having held near 1.61 through most of Asian trade. US markets are facing a modestly weaker start with earnings
continuing to be in focus.
The local market has been treading water all day and remains relatively flat with most sectors marginally firmer. Once
again there is no dominant theme in place. Some of the defensive sectors are just leading the gains with consumer
staples and healthcare sectors holding up well. In the materials space, gold stocks are the standout performers today
after the precious metal gained some ground overnight. Newcrest is up around 1.7% and Medusa has risen 3.2%. The big
miners were mixed with BHP up 0.1% to $36.60 in thin trade, while RIO was down 0.75% on expectations that the company’s
Q4 production data will be disappointing when it’s released later today. Analysts are anticipating production to be down
by 1.2% from 51.2 million tonnes on-quarter. In local market news - Australian surf ware company Billabong (BBG) surged
12.43% to $0.945 on the back of a takeover bid from a US consortium. After moving its opening time back to 11:00 (AEDT),
the share price did not reach the offer price of $1.10, suggesting investors are unsure if BBG’s books will be
sufficient to match the offer. The $1.10 bid represents a 63% discount to the offer made by TPG in February last year,
capping off a very poor performance by the board.
ENDS