IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Equities finished off a very active 24hours on the macroeconomic front on a mixed note. The dominant theme was central banks pledging their commitment to stimulate an economic recovery. US equities edged higher as investors felt signs of strain in the jobs market will be enough to keep QE around for a while yet. Unemployment claims jumped to 385,000, while consensus was for a fall to 352,000. However, European equities struggled with investors shrugging off some dovish comments by ECB president Mario Draghi. Mr Draghi said ECB policy will remain accommodative and that the ECB will assess all the incoming data in the coming weeks and stand ready to act. Judging from some of the recent data we’ve seen out of the eurozone, we feel it’s only a matter of time before it springs to action. Mr Draghi also stated that the Cyprus bailout is not a template for future bailouts. His comments propelled EUR/USD higher, surging from around $1.276 to a high of $1.295. GBP/USD also responded in similar fashion, rising from $1.508 to a high of $1.525.

It’ll be all about Japan in Asia today after Governor Haruhiko Kuroda went above and beyond in his first meeting at the helm yesterday. With the BoJ effectively doubling JGB purchases, including 40y JGBs into buying, temporarily suspending the bank note rule and increasing the average duration of buying, many who expected it to disappoint would have been caught out. After days of underperformance, USD/JPY sprung from around 92.80 and posted a high of 96.42 in US trade. The pair is now within striking distance of its March highs, where key near-term resistance is. There were also some big moves in the crosses with AUD/JPY above 100 for the first time since August 2008. The Nikkei was down around 1.6%, but managed to turn this around to finish up 2.2%. We are currently calling the Nikkei up 5.4% today at 13,003. Japan’s Nikkei last traded above 13,000 in September 2008. At around midday, Mr Kuroda will be on the wires again but we doubt we’ll get any game changers from that speech.

Ahead of the open, we are calling the ASX 200 up 0.3% at 4930. Commodities experienced a strong recovery as the US dollar lost some steam. BHP’s ADR is pointing to a 1.1% gain to 32.12. Gold experienced a minor recovery which might help some of the local gold names come off yesterday’s lows. We expect to see the rest of the resource space respond in similar fashion today with investors bidding the cyclical plays higher. As investors start to look ahead to US non-farm payrolls data due out later today, we are likely to see plenty of US dollar positioning. This might have an impact on how commodities trade in Asia. Defensives and yield plays might lag the market today as investors focus on recent underperformers. Otherwise news is relatively thin on the stock front, and as a result, the macro themes are likely to dominate trade.

Market Price at 7:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0436 -0.0019 -0.18%
ASX (cash) 4930 16 0.3%
US DOW (cash) 14609 31 0.21%
US S&P (cash) 1558.6 4.3 0.27%
UK FTSE (cash) 6358 -48 -0.75%
German DAX (cash) 7831 -48 -0.61%
Japan 225 (cash) 13003 661 5.36%
Rio Tinto Plc (London) 30.14 -0.11 -0.36%
BHP Billiton Plc (London) 18.97 -0.03 -0.17%
BHP Billiton Ltd. ADR (US) (AUD) 32.12 0.35 1.11%
US Light Crude Oil (May) 93.37 -1.11 -1.17%
Gold (spot) 1553.45 4.8 0.31%
Aluminium (London) 1888 19 1.02%
Copper (London) 7453 113 1.54%
Nickel (London) 16144 156 0.97%
Zinc (London) 2078 40 1.95%
Iron Ore 135.90 0.3 0.22%

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.

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