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IG Markets – Morning Prices 26 October 2010

IG Markets – Morning Prices

26 October 2010

In the US overnight, stocks finished the session firmer, and at their highest levels since April despite a late session sell off triggered by continuing concerns over the mortgage foreclosure crisis.

Once again, the technology laden NASDAQ was the top performer, up 0.5% while the Dow Jones Industrial Average and broad-based S&P 500 could only manage gains of 0.3% and 0.2% respectively.

Locally, the ASX 200 is called to open 0.3% lower at 4697, just below the all important 4700 level. All eyes are likely to be on the materials sector today after commodities and materials leads from the US all had a very strong night.

On the London Metals Exchange, base metals were all higher while in normal London equities trade, Rio Tinto and BHP Billiton rose 2.5% and 2.4% respectively. However, BHP’s ADR is only calling the locally listed entity 0.2% firmer.

Elsewhere, gains of 0.6% and 0.5% among consumer discretionary and healthcare names could spur some local sector buying interest today.

Leads for the financial sector weren’t great, with the US sector down 0.4%. Bank of America, JP Morgan and Wells Fargo were all weaker by more than 1.5% on mortgage foreclosure concerns. However, as we saw yesterday there was a lot of buying interest in the big four banks ahead of their full year results which start tomorrow. Whilst the leads may dampen the interest, we’d expect to continue to see healthy money flows.

In summary, it looks like the Australian market is going to open flat to slightly lower ahead of a relative quiet session in terms of corporate and economic news. Eyes are likely to focus on Asian trade for intra-session leads. There could be some caution ahead of tomorrow’s key CPI inflation reading.

In foreign exchange news, late Asian trade yesterday saw further positive capital flows into risk currencies as traders continued to warm to comments that G20 nations had agreed to turn their back on ‘competitive devaluations’. The stronger than expected PPI reading yesterday saw credit markets in Australia assign a 52% chance of an RBA rate hike next week, up from 38% earlier in the session.

The positive sentiment towards risk saw the AUD trade to an overnight high of 99.74 and the Euro push up to 1.4080; once again it showed that it couldn’t hold the 1.40 level, falling back towards 1.3965. The yen also strengthened to a new 15 yr high against the Greenback, pushing down to 80.41, only 0.8% from an all time low. The Yen should be well supported around 80.00 as below this level would almost certainly worry the Bank of Japan, heightening the chance of intervention.

What was interesting though was the greenbacks perverse relationship with good economic data. Again, better-than-expected existing home sales numbers, up for a second month in a row marked the high in the AUD. So rather than causing a rally in risk assets it actually caused the USD to rally; the theory is it in weakens the argument for QE from the Federal Reserve.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9903 -0.0028 -0.28%
ASX (cash) 4697 -13 -0.29%
US DOW (cash) 11159 -64 -0.57%
US S&P (cash) 1185.8 -8 -0.68%
UK FTSE (cash) 5740 -40 -0.69%
German DAX (cash) 6635 -41 -0.61%
Japan 225 (cash) 9369 -64 -0.68%
Rio Tinto Plc (London) 42.08 1.04 2.53%
BHP Billiton Plc (London) 22.53 0.54 2.43%
BHP Billiton Ltd. ADR (US) (AUD) 41.81 0.07 0.16%
US Light Crude Oil (Dec) 82.30 -0.14 -0.17%
Gold (spot) 1339.4 0.4 0.03%
Aluminium (London) 2370 5 0.21%
Copper (London) 8470 136 1.63%
Nickel (London) 23300 75 0.32%
Zinc (London) 2560 48 1.91%
RBA Cash Rate to be raised by 25bp (Nov) (%) 46.00 6 6.00%

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.

ENDS


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