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IG Markets – Morning Prices 20 October 2010

IG Markets – Morning Prices

20 October 2010

Overnight, US markets suffered their heaviest losses in almost two months due to USD strength (courtesy of a surprise Chinese rate hike) and news that Bank of America was being sued by a consortium of investors to repurchase problematic mortgages.

The Dow Jones Industrial Average shed 165 points or 1.5% - at one stage having been down more than 220 points, the S&P 500 fell 1.6%, while the NASDAQ was the worst performer, plunging 1.8%.

Stocks opened the session lower on the back of weakness in Apple and IBM, who both disappointed the market with forward-earnings outlooks after the bell of the previous session. Weakness across these two names, combined with news China had hiked interest rates to curb domestic inflation, sparked a USD rally which saw a precipitous unwind of gold, oil, base metals and risk currencies

Last night’s price action just goes to show how much the weaker USD, resulting from the prospect of further QE, has artificially inflated various asset classes and currencies. It also sets us up for a pretty poor session here in Australia.

The ASX 200 is called to open 33 points or 0.7% weaker at 4623, which would be quite a good result for the local market in light of US leads. That said, there is an obvious downside bias to this opening level with the financial, materials and energy sectors likely to come under heavy selling pressure. Losses though should be relatively broad based.

The weaker USD saw commodity prices smashed last night with BHP’s ADR suggesting the local stock will open 1.3% weaker, while pure play miners are also likely to come under heavy selling pressure.

The dramatic fall in the AUD overnight from 0.9875 to 0.9680 will no doubt be a talking point and a great trading opportunity for those convinced the fundamentals are in place for the AUD to once again retest parity with the USD.

One stock to watch closely this morning is Ten Network. Yesterday after the market close, James Packer is believed to have acquired a 15.6% stake in the company buying more than 163m shares at price of $1.50 per share, a 6.4% premium to the closing price of $1.41. While his exact intentions are unknown this raid on Ten will no doubt create some excitement in the media sector.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9693 -0.0176 -1.78%
ASX (cash) 4623 -33 -0.70%
US DOW (cash) 10986 -74 -0.67%
US S&P (cash) 1166.4 -9 -0.73%
UK FTSE (cash) 5685 -43 -0.75%
German DAX (cash) 6486 -25 -0.38%
Japan 225 (cash) 9458 -57 -0.60%
Rio Tinto Plc (London) 39.48 -1.32 -3.24%
BHP Billiton Plc (London) 21.39 -0.47 -2.13%
BHP Billiton Ltd. ADR (US) (AUD) 40.61 -0.55 -1.33%
US Light Crude Oil (Dec) 80.07 -3.30 -3.96%
Gold (spot) 1332.8 -34.0 -2.49%
Aluminium (London) 2338 -77 -3.19%
Copper (London) 8225 -217 -2.57%
Nickel (London) 23250 -770 -3.21%
Zinc (London) 2365 -67 -2.75%
RBA Cash Rate to be raised by 25bp (Nov) (%) 36.00 1 1.00%

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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