IG Markets: Morning Report

IG Markets: Morning Report

On Wall Street overnight, US markets surged to new two year highs as traders came to grips with the Fed’s latest plan to purchase US$600 billion worth of long-dated Treasury’s. Also, news that Obama is open to extending tax cuts and reports that Federal Reserve deemed “healthy banks” may be allowed to increase dividend payments shortly also helped to boost sentiment.

The concentrated Dow Jones Industrial Average was the top performer, rising 2% while the S&P 500 and NASDAQ added 1.9% and 1.5% respectively.

Domestically, the ASX 200 is called to open 1.6% stronger at 4821 following the very bullish overnight leads. All sectors in the US finished deep in positive territory.

The heavily weighted materials and financial sectors are likely to lead the local market higher from the open after they were the top performers in US trade, both adding 3.3%. It all started in London with base metals flying on the London Metals Exchange, all up between 0.7% and 3.3%. In normal London trade, Rio Tinto and BHP Billiton jumped too, rising 4.8% and 6.6% respectively.

News that the Canadian Government had rejected BHP’s takeover bid for Potash helped the outperformance. Locally, BHP’s ADR is called to open the session 2.8% higher at $44.94. Precious metal miners should also see solid gains after gold futures surged to a fresh record of US$1393.3 per ounce and silver rose to a 30-year high of US$26.37.

The financial names should also attract a fair bit of buying interest this morning after their US peers surged on reports the Federal Reserve may deem some banks are healthy enough to start increasing their dividend payments. The likes of Bank of America, JP Morgan, Wells Fargo and Citigroup were all up more than 3.3%, with JP Morgan jumping as much as 5.5%.

Elsewhere, energy names should put in a good performance after the US sector rallied 3.2% and crude oil futures rose 1.5% to US$86.64 per barrel. Industrial and consumer discretionary sectors are likely to be well supported too.

In summary, it looks like we’re going to see a strong end to the week, with the bulk of the points likely to come from the resources sector as it continues to benefit from a plunging US dollar. There is not too much in the way of economic news although traders might pour over the latest RBA Monetary policy meeting minutes.

In the forex market overnight, the US dollar continued its demise with the US dollar index falling 07%. Subsequently, the euro surged above resistance at 1.4158 to a high of 1.4281 and the AUD traded as high as 1.0175 before settling slightly lower.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0147 0.0090 0.90%
ASX (cash) 4821 76 1.60%
US DOW (cash) 11427 207 1.84%
US S&P (cash) 1221.0 22 1.80%
UK FTSE (cash) 5885 98 1.69%
German DAX (cash) 6750 96 1.44%
Japan 225 (cash) 9469 111 1.19%
Rio Tinto Plc (London) 43.06 1.97 4.79%
BHP Billiton Plc (London) 24.30 1.50 6.58%
BHP Billiton Ltd. ADR (US) (AUD) 44.94 1.22 2.79%
US Light Crude Oil (Dec) 86.64 1.28 1.50%
Gold (spot) 1391.6 36.7 2.70%
Aluminium (London) 2463 16 0.65%
Copper (London) 8575 143 1.70%
Nickel (London) 24605 780 3.27%
Zinc (London) 2522 62 2.52%
RBA Cash Rate to be raised by 25bp (Dec) (%) 8.00 1 1.00%

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