IG Markets: Morning Prices

Friday night saw risk again take a back seat with traders buying into safe haven assets such as the USD and treasuries. US equities closed lower with the S&P 500 down 0.8% at 1189.4; as a result we saw the SPI futures lose 21 points so a negative start for our market is widely expected.

With traders happy to press the sell button we saw the Euro taking the brunt of the selling with continued fears that Portugal and Spain could be targeted by the bond market with the Euro pushing down to 1.3201, although some of that could be technical selling as the Euro broke below its longer term uptrend. The German finance minister also refuted claims made in an FT article that Portugal has been urged to accept a rescue package. Heightened worries about all out war in Korea did not help risk as well and the AUD traded down to 0.9613, Glenn Stevens’ comments on Friday clearly signalling the RBA is in no hurry to hike the cash rate.

It is hard to really have a firm grasp on how the market may fair today, what we are seeing in terms of leads is negative and commodity prices are generally lower on continued concerns that demand from China will decline as well as USD strength, BHP however looks set to open unchanged at $43.21 and in the energy sector Woodside Petroleum $40.79 down 0.3%.

Overnight though we saw Eurozone finance ministers approve a £85b which has given the Euro and AUD a sizeable boost in the Asian open. Some of the package will come from Ireland’s sovereign wealth fund and the remaining cash is to be sourced from the EU/IMF and other bilateral loans. It seems this has temporally pleased traders although liquidity is thin on ground and price moves exaggerated, the real test will be when Europe comes in, will we see a short term floor under the Euro or will traders sell into this strength?

There is not a lot on the data front with new homes sales at 11.00 unlikely to drive markets too much. 4555 is key support on the ASX 200 so we may see traders try and defend that level but that surely depends on how the Euro and the Shanghai composite trade later in the day. Keep an eye on US futures which open at 10.00 for additional direction.

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