IG Markets Morning Prices 11/3/11

On Wall Street overnight, US stocks were hammered as jobless claims unexpectedly rose, China’s export growth slowed and Spain’s credit rating was cut by one notch to Aa2 by Moody’s. Gold and oil also retreated despite protests in Saudi Arabia and reports police had opened fire on the protesters.

All three of the major indices were hit hard, with both the Dow Jones Industrial Average and S&P 500 losing 1.9%; it was the Dow’s biggest fall since August 11, 2010. The technology laden NASDAQ wasn’t much better, declining 1.8%.

Locally, the ASX 200 is called to open the session 1% lower at 4653 with material, energy and financial names likely to bear the brunt of the selling.

The energy sector was the biggest decliner, losing 3.6% in US trade as Crude Oil retreated 2.4% to US$102.33/barrel since our 4.30pm close yesterday, despite continuing tensions in the Middle East. Chevron, ExxonMobil and ConocoPhillips were all down more than 3.1%.

Material names were smashed too, with the US basic materials sector losing 2%. Base metal leads from the London Metals Exchange weren’t too bad but in normal equities trade, Rio Tinto and BHP Billiton were hammered to the tune of 3.8% and 3.5%, respectively. BHP Billiton’s ADR is calling the Australian stock to open 1% lower at $44.18.

Gold names aren’t likely to escape the selling either after the precious metal fell 1.2% to US$1412.50/oz from our 4.30pm close yesterday.

Elsewhere, the industrial and financial sector were both down more than 2% while healthcare and consumer discretionary names dropped 1.5% and 1.1% respectively.

In summary, it looks like a very bleak end to the trading week, with the bulk of the sectors likely to be firmly in the red come 4pm. In economic news, there is nothing in the way of local economic data, although it’s worth noting that RBA Assistant Governor Debelle is speaking around 1.45pm. However, we do have some very important data out of China.

At 1pm, the latest reading on CPI, Industrial production, New Loans and Fixed Asset Investment will be released. If the numbers come in weaker-than-expected and confirm yesterday disappointing trade balance figures, we could see further fears of a China slowdown ripple through the market. On the other hand, a CPI print north of 5% could easily cause concerns as well; the last thing we need right now is speculation the PBOC will look to tighten again in the short term.
In currency markets, anyone who thought the USD was losing its safe haven status has been reminded overnight that the world’s reserve currency will still be well bid when there’s panic in the air. Risk aversion continued from where it left off in Asia, with selling across the board as traders shifted their focus from oil supplies to whether the global economy is strong enough to support the higher input costs.

In early European trade, Moody's shocked traders by downgrading Spain’s sovereign debt rating by one notch; this was a crude reminder to traders that whilst the ECB are hawkish and rates are likely to go up, the ongoing problems in periphery Europe seem to be getting worse, not better. Spain as we know is the elephant in the room and higher funding costs could be disastrous when it comes to roll over its debt.

Earlier in the week we noted that net long positions in the euro were overly stretched; the renewed focus on sovereign debt issues has seen not only profit taking but also traders aggressively short selling the euro. Its trading at 1.3791 from session highs of 1.3923.

The AUDUSD has held up well of late, but retreated to below parity overnight as risk aversion reigned supreme. It’s currently trading at 0.9991, down from session highs of 1.0116.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9994 -0.0058 -0.57%
ASX (cash) 4653 -46 -0.99%
US DOW (cash) 11977 -145 -1.20%
US S&P (cash) 1294.6 -14 -1.10%
UK FTSE (cash) 5836 -63 -1.07%
German DAX (cash) 7031 -56 -0.80%
Japan 225 (cash) 10343 -100 -0.96%
Rio Tinto Plc (London) 39.32 -1.57 -3.83%
BHP Billiton Plc (London) 23.00 -0.83 -3.48%
BHP Billiton Ltd. ADR (US) (AUD) 44.18 -0.45 -1.00%
US Light Crude Oil (Apr) 102.33 -2.49 -2.38%
Gold (spot) 1412.5 -17.05 -1.19%
Aluminium (London) 2587.00 11 0.43%
Copper (London) 9226.00 -35 -0.38%
Nickel (London) 26065.00 40 0.15%
Zinc (London) 2290.00 6 0.26%
RBA Cash Rate to be raised by 25bp (Apr) (%) 5.00 -2 -2.00%

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.

Please contact IG Markets if you require market commentary or the latest dealing price.

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