IG Markets Morning Prices 24/3/11

In the US overnight, stocks finished the session higher thanks to an afternoon rally in material and industrial companies on the back of an expected uptick in demand from Japan for the rebuilding effort. Uncertainty in the Middle East and Japan continued, but had little impact on trade.

The concentrated Dow Jones Industrial Average was the top performer, rising 0.6%. The NASDAQ added 0.5% while the broad-based S&P 500 rose 0.3%.

Locally, the ASX 200 is called to open the session 0.4% stronger at 4669 following the positive overnight leads. It looks like most of today’s gains are going to be centered on the materials space following a gain of 1.5% for the US basic materials sector.

Base metal leads from the London Metals Exchange were all higher, up between 1.1% and 2.2% with copper the top performer. This translated into gains for the big miners, with Rio Tinto and BHP Billiton rising 2.9% and 2.2% respectively in London trade. Unsurprisingly, the locally listed BHP Billiton is called to open the session 0.4% firmer at $44.39; this feels a little cautious to us, so don’t be surprised if it outperforms this lead.

Precious metal names will likely be supported too as the likes of gold and silver pushed higher on the back of the Middle East concerns; gold added 0.7% since our 4.30pm close and is trading around the US$1437.20/oz level. Silver pushed to fresh 31-year highs, topping out at US$37.37/oz.

Elsewhere, we could see some support amongst consumer discretionary names as its peers performed well in US trade; the sector was second only to materials, rising 0.9%. Another gain of 0.7% in the Crude Oil price to US$105.50/barrel could also see upward pressure on energy names.

In summary, it looks like we’re set for a positive session locally, with gains expected to be focused on the materials sector. In economic news, we have the CB Leading Index due at 10.00am followed by the RBA Financial Stability Review at 11.30am; both of these are unlikely to have much of an impact on trade.

Turning to currencies and the big mover overnight was sterling, which fell against all major currencies as the Bank of England’s meeting minutes failed to live up to the markets elevated expectations. Whilst the bank effectively downgraded their growth projections and increased their budget deficit, the fact they see inflation at 2.2% next year really throws into question the aggressive tightening that is priced into sterling; hence, the British currency was sold off across the board.

The other big news this morning was the Portuguese Parliament rejecting the government’s austerity plans. As we wrote in the last couple of morning reports, the market had been expecting this, so it should not have come as a huge surprise. Nonetheless, the event triggered profit taking with the EURUSD dropping below 1.41.

Prime Minister Socrates had suggested he would resign if the austerity plan was rejected and he did exactly that. The country will now focus on its debt situation and electing a new government as quickly as possible. With two year bond yields pushing north to 6.38%, these ever increasing borrowing costs will make funding their debt that much more expensive. Given they have EUR4.2b in repayments due next month, the chances of asking for help from the EU and IMF is growing rapidly.

Given this event is unlikely to deter the ECB from raising rates in April, traders will look to buy dips with 1.40 expected to be a good buying opportunity.

Market / Price at 7:30am AEST / Change Since Australian Market Close / Percentage Change
AUD/USD / 1.0140 / 0.0045 / 0.45%
ASX (cash) / 4669 / 16 / 0.35%
US DOW (cash) / 12078 / 91 / 0.75%
US S&P (cash) / 1296.2 / 7 / 0.55%
UK FTSE (cash) / 5803 / 60 / 1.04%
German DAX (cash) / 6813 / 39 / 0.58%
Japan 225 (cash) / 9504 / 62 / 0.65%
Rio Tinto Plc (London) / 41.28 / 1.15 / 2.85%
BHP Billiton Plc (London) / 23.25 / 0.50 / 2.20%
BHP Billiton Ltd. ADR (US) (AUD) / 44.39 / 0.19 / 0.43%
US Light Crude Oil (May) / 105.46 / 0.72 / 0.69%
Gold (spot) / 1437.4 / 9.48 / 0.66%
Aluminium (London) / 2631.00 / 35 / 1.35%
Copper (London) / 9745.00 / 209 / 2.19%
Nickel (London) / 26850.00 / 300 / 1.13%
Zinc (London) / 2417.00 / 49 / 2.07%
RBA Cash Rate to be raised by 25bp (Apr) (%) / 2.00 / 0 / 0.00%

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.

ENDS

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