IG Markets: Morning Prices

In the US overnight, stocks snapped their three day losing streak to close near their session highs as commodity prices rebounded as participants began to speak about underlying demand fundamentals again and the Federal Reserve said that talks about an exit strategy from record stimulus measures don’t necessarily mean tightening would begin soon.

The tech-heavy NASDAQ was the best performer, up 1.1% while the S&P 500 added 0.9% and the Dow Jones Industrial Average gained 0.7%.

In Australia, the local bourse is called to open the session 0.4% firmer at 4712 following the positive overnight leads from Wall Street. Strength among commodities and energy sectors was the big story overnight and are likely to lead the Australian market higher.

The US materials sector was the standout performer, rising 2.3% as the buyers returned to the commodities complex. Leads from the London Metals Exchange were all positive too with base metals all finishing up between 0.2% and 2%. In normal UK trade, both Rio Tinto and BHP Billiton added 1.5%. BHP Billiton’s ADR is calling the locally-listed stock to open 0.7% higher at $44.62.

Precious metals names should be well supported too after both gold and silver rebounded. Gold rose 0.4% from our 4.30pm close yesterday to be trading atUS$1496.50/oz while silver jumped to be trading around the US$35.00/oz level.

The energy sector was the other main driver, adding 2% as the Energy Information Administration reported a surprise drop in gasoline inventories as well as crude oil supplies. This saw crude oil futures jump 2.1% to trade around the US$100.30/bbl level. The big US oilers all surged with ExxonMobil, Chevron and ConocoPhillips all jumping more than 1.7%.

Elsewhere, gains among US consumer discretionary, industrial and financial names are likely to help support the broader market locally. Although, Moody’s late downgrade to the big four banks yesterday may weigh a little.

In summary, it looks like the local market is set for a stronger open, with buying likely to return to the resources and energy sectors. In terms of economics, there is little due locally apart from MI Inflation expectations at 11.30am, which are unlikely to have much of an impact on trade.

In currency markets, despite a strong rally in commodity prices the AUDUSD was mostly flat. It’s currently trading at 1.6223 after touching earlier lows of 1.0567 and highs of 1.0664. Elsewhere, the sterling fell sharply cross the board after Bank of England policy makers voted 6-3 to keep interest rates on hold this month, with the majority of them warning tightening rates now could severely impact consumer spending and the economic recovery.

The USDJPY had a good session, with plenty of buyers emerging around the 81.00 level and driving the price to recent highs around 81.70. It was the biggest drop in three weeks for the yen versus the dollar as the US currency strengthened following a rebound in treasury yields.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0628 -0.0010 -0.09%
ASX (cash) 4712 18 0.38%
US DOW (cash) 12562 53 0.42%
US S&P (cash) 1341.4 9 0.64%
UK FTSE (cash) 5959 45 0.77%
German DAX (cash) 7343 20 0.27%
Japan 225 (cash) 9695 17 0.18%
Rio Tinto Plc (London) 41.63 0.62 1.51%
BHP Billiton Plc (London) 23.80 0.36 1.51%
BHP Billiton Ltd. ADR (US) (AUD) 44.62 0.33 0.74%
US Light Crude Oil (Jul) 100.29 2.09 2.13%
Gold (spot) 1497.1 5.35 0.36%
Aluminium (London) 2560.00 37.00 1.47%
Copper (London) 9100.00 175.00 1.96%
Nickel (London) 24650.00 50.00 0.20%
Zinc (London) 2191.00 35.00 1.62%
RBA Cash Rate to be raised by 25bp (Jun) (%) 20.00 0.00 0.00%

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