IG Markets - Morning thoughts and opening prices 13/10/11

Overnight, US stocks finished significantly stronger but well off their session highs, falling in the last hour on reports European banks may need to shrink to meet new capital rules. The late slippage came despite optimism that the Slovakian parliament had reached an agreement to ensure its approval of an expanded EFSF.

Among the major averages the Dow Jones Industrial Average added 0.9 % to end at 11518, the S&P surged 1% to 1207, while the NASDAQ jumped 0.8% to 2604. Among the major S&P sectors the financial, industrials and materials sectors were the biggest percentage gainers.

Heading into the last hour we had been looking at far healthier gains than what we ended up with. Late in the day reports surfaced that leading European banks would rather sell assets than raise expensive capital to meet EU demands for higher capital ratios. This was shortly followed by speculation that underlying Chinese copper demand may have been lower than previously thought after the Chinese released details of their inventory holdings. These two reports, both in the Financial Times, while not to be disregarded are further evidence of how global equity markets remain beholden to “headline risk”. Remember, just because you read it, doesn’t necessarily mean it’s true.

Turning to the local market, courtesy of the strong overnight session, the ASX 200 is set to resume its upwards momentum after a momentary pause yesterday. As things currently stand we are calling the market to unwind approximately 31 points or 0.7% higher at 4235. Gains for the day should be relatively broad based with positive US leads and higher commodity prices likely to support our market-leading financial, materials, industrials and energy sectors.

On the economic front there are some key data points to watch out for. At 11.30am Australian unemployment data is due out which is expected to reveal 10.1k jobs were created in September with the unemployment rate set to remain at 5.3%. Forecasts around this data have been notoriously inaccurate and with ANZ job ads earlier in the week showing a contraction in advertised jobs, it would not surprise if this number again came in negative.

Also on the radar today are Chinese trade balance numbers. As mentioned, the FT overnight postulated Chinese copper demand may have been weaker than previously thought. Today’s import numbers will go some way to answering that question.

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.

Cameron Peacock
Market Analyst
IG Markets

ENDS

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