Morning thoughts and opening prices 20/12/11

US markets were weaker overnight after ECB President Mario Draghi said significant risks to the European economy remain and he ruled out ECB bond purchases to prevent sovereign debt defaults. News that euro-currency members agreed to provide an additional EUR 150 billion to the IMF made no mention of contributions by some key EU members, and saw markets extend their losses. However, the relatively steady eurozone debt markets helped to prevent a sell-off similar to what we saw in the Asian session.

Among the major averages, the Dow Jones Industrial Average dropped 0.8% to close at 11766. The S&P shed 1.2% to 1205 and the NASDAQ was down 1.3% to 2523. Financial shares were the biggest losers in US markets, as regulations and increased capital requirements are expected to negatively impact performance and margins.

The ECB has maintained its position on bond purchases throughout the crisis, so it is surprising to see markets continue to react negatively to Mario Draghi’s comments on bond purchases. Risk assets mostly struggled with losses in commodities and risk currencies. Oil bucked the trend and managed to finish the session higher. This might be supportive of some of the energy plays. The Asian region will be digesting news of the death of North Korean leader Kim Jong-il after the Kospi came under significant selling pressure yesterday. His death is going to bring the geopolitical situation in North East Asia very much back onto the agenda.

The Christmas break may now be very much in sight for traders, but equity markets seem unlikely to find themselves awash with festive cheer in the coming days. We are calling the Aussie market to open down 0.3% at 4047. Locally, there isn’t much to lookout for on the economic front, with the monetary policy meeting minutes the only event worth mentioning on the calendar.

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.

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