IG Markets Morning Thoughts

IG Markets Morning Thoughts

Overnight, US markets continued to push higher on a growing belief that the US economy was gaining some traction in its recovery efforts, and was capable of moving beyond the European concerns which have plagued global markets over the last 2 years.

Among the major averages, the Dow Jones Industrial Average added 0.6% to close at 12462, the S&P jumped 0.9% to 1292, while the NASDAQ was 1% higher, ending at 2676. Among the major S&P sectors, materials, industrial and financial names were the best performers.

There is still debate as to whether US markets are being propelled higher by nothing more than the ’January effect‘, or if in fact it is on the verge of taking on more independence from European headline risk. The latter side of the argument has been fuelled by a series of better-than-expected economic data out of the US in recent months. While it is still too early to make this call, the current US reporting season will go some way to providing a snapshot of the health of corporate America, and by extension the US economy. Additionally, it may not be until March, when the possibility of a hard default for Greece looms (should it not get its next round of bailout funding, and private sector haircuts not be ’voluntary‘) that we really get to see to what degree, if at all, the US has broken free of Europe’s woes.

Turning to the local market, the ASX 200 is set to open firmer today, with the benchmark index called to unwind 16 points or 0.4% higher at 4168. Based on US leads, we can expect to see a day of broad-based gains across the market, most probably led by cyclical growth sectors such as materials and energy. This is supported by stronger commodity prices overnight, with BHP’s ADR suggesting the local stock will open 57 cents or 1.6% higher at $36.23 It should be one of those days where everything moves higher; the real question will be at what level caution kicks in and investors start to ask whether they are getting too far ahead of themselves. As we’ve seen countless times over the past two years, this market can very quickly and very unexpectedly catch you out.

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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