IG Markets - morning thoughts and opening prices

IG Markets - morning thoughts and opening prices

In US trade, there was a big improvement in investors’ risk appetite as markets cheered better-than-expected manufacturing data in China and Europe, plus a successful Portuguese short-dated bond auction US manufacturing data came in slightly worse than anticipated, but still was running at a healthy 54.1. European equity markets and Wall Street posted solid gains on hopes of the global economy gaining a solid footing and the banking sector continued to rally on the belief that Europe will avoid a catastrophe.

Among the major averages, the Dow Jones Industrial Average put on 0.8% to close at 12733. The S&P climbed 1% to finish at 1326, and the NASDAQ added 1.2% to close at 2849. The S&P’s 50- and 200-day moving averages are about to cross. During the last 50 years, this Golden Cross has occurred 26 times. In 21 out of those 26 times, the stock index climbed an average of 5% within the next six months. On the last two occasions (June 2009 and October 2010), the bullish trends were larger (20% and 12%).

Risk assets and risk currencies moved higher across the board. This should be positive for our high beta names. The better global manufacturing data sent base metals higher, with copper breaking a three-day losing streak to post a gain of around 1.4%. This could finally see our resource stocks come to life after a poor performance this week. BHP Billiton’s ADR is pointing to a gain of around 1.8%. Investors will be hoping the Aussie market breaks its recent run of underperformance. However, the high Aussie dollar will keep pressure on the currency sensitive stocks. AUD/USD broke through technical resistance ahead of 1.0700 and remains at worrying levels for exporters.

Woolworths released its second quarter retail results this morning. At first glance, the results look roughly in-line with what analysts were expecting with a particularly strong performance from Coles. Analysts from CS and DB were expecting Coles to outperform Woolworths, and it seems WES has delivered on this. The Malaysian government has granted rare earths miner Lynas a temporary refinery license. This will be supportive of LYC shares. Ahead of the open, we are calling the Aussie market up 1.2% at 4276. On the economic front, participants can look out for trade balance data due out at 11.30am.

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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ENDS

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