IG Markets - morning thoughts and opening prices

IG Markets - morning thoughts and opening prices

In US trade, markets retreated on Chinese growth concerns. Premier Wen Jiabao’s 2012 growth forecast of 7.5% largely disappointed after having targeted 8.0% for the previous eight years. However, US ISM services data came in better than expected, and expanded at the fastest pace in a year. This helped cushion the selling in risk assets.

Among the major averages, the Dow Jones Industrial Average was down 0.1% at 12963. The S&P was 0.4% lower at 1364 and the NASDAQ declined 0.9% to finish at 2950. The encouraging US data helped Wall Street bounce off the lows.

Commodity currencies closely linked to the China story had a tough time, with the Aussie dollar losing 0.6% to the greenback. Some traders might look to buy the dips on AUD/USD ahead of the RBA’s interest rate decision at 2.30pm today. The RBA is widely expected to keep rates unchanged, with only a 12% chance of a cut today priced in by money markets. Most analysts expect little or no change to February's statement, which left the door open for a rate cut if there was a ’material change‘ to its outlook for the economy. A less-dovish stance by the RBA might give some upside to AUD/USD, given money markets are still pricing in 40 basis points worth of cuts over the next 12 months. This is looking increasingly unlikely as the economy is expected to get back to trend growth towards the middle of the year. Another currency pair to keep an eye on is AUD/NZD, which is up 1.5% in the past five sessions. Sellers are likely to emerge at around 1.3022, which is at the 100-day moving average and the 50% retracement of the December to February (1.3275/1.2768) sell-off.

Ahead of the open, we are calling the Aussie market down about 0.3% at 4249. BHP’s ADR is pointing towards a 1.6% drop at the open, which brings it back to the key support band between $34 and $35. We might start to see buyers emerge for the mining giant at these levels, which have held on numerous occasions. The resource sector is likely to be in for a tough start, with potential for an overreaction to the China growth target and sharp falls in base metals overnight. It is important to note that the 7.5% growth figure for China is a target and not a forecast, and therefore it merely indicates what its policy setting is looking to achieve.

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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