IG Markets - Morning Prices March 14

In US trade, markets rallied on the back of better-than-expected US retail sales data, followed by the FOMC statement acknowledging the improving US economy. However, the Fed gave no clues as to whether or not further monetary easing is on the cards. From the statement, it seems chances of QE III have been lowered, but policy remains easy. European markets also enjoyed a firm session buoyed by better-than-anticipated German ZEW economic sentiment figures.

Among the major averages, the Dow Jones Industrial Average was up 1.7% at 13178. The S&P advanced 1.8% to 1396 and the NASDAQ climbed 1.9% to finish at 3040. JP Morgan shares rallied after the company increased its dividend and announced a US$15 billion buyback.

With the exception of gold, commodities were fairly resilient, despite a broadly stronger USD. Gold is losing its appeal as talk of QE III fades. As a result, we are likely to see gains for most of the resources, with gold stocks underperforming. We expect to see broad gains in the cyclical space today after a subdued session yesterday. Currency sensitive stocks with high USD exposure are likely to get a lift from the stronger USD and the Fed acknowledging the improvement in the US economy. Financials will be supported by news that 15 out of 19 US banks passed stress tests, and many announced plans to hike dividends.

Ahead of the open, we are calling the Aussie market up about 0.8% at 4284. Once again, this sees the market trade near the 4300 level, which has eluded investors on several occasions. After yesterday’s rally for the local market, we are unlikely to replicate the rallies in seen in US markets. The Nikkei is likely to outperform the region after the yen weakened further. USD/JPY finally broke above 83.00 for the first time since April 20 last year. A weaker yen helps the Nikkei as it reduces pressure on Japan’s exporters. On the economic front we have Westpac consumer sentiment and housing starts data, and given the recent run we’ve had, we wouldn’t be surprised to see these readings disappoint.

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