IG Markets: Morning Thoughts

IG Markets: Morning Thoughts

In US trade, markets were relatively flat, as investors remained cautious over the situation in Europe. However, sentiment improved significantly from the Asian session. It seems investors are coming to grips with the fact that French election results were largely expected, and that the new leader would not derail the policies currently in place. Fitch's reaffirmation of France's AAA rating in the wake of Hollande's victory also helped sentiment.

Among the major averages, the Dow Jones Industrial Average was down 0.2% at 13009. The S&P was flat at 1370, whilst the NASDAQ was up a point finishing at 2958.

Risk sentiment was markedly improved, resulting in a bounce across the risk space. We expect to see a mild recovery in cyclical stocks at the start of trade today, but a cautious tone is likely to persist. BHP’s ADR is pointing to a 1.2% gain to $34.99. This is encouraging, particularly after the bloodbath we saw in the resource space yesterday. Orica will be a stock to watch today after its fairly positive report was overlooked yesterday due to the broad sell-off.

Ahead of the open, we are calling the Aussie market up 0.6% at 4329. This is not too surprising considering the massive slump we saw in equities into the close of yesterday’s session. On the economic front, we have trade balance figures due out at 11.30am, with the market expecting a $1.38 billion deficit. Post-market close, we have the federal budget as the highlight for the Australian economy. The budget is expected to confirm a further tightening of fiscal policy to achieve a 2012-2013 surplus, effectively placing a greater burden on the RBA to support growth. This will probably result in an extended dovish cycle and weigh on the Aussie dollar. Although the French election result has now been deemed to not be a threat, Greece remains a significant concern and is likely to be a source of volatility through the week.

Market

Price at 8:30am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

1.0198

0.0047

0.46%

ASX (cash)

4329

27

0.63%

US DOW (cash)

13008

117

0.91%

US S&P (cash)

1369.7

17.6

1.30%

UK FTSE (cash)

5636

64

1.15%

German DAX (cash)

6585

204

3.20%

Japan 225 (cash)

9194

75

0.82%

Rio Tinto Plc (London)

closed

-

-

BHP Billiton Plc (London)

closed

-

-

BHP Billiton Ltd. ADR (US) (AUD)

34.99

0.42

1.22%

US Light Crude Oil (June)

97.93

0.88

0.90%

Gold (spot)

1638.7

-1.6

-0.10%

Aluminium (London)

closed

-

-

Copper (London)

closed

-

-

Nickel (London)

closed

-

-

Zinc (London)

closed

ends

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