IG Markets - Morning thoughts and opening prices

Good morning,

In US trade, markets extended their losses after having traded in positive territory early in the session. Positive US and eurozone economic data had lifted sentiment early, but this did not last long as Greece once again dampened investor appetite. News that Greece is set for elections again in June after the President failed in his efforts to convince the key political parties to forge an alliance saw US markets fall sharply into the close.

Among the major averages, the Dow Jones Industrial Average was down 0.5% at 12632. The S&P was 0.6% lower at 1331, while the NASDAQ retreated 0.3% to close at 2894.

The Greek news triggered a sharp 'risk off' reaction as the euro slumped, the dollar was broadly firmer, peripheral yields rose and stocks fell. Key commodities struggled, with big drops for gold, copper and oil. Gold is about to test a key support level at around $1532, which was the low from September and December last year. After the sharp sell-off we have seen in the precious metal, we could see this level respected. The sell-off in the commodities space suggests we will see resources struggle at the open. BHP’s ADR is pointing to a 2.2% fall to $33.12. This would see our biggest miner trade at its lowest level in three years after breaking a key support level at $34. Apart from resources, there are some stocks which have completely defied the recent sell-off, and deserve some attention. Some of these stocks are Telstra, Commonwealth Bank, Newscorp, CSL Limited and Resmed.

Ahead of the open, we are calling the Aussie market down 0.9% at 4228. This move would see the local market break key support at around 4250, which had held for the past week. Given the continued political uncertainty in Greece, plus the associated fears of a halt or postponement of external support, a hard default and fears of a euro exit, it is difficult to see where investor confidence could stem from. However, the sharp sell-off has had a pretty long run now, and we wouldn’t be surprised to see some bargain hunting kick in. A weaker Aussie dollar will also continue to support some sectors as AUD/USD trades below parity. On the economic front, we have Westpac consumer sentiment and wage price index data due out today. However, these data prints are not big market movers.

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.

Please contact IG Markets if you require market commentary or the latest dealing price.

Kind regards,
Stan Shamu
Market Strategist
IG Markets
www.igmarkets.com.au

ENDS

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