IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

In US trade, markets extended their losses after having traded in positive territory early in the session. Another round of positive economic data gave US markets an early lift, but Europe continued to unsettle investors. US housing starts and industrial production exceeded expectations, while the FOMC meeting minutes revealed several members of the Fed would back more QE if the US economy faltered, compared to only ‘a couple of members’ in the March statement. Reports the ECB will freeze lending to some Greek banks spooked investors. As expected, Greece announced a caretaker government and will have another round of elections on June 17.

Among the major averages, the Dow Jones Industrial Average was down 0.3% at 12599. The S&P was 0.4% lower at 1325, while the NASDAQ retreated 0.7% to close at 2874.

Key commodities struggled yet again, with copper falling for the fourth straight day to a four-month low, while gold and oil also slumped. The US dollar continued to trek higher, gaining ground against all the majors including the yen. With commodities continuing to falter and the USD remaining elevated, resources may come under pressure yet again. However, after the sharp falls we have seen in our local resource names, some bargain hunting is likely to kick in at some stage. Looking at the price action for some of the commodities from the Australian market close yesterday paints a bit of a different picture, with some gains actually being posted in gold and oil. BHP’s ADR is only pointing to a 0.1% fall to $32.50. Commonwealth Bank will be in focus today after posting its March quarter trading update. Just like the other banks, CBA saw higher funding costs negatively impact net interest margins and subdued credit demand affected revenue growth.

Ahead of the open, we are calling the Aussie market down 0.4% at 4150. This is right near the 4143 level where the market bottomed out at the beginning of March this year, before it started the big move higher which took it to 4448.5. As a result, this could be a turning point for the market today and a relief rally can’t be too far away after the lengthy losing streak we have seen recently. It’s also fair to say most of the bad news on Greece is out there now and a potential victory for Syriza in the next election is expected. At the same time, the market is down 6.3% from the May 1 high of 4448.5, which warrants some sort of stability in the near term. This is likely to keep fresh sellers at bay ahead of key near-term support at 4143. On the economic front, we have MI inflation expectations data due out today. However, these data prints are not big market movers.

Market

Price at 6:30am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

0.9911

0.0008

0.08%

ASX (cash)

4150

-17

-0.40%

US DOW (cash)

12632

16

0.12%

US S&P (cash)

1326.8

-0.5

-0.04%

UK FTSE (cash)

5379

9

0.16%

German DAX (cash)

6356

29

0.46%

Japan 225 (cash)

8753

-49

-0.55%

Rio Tinto Plc (London)

29.12

-0.41

-1.40%

BHP Billiton Plc (London)

17.51

-0.15

-0.84%

BHP Billiton Ltd. ADR (US) (AUD)

32.50

-0.02

-0.06%

US Light Crude Oil (June)

92.63

0.29

0.31%

Gold (spot)

1539.4

5.1

0.33%

Aluminium (London)

2034

13

0.65%

Copper (London)

7648

-24

-0.32%

Nickel (London)

16966

117

0.69%

Zinc (London)

1962

-37

-1.86%

ends

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