IG Markets: Morning Thoughts

IG Markets: Morning Thoughts

Generally softer-than-expected US data served as a reminder that not all the risks are confined to Europe. However, reports that the IMF has started discussing contingency plans for a rescue loan for Spain gave the euro and other risk assets a lift late in the US session. The IMF report was flatly denied as baseless by Spain's Finance Minister, and risk assets dropped in the last moments of trade. Overall, it was a tough month for markets all round, with the S&P finishing May down 6.3%, Spain 13% lower and oil slumping 17%. This was the S&P’s biggest monthly decline since September. The Dow had 17 down days in May, a feat that last occurred in 1956.

After the big swings in sentiment we saw through European and US trade, we are likely to see a choppy session today to start off the month. Ahead of the open, we are calling the Aussie market down 0.5% at 4055, with resources expected to weigh after key commodities struggled overnight. Despite yesterday’s recovery from the lows, the local market still finished May down 7.3%. We kick off the new month with some key economic data due out in the region. On the calendar we have China’s manufacturing PMI and HSBC’s final manufacturing PMI. With China growth fears still a hot topic, chances are this data will have quite an impact on risk assets today. Locally, we have AIG’s manufacturing index and commodity prices data due out. Talk over the next few sessions is likely to surround the RBA’s June interest rate decision. As the rest of the economy (apart from the mining sector) continues to lose momentum, UBS now expects the RBA to cut the cash rate by 25 basis points at the upcoming meeting next Tuesday.

On a stock level, we expect a weaker start for BHP Billiton, with its ADR pointing to a 1.1% fall to $31.61. We are likely to see similar falls in the other resource names. Changes to S&P/ASX Indices will be announced today, and these are always interesting as they have a bearing on portfolio re-adjustments. ASX Limited will be one to watch after reports it is considering buying back Link Market Services. The Aussie dollar managed to bounce off its lows, and is currently trading at around 0.9724 against the greenback. However, with the China numbers in focus and key data in the US, including jobs numbers, we wouldn’t be surprised to see some big moves today.

Market

Price at 6:30am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

0.9734

0.0017

0.18%

ASX (cash)

4055

-22

-0.53%

US DOW (cash)

12425

-28

-0.22%

US S&P (cash)

1310.8

-3.5

-0.27%

UK FTSE (cash)

5334

37

0.70%

German DAX (cash)

6264

-21

-0.34%

Japan 225 (cash)

8542.73

10

0.12%

Rio Tinto Plc (London)

27.80

-0.22

-0.77%

BHP Billiton Plc (London)

16.94

-0.13

-0.78%

BHP Billiton Ltd. ADR (US) (AUD)

31.61

-0.36

-1.13%

US Light Crude Oil (July)

86.54

-1.37

-1.56%

Gold (spot)

1563.9

0.9

0.06%

Aluminium (London)

1995

-14

-0.68%

Copper (London)

7437

-46

-0.61%

Nickel (London)

16347

-34

-0.20%

Zinc (London)

1924

2

0.08%

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.

ends

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