IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets rallied late in the European session and the momentum continued through US trade. Investors shrugged off higher Spanish and Italian yields, and decided to focus on the prospect of further easing instead. Extremely dovish comments from the Fed member Charles Evans helped fuel hopes of more action from the global central banks. It is surprising to see markets remain resilient in the face of rising peripheral yields. It seems the threat of systemic escalation of the crisis that threatens the entire eurozone is being neutralised by hopes of a concerted policy response that ultimately sees fiscally-strong eurozone countries stand behind the weak. The Aussie dollar maintained the recovery path after bottoming out at 0.98507 against the greenback in the Asian session. We are likely to see AUD/USD test parity again shortly. Glenn Stevens’ comments today might be a catalyst for the Aussie dollar’s price action.

Ahead of the open, we are calling the Aussie market up 0.6% at 4097. Should it manage to gain further ground, the next key resistance is in the 4120 region, which has capped any attempts at a recovery over the past month. If the bulls manage to break through this resistance region, we could potentially see a move to 4150 in coming sessions. However, no matter how positive the price action can get, the event risk this week is not something to take lightly, particularly with Greek elections on the cards. On the economic front, RBA Governor Stevens is speaking this morning and we have Westpac consumer sentiment due out.

On a stock level, we expect a strong start for BHP Billiton, with its ADR pointing to a 1.2% rise to $32.09. Gold stocks are likely to bounce back today after gold prices rallied back above $1600. Whitehaven Coal will be one to watch following reports Nathan Tinkler may be close to a deal on a 21.4% stake in the company. Although there is no fresh news today, Qantas will remain one of the main talking points after its shares rallied significantly yesterday following a slump in its share price.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9966 0.0071 0.72%
ASX (cash) 4097 24 0.59%
US DOW (cash) 12564 147 1.18%
US S&P (cash) 1324.2 14.1 1.08%
UK FTSE (cash) 5503 79 1.46%
German DAX (cash) 6208 81 1.33%
Japan 225 (cash) 8570 33 0.39%
Rio Tinto Plc (London) 28.77 0.26 0.90%
BHP Billiton Plc (London) 17.90 0.25 1.40%
BHP Billiton Ltd. ADR (US) (AUD) 32.09 0.37 1.17%
US Light Crude Oil (July) 83.44 1.71 2.09%
Gold (spot) 1613.5 23.5 1.48%
Aluminium (London) 1971 -2 -0.09%
Copper (London) 7401 48 0.66%
Nickel (London) 17085 71 0.41%
Zinc (London) 1899 -2 -0.10%

www.igmarkets.com.au

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