IG Markets - Afternoon Thoughts

IG Markets - Afternoon Thoughts

FTSE 5576 -10

DAX 6245 -18

CAC 3109 -9

IBEX 6677 -17

DOW 12812 -25

NAS 2616 -5

S&P 1354 -4

Oil 84.37

Gold 1620

Across Asia, markets are mostly higher ahead of the FOMC meeting later today. Risk sentiment improved through European and US trade, as Spanish debt markets calmed, plus there is optimism that the Fed will announce some form of easing. Greek coalition talks are also reported to be going well and we are likely to hear some news from Greece at some stage today. The euro and other risk currencies were well supported and pushed higher. There was also some positive economic data out of the US as building permits beat consensus, while housing starts matched expectations.

Taking a closer look at regional markets, the Nikkei is leading the way with a 0.9% gain, while the Hang Seng is 0.4% higher and the ASX 200 is up 0.1%. Unfortunately the region hasn’t quite mirrored the gains seen in European and US trade. We continue to see fairly tight ranges with a great degree of caution across the region. Given the lack of fresh positive drivers in the Asian session, European and US markets are facing a modestly weaker open. On the economic front, we have German PPI due out today ahead of a swathe of data from the UK, including jobs numbers and MPC meeting minutes.

We saw the dollar fall across the board as market expectations continue to build that the FOMC meeting may produce yet another round of balance sheet expansion. Although there is a growing number of analysts who feel we will see some form of easing, there is also a possibility that we will simply get an adjustment in the policy language to indicate the Fed's greater readiness to ease in future, particularly given the increased risks to the outlook arising from the eurozone crisis. Alternatively, we could get a temporary extension of Operation Twist along with an adjustment in the policy language. Whichever way it plays out, we are likely to see some big moves in the currency space. The relative calmness in the currency markets through the Asian session suggests traders are happy to wait and react to the announcement. Gold will also be a point of focus as it works as an inflation hedge in the event of an increase in US dollar supply.

The local market has given up most of its early gains today after struggling in the 4150 to 4160 resistance zone. Newscorp’s (NWS) bid for Consolidated Media (CMJ) was the main story of the day. NWS made a takeover offer of $3.50 per share, and CMJ is currently trading up 9.7% at $3.38. Seven Group (SVW) has also benefited from the takeover, being a CMJ shareholder, and is currently 2.7% higher. One of the stocks that continues to go unnoticed is James Hardie Industries (JHX). The stock has tacked on 1% today, lifted by positive US building permits and housing starts data. Unfortunately local housing starts data was disappointing today, but considering JHX has greater US exposure. The next key level to look out for is $8, while a pull back to $7.50 could present some buying opportunities at support.

www.igmarkets.com.au
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