IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Overnight, European and US equities continued their strong start to the new financial year, propelled higher on the back of momentum established from last week’s EU summit. This also occurred due growing expectations that central banks would soon embark on stimulus measures to reinvigorate economic growth.

This week the ECB is expected to cut rates by up to 50 basis points to record lows, while the BoE is also expected to expand the size of its current quantitative easing program. In the US, yesterday’s first contractionary ISM manufacturing report in three years has intensified talks that the Fed would be forced down the path of enacting another QE program of its own. A near US$75 pop in the price of gold over the last three days suggests traders are positioning themselves for imminent Fed action, however many still remain sceptical. The Fed has, in recent months, seemed reluctant to go down the QE path short of a severe deterioration in the US economy, with numerous commentators suggesting it will not embark on such a programme in the lead up to the US elections in November.

Turning to the local market, the ASX 200 is called to open approximately 22 points or 0.5% higher at 4149. Overnight, the USD was relatively flat, as were most currencies, but base metals, crude oil and gold all had strong sessions, again suggesting the market is anticipating more easing measures from the Fed in the near term. As a result, materials and energy names are again expected to be among the day’s best performers. BHP’s ADR is calling the local stock 1.8% higher at $32.38.

On the economic calendar, Australian June retail sales numbers are due out at 11.30am. Expectations are for month on month growth of 0.3%, compared to a contraction of 0.2% in May. It will be very interesting to see the effect, and to what extent, 75 basis points of rate cuts have had on consumer spending patterns.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0283 0.0012 0.12%
ASX (cash) 4149 22 0.53%
US DOW (cash) 12933 94 0.73%
US S&P (cash) 1372.7 11.1 0.82%
UK FTSE (cash) 5689 32 0.57%
German DAX (cash) 6580 65 1.00%
Japan 225 (cash) 9150 83 0.92%
Rio Tinto Plc (London) 31.57 0.96 3.14%
BHP Billiton Plc (London) 18.70 0.40 2.20%
BHP Billiton Ltd. ADR (US) (AUD) 32.38 0.58 1.84%
US Light Crude Oil (August) 87.57 3.11 3.69%
Gold (spot) 1617.6 12.1 0.75%
Aluminium (London) 1970.75 47 2.46%
Copper (London) 7781.5 33 0.42%
Nickel (London) 17217.5 292 1.73%
Zinc (London) 1927.75 34 1.80%

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.

www.igmarkets.com.au

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