IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Overnight, European and US markets experienced relatively lacklustre sessions. This occurred as relief over China’s growth trajectory waned and investors readied themselves for Ben Bernanke’s testimony before the House and Senate committees later this week. US corporate earnings are also taking centre stage at the moment, with negative to positive earnings guidance thus far running at a ratio of 3.3 to 1, the worst since 2008, according to data from Thomson Reuters.

Yesterday we posed the question: how long would Friday’s ‘China inspired’ momentum continue? As our market drifted well off its earlier highs, the answer seemed to be – not long. It was even shorter for European and US markets, with investors quickly moving on to other concerns. Based on the sluggish offshore performance, we are currently expecting a flat start for the local market today, with the ASX 200 currently called to open about two points higher at 4107. Clearly there can be little conviction behind this call, with today’s market direction likely to be dictated by developments throughout the day.

Overnight, the US dollar index weakened marginally, helping push crude oil up 1.6% and resulting in a flat to slightly stronger performance across the base metals complex. On this basis, energy names could be expected to be leading performers today (as they were in the US overnight), however BHP’s ADR is currently pointing to a 0.45% fall for our major miners. Production reports from Rio Tinto and Fortescue Metals during today’s session will no doubt influence sentiment towards the mining sector.

On the economic front, investors will no doubt carefully review today’s release of the RBA meeting minutes for any further insight into the Board’s position on interest rate policy, while Chinese Direct Investment data will provide the latest insight into the foundations of the Chinese economy. All in all it’s shaping up as a relative mundane session.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0251 0.0021 0.21%
ASX (cash) 4112 6 0.16%
US DOW (cash) 12716 -31 -0.24%
US S&P (cash) 1351.4 -0.9 -0.07%
UK FTSE (cash) 5656 -12 -0.21%
German DAX (cash) 6556 -1 -0.01%
Japan 225 (cash) 8735 11 0.12%
Rio Tinto Plc (London) 29.86 -0.34 -1.13%
BHP Billiton Plc (London) 17.95 -0.11 -0.60%
BHP Billiton Ltd. ADR (US) (AUD) 30.63 -0.14 -0.45%
US Light Crude Oil (August) 88.29 1.43 1.64%
Gold (spot) 1589.7 -0.1 0.00%
Aluminium (London) 1917.5 8 0.44%
Copper (London) 7695.875 3 0.04%
Nickel (London) 16182.5 -22 -0.14%
Zinc (London) 1897.5 21 1.11%

www.igmarkets.com.au

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