IG Markets - Opening Calls

IG Markets - Opening Calls

The Australian share market should see some modest love for stocks on the open, with a 0.9% gain expected. The local bourse should unwind at 4163, just above the 38.2% retracement of the year’s high to low, while we will also be keeping an eye on the July 5 high of 4175. Provided we see follow-through buying, the 200-day moving average at 4201 could come into play sooner, rather than later.

It seems like the lead from Wall Street is a positive one, and despite Europe doing its best to pour doubt into traders’ minds, the S&P pushed up 0.6%. Angela Merkels comments that ‘we haven't yet shaped the European project in a way that we can be sure that everything will work’ saw the euro punished across the G10 complex, while it certainly would have been positive to see Bank of America join the risk on rally as well. However, a record number of claims of refunds of faulty mortgages saw traders dismiss the better-than-expected earnings report as unsustainable. The KBW banking index is fast approaching the March downtrend, so perhaps it was time to lighten up a touch on financials. The same could be said for Australian banks, which probably won’t be hindered too much by the pullback in the US banking sector. In a global market place searching out yield in every part of the capital markets our banks are being used for income, with our financial sector now gaining 10.1% since June 4. The sub-index closed at 4278 and all eyes focus firmly on the June 1 high of 4349, where those who have been short for some time will clearly be feeling the pain.

Commodities had a decent run overnight, that is unless you are holding gold which has pulled back a touch from yesterday’s close and should be reflected in a slightly negative open for gold stocks. The big support for the precious metal is $1521-$1532, which has been great buying for many months. We would expect gold to be nicely supported around these levels, especially with Ben Bernanke still keeping an eye firmly on the upcoming data ahead of the Jackson Hole meeting (August 31), and then most importantly the FOMC meeting on September 12 and 13.

Natural gas continues its grind higher and the expected lower supply surplus saw the price spike up 6.3%. This could feed into BHP’s share price today, which looks as though it may see better fortunes, with London traders seeing yesterday’s result in a more optimistic light.

All-in-all, US earnings remain supportive of markets with the majority beating expectations once again. Dow heavyweight IBM has had an impressive result and is supporting US futures. Tonight we get Baxter (could influence CSL tomorrow), Freeport Mcmoran (copper), Microsoft and Google.

Germany’s Bundestag will also vote on the Spanish loan, which in fairness should pass and could see risk assets breathe a sigh of relief. Spain also looks to tap the bond market in two-, five- and seven-year bonds, which given last night’s sell-off (with bad loans as a percentage of total loans increasing to 8.95%), should see borrowing costs once again rise.

We once again highlight the underlying strength in AUD/USD, which continues to track movements in US equities. Some technical traders are focusing on 1.0462 as the short-term target. However, in a world seeking yield there is no more attractive place to be than short EUR/AUD, where both the technicals and fundamentals point to further losses despite it all being one-way traffic of late. We feel this pair could easily trade to 1.1720 in the short term, with any rallies a good chance to get short.

Market Price at 7:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0368 0.0067 0.65%
ASX (cash) 4163 39 0.95%
US DOW (cash) 12947 182 1.42%
US S&P (cash) 1374.9 17.6 1.30%
UK FTSE (cash) 5698 59 1.05%
German DAX (cash) 6721 114 1.73%
Japan 225 (cash) 8778 51 0.58%
Rio Tinto Plc (London) 29.30 0.13 0.44%
BHP Billiton Plc (London) 18.18 0.35 1.95%
BHP Billiton Ltd. ADR (US) (AUD) 30.58 0.40 1.31%
US Light Crude Oil (August) 90.26 1.54 1.74%
Gold (spot) 1573.8 -5.2 -0.33%
Aluminium (London) 1906 -3 -0.16%
Copper (London) 7641 4 0.05%
Nickel (London) 16073 -27 -0.17%
Zinc (London) 1899.625 32 1.69%

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.

www.igmarkets.com.au

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