IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets mostly consolidated in the absence of any fresh incentives ahead of this week's key events. Euro bulls are still hoping for a bolder policy response from the ECB and/or more reassuring comments from Mario Draghi on Thursday that would formally endorse the reactivation of the SMP, possibly in tandem with purchases by the EFSF in the primary markets further down the road. Fears are now growing that market expectations for ECB action have been ramped up to the point where the scope for disappointment is that much higher now. The fear factor was illustrated by the moves in the euro, as EUR/USD and other euro crosses remained heavy. However, it wasn’t all bad in the risk space as the Aussie dollar rallied, with AUD/USD nudging through 1.05 to print a high of 1.0508.

Ahead of the open, we are calling the Aussie market up 0.2% at 4254. On the economic front, we have building approvals and private sector credit data due out at 11.30am today. Building approvals are forecast to have dropped by 14.6%, which is quite alarming compared to the previous reading of a 27.3% rise. These figures could have an impact on AUD/USD, which has had a big run since bottoming out at 0.95816 on June 1. However, with the Fed, BoE and ECB holding policy meetings, and key US data (including July payrolls) being released this week, we might just see local data take a back seat to global factors. These factors will be the key catalyst for the next move in the AUD/USD. Until then, we could see the pair remain in a holding pattern.

On a stock level, we expect a firmer start for BHP Billiton, with its ADR pointing to a 0.4% rise to $31.77. Soft commodities (wheat, soybean and corn) rallied as the US drought continues to threaten supply. This will continue to support stocks like Graincorp and Nufarm. The new home sales data will have some bearing on building products companies like Boral and James Hardie as well as some of the property stocks. There are a number of stocks with production reports/trading updates due out today. With a shortage of fresh leads for today’s session, this could have a significant impact on how the local index trades today. Some of the stocks to look out for are Lynas, Origin and Paladin.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0499 0.0029 0.28%
ASX (cash) 4254 8 0.20%
US DOW (cash) 13062 0 0.00%
US S&P (cash) 1384.6 2.0 0.14%
UK FTSE (cash) 5686 42 0.74%
German DAX (cash) 6763 9 0.13%
Japan 225 (cash) 8634 -2 -0.02%
Rio Tinto Plc (London) 29.37 0.45 1.55%
BHP Billiton Plc (London) 18.80 0.30 1.59%
BHP Billiton Ltd. ADR (US) (AUD) 31.77 0.14 0.43%
US Light Crude Oil (September) 89.67 -0.71 -0.79%
Gold (spot) 1622.3 3.5 0.21%
Aluminium (London) 1900.25 7 0.39%
Copper (London) 7540.875 -13 -0.17%
Nickel (London) 16172 276 1.73%
Zinc (London) 1943.375 26 1.36%

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

ends

© Scoop Media