IG Markets - Afternoon Thoughts

IG Markets - Afternoon Thoughts

FTSE 5756 -21
DAX 7010 -37
CAC 3438 -25
IBEX 7344 -55
DOW 13102 -23
NAS 2778 -5
S&P 1407 -3

Oil 95.33
Gold 1660

Asian markets basically picked up from where they left off yesterday with mixed trading in relatively tight ranges. Risk currencies took a bit of a hit when Japanese markets opened with EUR/USD falling through 1.25 to a low of 1.2466 and AUD/USD testing 1.035. Apart from that move, it’s been a fairly quiet session with most asset classes relatively flat. In US trade, it was much the same for risk assets with limited data releases on the calendar. However, we are likely to start seeing a lot more commentary hit the wires as the Jackson Hole symposium approaches. More dovish talk from the Fed speakers continued with Chicago Fed President Charles Evans calling again for 'open-ended bond purchases' to boost the economy, while Cleveland Fed President Sandra Pianalto said the economic recovery remains frustratingly slow and ‘large-scale asset purchases can be effective’. Any comments by Fed members are being closely watched ahead of the Jackson Hole symposium on August 31.

Taking a closer look at regional markets, Japan’s Nikkei is the worst performer in the region, dropping 0.6% after the country downgraded its economic assessment. The government lowered its assessment of the Japanese economy, cutting its view on personal consumption, home-building, exports, imports and industrial production, according to a monthly report released by the Cabinet Office in Tokyo. Hong Kong’s Hang Seng is down 0.1%, while the Shanghai Composite is flat. Concerns that China’s economic slowdown is weighing on corporate earnings are keeping Chinese investors at bay while they wait for some sort of action by officials. The ASX 200 is up 0.2% with high-yielding plays in favour while the big resource names struggle. European markets are set to open lower with major bourses likely to give up yesterday’s gains. US markets are pointing to mild losses at the open.

With EU President Herman Van Rompuy scheduled to meet Spanish Prime Minister Mariano Rajoy ahead today, we could start seeing increased volatility in the euro. They are expected to discuss measures to lower the high borrowing costs of the Spanish government. Spanish 10-year yields traded above 6.3% overnight. French President Hollande called for quicker implementation of the June EU Summit accord and noted that the 'Euro decisions' must be completed by October 18, the next EU summit date.

The local market has been oscillating around the 4350 level today and is currently a touch higher at 4352. Reporting today were Aristocrat Leisure (+7.4%), Beach Energy (-2.6%), Flight Centre (+0.9%) and Seven Group (+5.4%). In an environment where most company restructures are leading to job losses, it is refreshing to get hear FLT announcing it will add 1,000 staff globally. The company’s earnings beat estimates as well as a final dividend of 71 cents (versus a prediction of 62 cents). ALL’s results also came in ahead of estimates but what was even more impressive was the FY guidance and positive outlook comments.

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