IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk sentiment remained subdued through European and US trade as market participants focused on the developments in Europe, plus China growth concerns. As we mentioned yesterday, a clash between Germany and France on a timetable regarding a banking union has reignited concerns about leaders working together to come up with a solution. There are also concerns that Spain is in no hurry to request a bailout despite the FT article from last week which suggested we could hear something from Spain as early as Thursday. Disappointing German IFO business climate figures also weighed on risk assets and contributed to the bearish tone in risk. However, with most risk currencies having slid in the Asian session, there was limited downside for EUR/USD and AUD/USD, as the crosses mostly consolidated in US trade. AUD/USD ventured below 1.04 but managed to recover to around 1.042 to finish the session relatively flat. EUR/USD tested 1.29 before a minor recovery to around 1.293.

Ahead of the open, we are calling the Aussie market down 0.1% at 4381. In the absence of a positive catalyst in the Asian session, it is difficult to see what could encourage buyers to push the market higher. Market participants currently seem satisfied to take profits on recent gains which is a perfect environment for the bears. On the economic front we have the RBA financial stability review which could be a source of volatility for the AUD. China’s Conference Board leading index also deserves some attention and might give some light on the direction of the economy. AUD/USD is facing near-term resistance at around 1.045 and could be in for a volatile session with the RBA and China on the wires.

On a stock level, we expect a softer start for BHP Billiton, with its ADR suggesting it will be down 0.4% at the open to $33.27. Iron prices dropped back to $103.70 and this might impact the iron ore giants today. However, gold stocks are still the ones to watch after the precious metal bounced back from Friday’s sharp reversal. The majority of the best performing stocks in the quarter are gold miners (seven of the top ten in the top 200) with OceanaGold being one of the leaders. With Apple shares pulling back on disappointing iPhone 5 sales, we could see some of the telecoms and infotech stocks in the region struggle after a good run recently.
Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0426 0.0016 0.16%
ASX (cash) 4381 -4 -0.10%
US DOW (cash) 13561 14 0.10%
US S&P (cash) 1454.8 2.3 0.15%
UK FTSE (cash) 5844 37 0.64%
German DAX (cash) 7422 2 0.02%
Japan 225 (cash) 9048 -22 -0.24%
Rio Tinto Plc (London) 29.81 -0.60 -1.98%
BHP Billiton Plc (London) 19.48 -0.09 -0.49%
BHP Billiton Ltd. ADR (US) (AUD) 33.27 -0.14 -0.41%
US Light Crude Oil (November) 92.00 -0.14 -0.15%
Gold (spot) 1765.1 4.7 0.26%
Aluminium (London) 2083 -9 -0.44%
Copper (London) 8180 -35 -0.43%
Nickel (London) 17984 47 0.26%
Zinc (London) 2262 4 0.18%

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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