IG Markets - Morning thoughts and opening prices

Good morning,

The European session was massively risk-off, with some steep falls in equities and other risk assets. The DAX dropped 2%, the CAC declined 2.8% and Spain’s IBEX plunged 3.9%. We are back to watching Spanish yields again after a big spike in 10-year yields. Investors grew increasingly pessimistic over Europe after Germany, the Netherlands and Finland announced that ESM bank recapitalisations should only apply to new cases. This effectively puts the pressure back on governments and does not help alleviate concerns over struggling countries like Spain. Later today, the market will be focused on Spain’s budget and banking sector review. Already, protests opposing austerity measures are taking place and there is a risk of this heightening following the structural reforms plan and budget. Calmer heads prevailed in the US session with risk assets finding some stability. EUR/USD bounced off lows of around 1.284 and is now trading near 1.288. AUD/USD has recovered from 1.033 to around 1.037.

The positive momentum from US trade has resulted in a smaller loss in our opening call after having been as low as 4330. Ahead of the open, we are predicting the Aussie market to be down 0.4% at 4344. However, the situation in Europe is likely to keep many market participants cautious as we approach the end of the quarter. There is nothing major on the local economic calendar to act as a catalyst today. As a result, focus will remain on the macro issues facing global markets. Some unusual moves in the next two sessions wouldn’t be surprising as quarter-end rebalancing ramps up.

On a stock level, we expect a softer start for BHP Billiton, with its ADR suggesting it will be down 0.9% at $32.51. The resource space is likely to remain under pressure with investors favouring defensive names. Commodity markets have continued to struggle and even gold has given up significant ground. As a result, it is difficult to find any bright spots in the resource space. The Wall Street Journal has reported that Woolworths has sold Dick Smith Electronics to Anchorage Capital Partners in a deal worth around $5 million.

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.

STAN SHAMU
Market Strategist
www.igmarkets.com.au

ENDS

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