IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

It was a mixed session for risk assets on Friday with fairly risk-on European trade, while risk assets slumped in US trade. The headline from Friday was a big 0.3% drop in the US unemployment rate to 7.8% (versus 8.2% consensus). The overwhelmingly good report was greeted with mixed feelings, but the overall impact was negative on risk assets. Creating a sustainable recovery in the jobs market is one of the core principals of the Fed’s QE programme, and this positive data could mean QE won’t go on for as long as some hoped. With reduced scope for prolonged QE, the mood in equities was dampened resulting in a sell-off in US trade. The Aussie dollar was one of the main casualties of the negative risk tone, as AUD/USD declined from around 1.026 to 1.016. EUR/USD held up relatively well after topping out at 1.307 and still managed to hold above 1.3.

Ahead of the open, we are calling the Aussie market down 0.1% at 4492. Once again, with the market just shy of 4500, this level will be firmly in focus. We haven’t seen much of a move in the risk currency space this morning in the absence of any major developments after the US session. China returning to trade is likely to be the main event of the Asian session as it reacts to all the developments from last week. This could see caution prevail in Australia until Chinese markets resume trading. AUD/USD is currently at a key neckline support level (September pivot low), a break of which would leave the pair extremely exposed for a move back to parity and below. We have RBA Governor Glen Stevens on the wires this morning and his comments could be a source of volatility for the pair. We also have ANZ job ads due out at 10.30am.

On a stock level, we expect a firmer start for BHP Billiton with its ADR suggesting it will be up 0.5% at $33.47. However, a relatively poor showing by commodities in US trade on Friday could have a negative impact on the resource names. Bank of Queensland will be one to watch after Friday’s drop. We have already seen some broker re-ratings this morning with some concerns being aired on its upcoming earnings report. Westpac, the third of the big four to react, has passed on 18 of the 25 basis point rate cut to its borrowers. ANZ is yet to announce its decision which is expected on Friday.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0167 -0.0098 -0.95%
ASX (cash) 4492 -3 -0.06%
US DOW (cash) 13611 42 0.31%
US S&P (cash) 1460.6 -0.3 -0.02%
UK FTSE (cash) 5850 1 0.02%
German DAX (cash) 7367 34 0.46%
Japan 225 (cash) 8894 31 0.35%
Rio Tinto Plc (London) 29.88 0.65 2.22%
BHP Billiton Plc (London) 19.30 0.17 0.90%
BHP Billiton Ltd. ADR (US) (AUD) 33.47 0.15 0.45%
US Light Crude Oil (November) 89.76 -1.61 -1.76%
Gold (spot) 1779.6 -13.0 -0.73%
Aluminium (London) 2110 -2 -0.09%
Copper (London) 8295 -5 -0.06%
Nickel (London) 18300 -375 -2.01%
Zinc (London) 2075 10 0.48%

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.

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