IG Markets - Afternoon Thoughts

IG Markets - Afternoon Thoughts

FTSE 5786 -24
DAX 7209 -26
CAC 3366 -17
IBEX 7696 -49
DOW 13463 -11
NAS 2742 0
S&P 1440 +2

Oil 92.01
Gold 1764

Asian markets have slumped in a fairly quiet session on the event risk front. The euphoria surrounding China’s big liquidity injection from yesterday has swiftly waned as traders search for a catalyst to drive the region higher. With markets already trading at the top end of the recent range, some investors are looking for a justification of the price action before pushing it higher. A lack of positive rhetoric from Europe was mostly to blame for the weakness we saw in European and US trade. With various meetings taking place among European leaders and officials, traders were hoping to get some market-friendly news, particularly on the Spanish front. Economic data from Europe also disappointed with wider-than-expected trade balances for France and the UK. Heightening tension in the Middle East also contributed to the negative tone and resulted in a jump in crude oil prices. The euro has slipped further in the Asian session with EUR/USD printing a low of 1.2836.

Looking at the equities in the region, the Nikkei is the worst performer with a 1.7% drop, while the Hang Seng is down 0.5%. The ASX 200 has lost 0.3% while the Shanghai Composite is relatively flat. Industrials are weighing on the region today with the Alcoa result being pinned as one of the main reasons for this. Alcoa cut its forecast for global aluminium demand and this revived some of the growth concerns markets have been facing. European markets are in for further losses at the open with drops of around 0.5% expected, while US markets are pointing towards a relatively flat open. It seems expectations were for Spain to have formally requested a bailout by now or at least alluded to the fact that it will request one. Unfortunately this hasn’t materialised and some traders are growing impatient of being long the single currency. With German Chancellor Angela Merkel visiting Greece, traders will be monitoring the wires for a potential deadline extension ahead of the Troika report. On the economic calendar, we have French and Italian industrial production. Over in the US, we have the Beige Book due out.

The local market has been in the red all day without a clear risk theme in action. However, the market has done well to come off its lows led by a recovery in some of the big miners. The sectors in the black are energy, infotech and healthcare. Woodside (+1.3%) and Oil Search (+0.8%) have been given a lift by the rise in crude oil. In the healthcare space, CSL and Ansell are both around 1% firmer. The materials sector is weaker with some mixed performances among the big miners. BHP Billiton has edged up 0.2%, Alumina has surged 2.9%, while Fortescue has dropped 3.2%. Roc Oil has been one of the best performers of the day, gaining over 6% after announcing an oil discovery at the Beibu Gulf Exploration drilling programme. There hasn’t been much on the local economic calendar today and therefore focus is likely to remain on China and other macro developments. However, tomorrow we have jobs numbers due out and this is generally a high impact announcement. Any signs of a weakening in the jobs market are likely to weigh on the Aussie dollar further. The unemployment rate is expected to rise to 5.3% with 4,400 jobs added.

www.igmarkets.com.au

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