IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Markets recovered yesterday as the risk tone improved in European and US trade. It was a fairly quiet European session but event risk ramped up in US trade with plenty of releases on the calendar. Retail sales rose 1.1%, beating expectations of a 0.7% gain. However, the Empire State manufacturing index slightly disappointed, shrinking for the third month in a row. On the earnings front, Citigroup was a highlight, jumping 4.5% after its earnings topped estimates. There was a lot of scepticism ahead of the US reporting season and so far the results haven’t actually been bad at all. This could help instil some confidence in investors going into year end. There was certainly a significant recovery in some of the risk currencies after a woeful start to the Asian session. EUR/USD snapped back above 1.29 and closed US trade at around 1.295, while AUD/USD surged from 1.02 to close at around 1.025. This momentum is likely to carry through to the Asian session with equities in for a firmer start.

Ahead of the open, we are calling the Aussie market up 0.7% at 4513. This would see us test the recent high of 4512.8 which is near-term resistance. However, it is difficult to see the local market maintain gains through that resistance level unless the miners participate in the rally. Another relatively subdued session for commodities could weigh on the resource names. On the local economic front, today we have the RBA’s monetary policy minutes due out. This may have some bearing on the AUD as market participants search for hints of how long this easing cycle will last. We are likely to continue seeing choppy trading in the risk space ahead of the EU summit and a swathe of data releases from China later in the week.

On a stock level, we expect a relatively flat start for BHP Billiton with its ADR suggesting it will rise 0.1% at $33.39. Rio Tinto will be in focus with its production report due out at 3:00pm Sydney time. Iron ore prices were down again as the momentum from last week continues to wane. However, any consolidation above $100 will be positive going forward. Gold slumped along with other precious metals and this could see related stocks underperform. Financials are likely to outperform today as we continue to see impressive reports from their US peers.

Market Price at 7:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0254 0.0034 0.34%
ASX (cash) 4513 29 0.65%
US DOW (cash) 13427 113 0.85%
US S&P (cash) 1439.7 14.1 0.99%
UK FTSE (cash) 5831 45 0.78%
German DAX (cash) 7300 60 0.83%
Japan 225 (cash) 8635 64 0.75%
Rio Tinto Plc (London) 29.73 -0.50 -1.65%
BHP Billiton Plc (London) 19.27 -0.09 -0.44%
BHP Billiton Ltd. ADR (US) (AUD) 33.39 0.04 0.11%
US Light Crude Oil (November) 91.79 0.68 0.74%
Gold (spot) 1736.7 -8.4 -0.48%
Aluminium (London) 1975 -4 -0.19%
Copper (London) 8127 38 0.47%
Nickel (London) 17200 203 1.19%
Zinc (London) 2116 -13 -0.62%

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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