IG Markets - Morning thoughts and opening prices

Good morning,

Risk sentiment turned sour in US trade as the corporate earnings season finally showed some cracks. US equities lost ground on the back of a sell-off in Google shares following its disappointing results. Confusion surrounding the early release of the Google results did not make the situation any better. On the economic front, unemployment claims came in weaker than expected (388,000 versus 367,000 consensus) and this helped contribute to the negative tone. On a more positive note, the Philly Fed manufacturing index was back in positive territory at 5.7 and exceeded expectations. European equities, apart from the IBEX, pushed higher as Spain and Italy both had successful bond auctions and European traders saw the positives in yesterday’s Chinese data. However, EUR/USD remained relatively sidelined at 1.31 before losing its grip on the level late in US trade to around 1.3067. AUD/USD retreated after making an attempt to break through the 1.04 level.

Ahead of the open, we are calling the Aussie market down 0.4% at 4542. We saw quite a sharp reversal from the highs into the close yesterday as market participants begin to feel nervous at elevated levels. Yesterday’s open left a gap between 4537 and 4547. These gaps tend to be filled and therefore we could see the price fall to around 4537 before finding some stability. Based on yesterday’s close, the local market is up 1.6% for the week. Looking ahead, the key event risk will be the EU Summit. Expectations are low and while we don’t expect any major sentiment changing rhetoric, most of the commentary will be around the future architecture of the EMU, with officials discussing banking supervision, job creation and growth. European Council President Herman Van Rompuy will largely go over his findings on fiscal and economic integration, which will no doubt be shot down by the more fiscally conservative European nations.

On a stock level, we expect a firmer start for BHP Billiton with its ADR suggesting it will rise 0.3% to $34.66. Commodities were mixed so it could be a day of consolidation for the resource names after a monster rally this week. Atlas Iron (AGO) will be one to watch today after announcing a trading update at the end of yesterday’s session. AGO is sticking by its plan to raise the FY13 shipping rate, cut jobs and also tap debt markets for US$325 million. James Hardie has had a good run on the back of the improving US economic data, particularly on the housing front. The stock is likely to remain on investors’ radars with any pullbacks used as an opportunity for fresh entries.

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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