IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

It was a mixed session for risk assets with some choppy trading, as markets failed to establish a set risk theme. In the European session, disappointing economic readings set a negative tone for most risk assets. European, German and French flash manufacturing PMIs all missed expectations, while the German Ifo reading also disappointed. As a result, EUR/USD slumped from around 1.3 down to 1.292 before finding some stability in US trade and recovering to 1.298. Better-than-expected new home sales (389,000 versus 386,000 expected) helped lift sentiment early in US trade. However, comments from the FOMC statement were used as an excuse to sell risk assets as the Fed highlighted some of the challenges the economy is facing. The Aussie dollar was a standout as AUD/USD extended its gains from the Asian session and rallied to a high of 1.0367. We saw the pair top out at around 1.04 last week and that is the level to keep an eye on in the near term.

Ahead of the open, we are calling the Aussie market down 0.3% at 4494. Once again the 4500 level will be in focus after the local market found support in that region yesterday. An interesting fact is level of interest in bond auctions of late. There was significant demand in the two-year and five-year bonds yesterday with pension/insurance funds taking out 15.5% of the issue, the highest since November 2010. The bund auction also got away very well with €5.06 billion raised (above €4 billion target), the first time they have done that in a while. With the fiscal cliff uncertainty, US earnings disappointing and euro data not improving, the bond market is clearly reacting to the uncertainty in the market place.

On a stock level, we expect a softer start for BHP Billiton with its ADR suggesting it will fall 0.7% to $34.08. Commodities were mixed with oil dropping 3% after an inventory report showed a big jump in supplies. This will weigh on some of the energy names today. On the contrary, iron ore prices gained 1%, and this could be a positive for some of the big resource names. Focus will be on ANZ Bank’s full year earnings today. ANZ reported an underlying profit rise of 6% to $6.01 billion, broadly in-line with analyst estimates. The final dividend of 79 cents per share was also in-line with estimates. However, the headline profit of $5.66 billion (+6%) seems to have missed estimates. Resmed will be one to watch today after its US listed shares surged to a record ahead of its earnings report. Wesfarmers report first quarter sales today.

Market Price at 7:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0346 0.0033 0.32%
ASX (cash) 4494 -12 -0.26%
US DOW (cash) 13077 -58 -0.44%
US S&P (cash) 1408.1 -8.0 -0.56%
UK FTSE (cash) 5790 -19 -0.33%
German DAX (cash) 7168 -46 -0.64%
Japan 225 (cash) 8950 -42 -0.47%
Rio Tinto Plc (London) 31.25 -0.07 -0.23%
BHP Billiton Plc (London) 19.93 0.11 0.58%
BHP Billiton Ltd. ADR (US) (AUD) 34.08 -0.23 -0.68%
US Light Crude Oil (December) 85.72 -1.59 -1.82%
Gold (spot) 1702.1 -8.3 -0.49%
Aluminium (London) 1945 -6 -0.32%
Copper (London) 7861 -26 -0.32%
Nickel (London) 16404 31 0.19%
Zinc (London) 2017 -26 -1.28%
Iron Ore 118.7 1.20 1.02%

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.

www.igmarkets.com.au

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