IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets had a choppy session as market participants struggled to pick a direction ahead of the US presidential elections. The European session was mainly risk off as Greece issues surfaced yet again, with the November 12 meeting edging closer. Spanish unemployment jumped to 128,200, far worse than a consensus of 90,300. EUR/USD slid from 1.284 to a low of around 1.277 before stabilising in US trade. Most risk assets were range-bound in US trade, with US equities managing to drift higher late in the session. ISM non-manufacturing PMI slightly missed consensus but continues to show growth, which is always positive. AUD/USD is at the top end of its range near 1.037, ahead of the RBA’s monetary policy decision later today.

Ahead of the open, we are calling the Aussie market down 0.2% at 4464. It will be all about rates watch today, with consensus suggesting the RBA will cut rates by 25 basis points to 3%. Should this happen, the RBA statement is likely to show a change in tone going forward. It is difficult to see the RBA go lower than 3% unless conditions significantly deteriorate further. The last thing the RBA would want is to create a housing bubble and fuel inflation. There are a growing number of analysts who feel the RBA is more likely to stay on hold as the recent rate cuts filter through. There has already been evidence of improving consumer sentiment, particularly in the property market where we are seeing signs of a recovery along with stabilisation in China. Whatever the outcome of today’s rate decision, the statement will probably carry more weight. With such a line ball call on the rates front, the Aussie dollar is in for a big day. A cut will not necessarily mean the AUD will be sold off, as the statement might indicate a shift to a more hawkish stance going forward and an end to the easing cycle.

On a stock level, we expect to see a softer start for BHP Billiton, with its ADR pointing to a 0.3% fall to $34.70. A tough session for commodities could see the resources on the back foot when the market opens today. Mild gains for gold might stabilise some of the gold names today after they were sold off yesterday. We will continue to see a reaction to Westpac’s full-year results as analysts revise their ratings. The stock enjoyed a strong bounce off $25 yesterday. Retailers were sold off yesterday ahead of the rate decision and they will remain in focus today as we head into the key festive trading season.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0364 -0.0001 -0.01%
ASX (cash) 4466 -8 -0.19%
US DOW (cash) 13109 24 0.18%
US S&P (cash) 1415.2 2.9 0.20%
UK FTSE (cash) 5843 -1 -0.02%
German DAX (cash) 7340 2 0.03%
Japan 225 (cash) 9021 29 0.32%
Rio Tinto Plc (London) 31.46 -0.69 -2.13%
BHP Billiton Plc (London) 19.91 -0.31 -1.52%
BHP Billiton Ltd. ADR (US) (AUD) 34.70 -0.12 -0.34%
US Light Crude Oil (December) 85.76 0.66 0.78%
Gold (spot) 1684.4 5.3 0.32%
Aluminium (London) 1906 -19 -0.99%
Copper (London) 7650 -15 -0.20%
Nickel (London) 15900 -75 -0.47%
Zinc (London) 1868 -6 -0.32%
Iron Ore 120.5 0.40 0.33%

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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