IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Overnight, US equities see-sawed around the flat line amidst ongoing discussions over the US fiscal cliff. With Democrats quick to reject the Republicans’ $2.2 trillion dollar deficit reduction plan because it did not involve any tax hikes for the wealthy, the markets faced another day of political gridlock and hence finished effectively unchanged.

With little in the way of leads from offshore markets and fiscal cliff discussions continuing in earnest, the Australian market is set to focus on local issues today, namely when and how much of yesterday’s rate cut will be passed on to consumers; will it be enough to help out the Christmas shopping season; what to make of the stubbornly high AUD and what will today’s GDP data reveal?

Given the sell-off we saw yesterday after the RBA decision, we are looking at a slight correction on the open this morning with the ASX 200 set to unwind seven points or 0.15% higher at 4510.

It was perhaps a little confusing yesterday to see the Aussie market fall after the rate cut and the AUD rise, but in essence it’s all about positioning and perception. Everyone was short AUD heading into the rate cut, the statement was relatively neutral and gave no clear evidence of imminent further easing, so it was not that surprising to see the AUD rally as ‘shorts’ closed positions. Also, why did the market fall from -0.2% to -0.6%? Part of that was due to the retailers which you’d think would have been among the biggest beneficiaries of a cut. Myer and David Jones were up close to 5% and 2% respectively before the cut, yet finished flat. Why? Maybe the market figured (or realised) the flow-through effects of a December rate cut will be too late to influence the Christmas shopping period? That’s why we suggested heading into the November RBA decision that an earlier cut would have been more beneficial to the consumer and thus the economy.

Outside of today’s Q3 GDP data at 11.30am, where the market is looking for a 0.6% print, it’s appearing like another relatively lacklustre and directionless day.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0476 0.0034 0.33%
ASX (cash) 4508 4 0.10%
US DOW (cash) 12960 29 0.22%
US S&P (cash) 1409.6 2.8 0.20%
UK FTSE (cash) 5868 15 0.26%
German DAX (cash) 7446 41 0.55%
Japan 225 (cash) 9408 -22 -0.23%
Rio Tinto Plc (London) 31.30 0.10 0.33%
BHP Billiton Plc (London) 19.51 -0.15 -0.74%
BHP Billiton Ltd. ADR (US) (AUD) 34.27 0.01 0.03%
US Light Crude Oil (January) 88.42 -0.25 -0.28%
Gold (spot) 1697.45 -12.6 -0.74%
Aluminium (London) 2091.00 -16 -0.74%
Copper (London) 8031.25 53 0.66%
Nickel (London) 17480.00 111 0.64%
Zinc (London) 2236.75 0 -0.02%
Iron Ore 117.1 1.80 1.56%

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

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