IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Overnight, US markets surged for a second straight session as investors were encouraged by the apparent progress being made in relation to the fiscal cliff negotiations. Weekend talks saw the Republicans are offering up a degree of tax hikes on the wealthiest Americans in exchange for larger and more specific tax and entitlement cuts from the Democrats. This plan was rejected by Obama on the grounds it would supposedly only impact those households earning over $1 million per year. Yesterday however, the Democrats countered with an offer than would see only those earnings more than $400,000 paying a higher tax rate, an elevation from the party’s previously stated aim of increasing taxes for those earning over $250,000.

To be honest, the numbers are irrelevant at the moment and will change numerous times before a final deal is settled on. What is important and what is driving the market higher is that the two parties are now in constructive discussions over specific tax levels and spending programmes and working towards a common middle ground.

Thanks to the modest gains in Europe and the strong performance on Wall Street, the local market is set for a convincingly higher start today with the benchmark ASX 200 index called up 30 points or 0.6% at 4625. Yesterday the market made another foray above 4600 but was again unable to sustain that level by the close. Today looks like we could be set for our first close above this level since late July last year. Gains today are likely to be broad based with solid contributions again expected from the materials and energy sectors as investors continue to rotate out of defensive names and into more cyclical/growth sectors. Gold names could be one sub-sector of the materials space exempt from today’s rally after the commodity’s US $30 drop overnight to current levels around US$1670.

For those wishing to talk about ‘Santa Claus rallies’ - month to date our market is up 2% and for the quarter is up 4.7%, putting it on track to post its best fourth quarter in six years. These figures are before today’s expected 0.6% jump on the open.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0531 -0.0008 -0.08%
ASX (cash) 4628 33 0.72%
US DOW (cash) 13349 69 0.52%
US S&P (cash) 1446.3 11.5 0.80%
UK FTSE (cash) 5955 25 0.42%
German DAX (cash) 7672 46 0.60%
Japan 225 (cash) 10053 116 1.16%
Rio Tinto Plc (London) 35.67 0.97 2.80%
BHP Billiton Plc (London) 21.50 0.26 1.21%
BHP Billiton Ltd. ADR (US) (AUD) 36.91 0.25 0.70%
US Light Crude Oil (February) 88.45 0.13 0.15%
Gold (spot) 1672.15 -30.3 -1.78%
Aluminium (London) 2099 -13 -0.62%
Copper (London) 8012 -75 -0.92%
Nickel (London) 17747 -12 -0.06%
Zinc (London) 2314 -4 -0.16%
Iron Ore 132.2 0.00 0.00%

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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