IG Markets - Morning thoughts and opening prices

IG Markets - Morning thoughts and opening prices

Overnight, European and US markets turned negative for the first time this year. US markets finished the day particularly soft after the release of the Federal Reserve’s December minutes. The minutes show that members were ready to end ‘operation twist’ also known as QE3 in 2013. Views were mixed, however, as to when this would take effect was in question, with some stating that asset buying will continue at least until the end of 2013. Others believe it would be beneficial to slow and even stop purchasing bonds by the middle of the year, citing financial stability as their main concern. This saw all US indices retreat immediately with the S&P 500 lower by 0.27% to finish at 1459 points after a positive start. With the index reaching its highest level since September on Thursday after passing the budget bill, the Fed minutes put a dampener on economic data from Moody’s that showed private sector jobs grew in December and well exceeded expectations. This data is seen as a precursor to the more closely watched government employment report which is released tonight. The report also showed that the US unemployment rate remained steady at 7.7% - the lowest level in four and half years. Retailers also reported their December sales last night and showed results were mixed, as investors waited and watched consumer sentiment and spending during the holiday season. One positive to come out of the results were store sales, which rose 4.5% above the forecasted 3.3%.

European stocks also declined or the first time this year after reaching a 17-month high on Thursday. With the euphoria of the US budget bill fading, investors are now turning their attention to the size of the US fiscal deficit and the March deadline. Having now witnessed both the 2011 ‘debt ceiling’ and 2012 ‘fiscal cliff’ negotiations, investors are predicting another nail-biting finish in the House and the Senate come March. This saw both the DAX and the CAC retreat 0.29% and 0.2% to 7756 and 3721 points respectively.

Currencies also reacted to the Fed minutes and saw the dollar extend its gains. The dollar was already recovering loses from the budgetary news on Wednesday with the additional new wire increasing its rate of recovery. This saw the euro fall to $1.3072 from $1.3177. The yen continued its fall against the dollar to ¥87.28 on the back of the Fed minutes and has fallen further after statements by Japanese Prime Minister Shinzo Abe who reiterated his commitment to weakening the currency. The Aussie dollar was stronger in early trade as the risk currency broke back above $1.05 for a short while. However, it fell away sharply on the release of Fed minutes and is now back below $1.05 to be $1.0463.

Moving to our market and with the ASX 200 hitting its highest point since May 2011 closing 4740 points yesterday, it is expected to be flat today as investors look to consolidate their positions. We are calling the ASX down around 0.11% to 4735. With both raw materials and spot commodity also falling overnight, BHP’s ADR is matching down 1.24% to $37.68 after finishing at $38.15 - its highest level since February last year. As we head into the first weekend of the year, trading will be low today with no firm leads from global markets.

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.

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