IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

The S&P 500 was little changed heading into the close after punching above the 1500 mark. This was driven by data out of China before sliding back on profit taking and the Apple result sinking in. The S&P 500 is currently up ever so slightly to 1495 points. The stellar run in the S&P 500 can be contributed to enhanced profits, with 75% of companies that have released their fourth quarter results exceeding expectations. Even with Apple dragging on the market over the past 24 hours, it is still moving up to yearly highs.

This all bodes well for regional markets as the S&P and Dow futures continue to point a positive session. We believe that the Asian trading day will follow the futures markets, and coupled with comments from Japan’s Deputy Economy Minister Yasutoshi Nishimura that, 1) the decline in the yen isn’t over, 2) that the 90 level is just a correction and 3) the rise to 100 isn’t a concern, we expect the Nikkei in particular to surge. We would look for dips in USD/JPY.

Mr Nishimura ‘s comments filtered through our market yesterday afternoon, and we expect this to continue this morning. Most people say the move yesterday was down to China’s PMI figures, but we think Japanese rhetoric had a lot to do with it. Remember Japan is our second biggest trading partner; it is the largest regional market and is actively looking to expand its balance sheet and drive growth. China is only one part of the jigsaw. Japan is a major player in our market heading to 5200 points and beyond, and with Japanese CMI figures out this morning anticipated to show continued deflation, expect the rhetoric of Mr Nishimura to continue.

Overnight, AUD/USD couldn’t find support at all, dropping 0.91% and now finds itself back below $1.05, with currency traders all turning their attention to EUR/USD or EUR/JPY. The loss of support can be attributed to the long euro trade as LTRO loans are due this month. We expect to see €100 billion returning to the ECB balance sheet, which will add support to the euro as funds flow out of the market. The other reason for the falls was the unwinding of the carry trade in AUD/USD. AUD/USD is currently at $1.0457 and trending lower.

Locally, health care leader ResMed will report its second-quarter earnings this morning. RMD has been a stellar performer this year, up over 8% for the year and is well and truly outperforming the sector, which is up 0.5%. With 95% of its operations overseas, and strong exposure to the US and European markets, sales and EBIT are expected to excel. With defensive stocks still the main focus for investors, a solid result from RMD this morning could continue to see it outperform.

Moving to the open and we are calling the ASX 200 up 14 points to 4824. We are expecting a flat start for BHP with its ADR pointing down 0.05% to 37.14, however we do note that it traded higher in London overnight. With the market now at two-year highs heading into the weekend, be mindful of people closing out positions ahead of the long weekend. With the market closed on Monday for Australia Day, traders will be mindful of chasing their tails if global markets turn off tonight and Monday night; they will not want to be left in the cold, so watch for the market to possibly wane in the afternoon session.

Market Price at 8:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0459 -0.0057 -0.54%
ASX (cash) 4832 22 0.46%
US DOW (cash) 13844 71 0.52%
US S&P (cash) 1495.9 7.4 0.50%
UK FTSE (cash) 6256 64 1.04%
German DAX (cash) 7746 48 0.62%
Japan 225 (cash) 10825 253 2.40%
Rio Tinto Plc (London) 35.75 0.73 2.10%
BHP Billiton Plc (London) 21.38 0.28 1.34%
BHP Billiton Ltd. ADR (US) (AUD) 37.15 -0.01 -0.04%
US Light Crude Oil (March) 96.05 0.50 0.53%
Gold (spot) 1668.40 -13.7 -0.82%
Aluminium (London) 2072 5 0.22%
Copper (London) 8072 -2 -0.02%
Nickel (London) 17355 -87 -0.50%
Zinc (London) 2387 30 1.27%
Iron Ore 148.6 0.9 0.61%

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.

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