IG Markets - Morning Prices March 15

Once more, US economic data led the today’s trade with US PPI coming right in-line with estimates at 0.7%, and was up 0.5% on the previous month. Unemployment was again the major driver with claims once again beating estimates, dropping another 10,000 to 332,000 week-on-week. From the start of February, this figure had fallen every week but one, and since November last year 61,000 welfare payments have no longer been needed.

This caused the Dow to print its eight consecutive record high, and its tenth consecutive northward move - continuing its longest winning streak since 1996. At the close, the Dow finished on its high at 14539 (+0.58%). The S&P is now the talking point, finishing two points from its 2007 all-time high at 1563. The question now is whether or not it will reach this point tonight or next week. One thing that is noticeable is volumes are starting to thin out as more and more investors begin to take stock of their winning positions rather than pilling in.

Moving to the other side of the Pacific, Japan is one market we have been constantly discussing for months, and with good reason. Japan looks like finally breaking free of the ‘lost decades’, having suffered over 20 years of deflation and stagnate growth, and we are not the only people getting excited by the rumbling going on in the bowels of Japanese policy headquarters (Bank of Japan and the Japanese parliament).

The Nikkei is the best performing developed market this year, adding approximately 19% so far. Compared to the Dow that is up 10.95%, S&P 500 +9.61%, FTSE +10.71% and the ASX 200 +8.24%; it is outstripping world markets by also most double.

The index is now at its highest level since September 9 2008 and with Prime Minster Shinzo Abe’s nominees for the BoJ passing the lower house overnight, they now face their final hurdle in the upper house today, which they look like passing and will only strengthen the Nikkei’s position further.

We have also talked about the inverse correlation between the yen/Nikkei. Since Mr Abe came to power in November, USD/JPY has gained 20% with the Nikkei almost perfectly mirroring this move, adding weight to the excitement; the Tokyo stock exchange released data showing foreign investors bought ¥1.02 trillion yen worth of Japanese shares in the first week of March. That is the highest level since Bourse started recording such data in 1982. This is why Japan is so important to our region; with increases to the Japanese markets, Japanese wealth rises meaning local investors will start to look to global markets for additional wealth creation, particularly ones that are lagging the global bull market (i.e. ASX).

However, yesterday was a litmus test for what might happen to the global market when stimulus is pulled out. Unfortunately Australia was the test site for this event.
With such a stellar jobs report, (some are comparing the 71,500 jobs added in Australia to the US printing 1 million jobs added) investors started to realise that the likelihood of additional rate cuts is now slim to none before the next election. The ‘liquidity booster-shot ‘ that comes with a rate cut has helped our market jump up as much as 10.5% this year, and adds to the purses of consumers for discretionary purchases. It also means the Aussie dollar looks set to rise once more - AUD/USD jumped one per-cent overnight to $1.040, its highest level since February 6, after looking like it would finally head back to parity. The high dollar also impacts our market strength from the bottom up as most company bottom-lines denoted in US dollars are squeezed on repatriation.
Moving to the open, we are calling the ASX 200 up 18 points to 5050 (+0.4%). Commodities were mixed overnight; oil was up as was gold, copper and aluminium. Iron ore however was smashed, dropping a further seven dollars to $132 a tonne and led the global miners lower in London. Watch for the pure plays to drop further today - FMG and AGO lost all support yesterday and will lose out again today on the back of the iron ore price. That call is backed by BHP’s ADR is suggesting the stock is set to lose another 22 cents to $34.92 (-0.6%).
That means that once again support for the 0.4% call has to come from defensives, of note, Telstra and the big four banks have all fallen this week and may see a bounce today. The only risk assets likely to see a bounce is the energy sector on the back of the oil price.
As it is the end of the week, position reassessment will be in order, and after three days on the slide do not be surprised to see the Aussie market making it four in a row as investors cash out winning positions.

Market Price at 10:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0382 0.0013 0.13%
ASX (cash) 5050 18 0.35%
US DOW (cash) 14513 52 0.36%
US S&P (cash) 1558.8 5.0 0.32%
UK FTSE (cash) 6531 50 0.77%
German DAX (cash) 8045 69 0.86%
Japan 225 (cash) 12428 93 0.75%
Rio Tinto Plc (London) 33.11 -0.66 -1.95%
BHP Billiton Plc (London) 20.92 -0.15 -0.70%
BHP Billiton Ltd. ADR (US) (AUD) 34.90 -0.19 -0.55%
US Light Crude Oil (April) 93.13 0.88 0.95%
Gold (spot) 1590.45 2.8 0.18%
Aluminium (London) 1975 10 0.49%
Copper (London) 7803 43 0.56%
Nickel (London) 17195 285 1.68%
Zinc (London) 2249 12 0.53%
Iron Ore 132.90 -6.1 -4.39%

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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