IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets showed remarkable resilience to Cyprus concerns as equities gained ground. Contagion from the Cyprus situation has not quite materialised in the eurozone, and this has helped alleviate fears of a run-on banks in other countries. Yields remained calm, and this also helped the single currency recover from recent losses. The Fed also helped ease concerns of an abrupt end to QE, and this resulted in a continuation of the risk recovery. The board did drop its reference to easing global market strains, and continued to hint that it would not veer from its ultra-accommodative stance anytime soon. EUR/USD enjoyed a strong bounce off its Asian session lows, pushing through $1.290 and going on to print a high of $1.298. Meanwhile, the most significant move was probably in USD/JPY, which continues to find buyers on the dips. The pair is back above 96 and firmly has its recent high of 96.71 in sight. A Nikkei newspaper headline saying the BoJ will call for bold easing inspired yen weakness. While this is hardly ground-breaking news, the fact that Mr Haruhiko Kuroda is set to begin his post tonight makes the timing quite intriguing. No doubt we will see some positioning in the yen, as some traders anticipate further BoJ efforts to be announced before the official April 3 to 4 meeting. Japan was offline yesterday for the Vernal Equinox day, and we are confident these latest headlines will inspire a rally in the Nikkei. So far, we are calling the Nikkei up 1.4% at 12,645, resulting in a break of the March 15 high of 12,560. Whether or not the index can close above here we will have to see, but we feel confident it can. As we have said in our afternoon reports, there could some big changes to asset allocation from a number of life insurance companies in Japan; and also that the Government Pension Fund may shift to a more equity-focused stance, and this should keep this index firmly supported in the short term.

Ahead of the open, we are calling the ASX 200 up 0.4% at 4989. On the economic front, today we have the RBA bulletin which we doubt will have too much of an impact on sentiment. Regionally, we have the HSBC flash manufacturing PMI to look out for, and this will carry a lot more weight. After yesterday’s heavy selling in iron ore related names on the back of Goldman Sachs’ downgrade, today we may see some modest upside. BHP’s ADR is pointing to a 0.3% gain to $33.72 and it’ll be interesting to see if we can hold on to these early gains, considering iron ore prices continue to edge lower. The Goldman Sachs note on iron ore oversupply will continue to do the rounds, and could potentially be a significant source of underperformance for the big miners in the near term. Interestingly, FMG gave a reasonably upbeat view on the iron ore price yesterday, saying China demand for steel won’t fall for decades. Gold prices also retreated and this might result in gold names giving back some of the gains from yesterday. David Jones will be one-to-watch following its earnings, and we will continue to hear from analysts reacting to the results.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0380 0.0009 0.09%
ASX (cash) 4989 22 0.44%
US DOW (cash) 14495 40 0.27%
US S&P (cash) 1554.4 9.1 0.59%
UK FTSE (cash) 6426 -18 -0.28%
German DAX (cash) 7995 38 0.48%
Japan 225 (cash) 12645 177 1.42%
Rio Tinto Plc (London) 31.35 0.27 0.89%
BHP Billiton Plc (London) 19.62 -0.20 -1.00%
BHP Billiton Ltd. ADR (US) (AUD) 33.72 0.10 0.31%
US Light Crude Oil (May) 93.38 0.61 0.66%
Gold (spot) 1606.95 -6.3 -0.39%
Aluminium (London) 1943 -2 -0.09%
Copper (London) 7620 47 0.61%
Nickel (London) 16828 196 1.18%
Zinc (London) 2186 12 0.56%
Iron Ore 134.10 -0.3 -0.22%

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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