IG Markets - Morning Prices April 3

Overnight trading volumes were slightly on the light side again. However, good political news out of Europe and some strong US macro data drove both the Dow and the S&P500 to their all-time closing highs.

The S&P added eight points by the close, and got within two point of its all-time intraday high of 1576, as Cyprus was granted an additional two years (to 2018) to achieve reforms tied to the €10 billion bail-out.

Italy was also back on the right side of the political newswires, reporting that President Giorgio Napolitano has reignited negotiations by forming a committee of ‘wise men’ to start nutting out a deal to form a new government, which will mostly likely see the country return to the polls.

This news saw Italian ten-year yields falling 14 basis points (bps) to 4.62%, with ten-year Spanish yields following suit- dropping 12 bps to 4.94%. However, in the grand scheme of things, last night’s news was pretty mild in terms of drivers. The Cypriot saga and the Italian ‘elections’ have really only been put to one side, they will flare up again in the interim.

Realistically, it is the Asian region that should be dominating the headlines for two major reasons.

Firstly there are the two-day talks at the BoJ. More and more economists and ex-BoJ officials are stating the two per cent target ‘can’t be done’. Yesterday, Governor Kuroda borrowed Mr Mario Draghi’s patented tagline of ‘whatever it takes’ to end deflation at the opening of the two-day address, and gave himself a timeframe of two-years.

If the markets look at this realistically and practically, he actually has less time than this. Markets are forward looking and reactionary, if they cannot see results inside six to twelve months, market confidence will swing against him making the target nigh-on-impossible. This has been seen over the past few days with the appreciation of USD/JPY and EUR/JPY, with the Nikkei correlation well intact, seeing the index down for the second consecutive day.

The second headline issue is the Korean peninsula. This is a ticking time-bomb, and there are several major factors here. Firstly, Kim Jong-Un is still establishing his leadership at a time when internal rumblings are still bubbling. This is coupled with the fact North Korea may now actually have weapons of massive destruction. Secondly, South Korea has a new President and her resolve is deliberately being tested by the North (history tells us this is actually normal occurrence); she has so far responded in typical forms of rhetoric. Thirdly, and most importantly are the responses of China and the US. This is the biggest issue facing the peninsula, if something were to occur, how will the US respond to a missile launch from North Korea? What would China do if the US struck back in support of the South? Global markets would find themselves being turned upside down if this third point eventuated.

With the first week of a new month, Australian data continues to be released with the trade balance due today. It has been interesting to see the deficit continue to close. It does show that exporters are continuing to find ways around the high Aussie dollar. Bloomberg forecasts are calling for a deficit of $1 billion compared to $1.06 billion the month before.

Looking at the open, we are calling the ASX 200 up 10 points to 4995 (0.20%) as we follow global leads higher. Commodities were slightly weaker overnight, while gold was hammered down 1.5% to $1576 an ounce. This lead is the main reason for BHP’s ADR to be pointing lower, down seven cents to $32.65, despite the fact it jumped up 1.25% in London trading.

Newcrest is one stock to watch today, with gold down sharply and the fact its guidance dropped by another 10% to between 2 and 2.15 million ounces per annum on Thursday - it is heading to GFC lows today. It will be the first time NCM has been below $20 since November 2008. Watch again for the banks to move up today; Westpac, ANZ and NAB are all within striking distance of their interim dividend.

Market Price at 7:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0443 -0.0018 -0.18%
ASX (cash) 4995 10 0.20%
US DOW (cash) 14647 68 0.47%
US S&P (cash) 1566.8 6.3 0.40%
UK FTSE (cash) 6468 68 1.06%
German DAX (cash) 7914 122 1.56%
Japan 225 (cash) 12158 101 0.84%
Rio Tinto Plc (London) 30.85 -0.01 -0.02%
BHP Billiton Plc (London) 19.39 0.24 1.25%
BHP Billiton Ltd. ADR (US) (AUD) 32.65 -0.07 -0.20%
US Light Crude Oil (May) 96.80 0.09 0.09%
Gold (spot) 1576.00 -26.5 -1.65%
Aluminium (London) 1887 -13 -0.69%
Copper (London) 7485 33 0.45%
Nickel (London) 16381 -166 -1.00%
Zinc (London) 2057 -46 -2.19%
Iron Ore 136.10 -1.2 -0.87%

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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