IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

It’s all about equities printing record/cycle highs at the moment. This is occurring as investors continue to respond to what seems to be a concerted effort by central banks to ease, plus a slight improvement in data from key economies. Ever since Friday’s solid non-farm payrolls numbers, global data has been on a roll, with China’s trade balance result and German factory orders/industrial production impressing yesterday. The single currency has perhaps been the biggest beneficiary of the improving economic data out of Germany. When ECB President Mario Draghi cut rates last week, he emphasised the ECB is ready to do more should economic data continue to deteriorate. As a result, the German data saw EUR/USD spike to $1.3195 before a slight pullback into the $1.316 region. AUD/USD enjoyed a strong bounce off its lows in the $1.015 region yesterday, helped by the better-than-expected China trade balance data. The pair even managed to pop back above $1.0200 early in US trade, but found sellers once again and continues to gravitate back towards Tuesday’s lows. Today is another big day for the local currency, with jobs numbers and China CPI all due out at 11.30am AEST. The unemployment rate is expected to remain steady at a three-year high of 5.6% with 11,500 jobs added. Meanwhile, China’s CPI is expected to rise 2.3% which is well under the government’s target over there and therefore is fairly good for risk. Should the jobs data turn out to be market friendly, then resistance for AUD/USD will be in the $1.0222 region, while disappointing data will probably see lows in the $1.015 region retested and possibly breached.

Ahead of the open, we are calling the ASX 200 up 0.2% at 5208. The dominant theme in yesterday’s trade was a rotation out of some of the defensive names and into the resource stocks. Seeing investors come out of their comfort zone is always a good sign, and might just be what this market needs to keep the momentum going. A situation where the banks and miners move higher in unison has been rare this year and is exactly what this market needs to breathe confidence into investors.

BHP’s ADR is pointing to a 0.9% gain to 34.60, with iron ore back above 130. Gold/copper names should also be well supported after the two metals enjoyed strong gains. The yield-play will be back in focus today with NAB reporting its first-half results. At first glance, the numbers look solid with the cash profit of $2.92 billion coming in slightly ahead of consensus at $2.91 billion. NAB’s dividend came in at 93 cents, which is also a touch ahead of estimates, but its net interest margin might disappoint analysts after coming in at 2.03%. Some analysts were expecting a net interest margin of 2.07%. ANZ Bank goes ex-div today and therefore we expect to see it underperform. News Corp (NWS) has beaten expectations in its Q3 earnings report. The fact that shares rallied nearly 4% in after-hours trade suggests good days in Australia as well, and it should continue its strong uptrend. Publishing and satellite broadcasting remain weak, however strong results were seen in cable, TV and film. On the headline Q3 EBIT grew 4%, around 10% above expectations, while adjusted EPS beat consensus by a touch at $0.35. NWS is a sold brand and ticks a lot of boxes for investors, and despite paying a low 0.9% yield it remains a standout for growth focused investors. Also keep an eye on Billabong with reports suggesting it could see a revised bid under 45 cents a share.

Market Price at 7:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0171 -0.0015 -0.15%
ASX (cash) 5208 8 0.16%
US DOW (cash) 15102 68 0.45%
US S&P (cash) 1632.4 8.5 0.53%
UK FTSE (cash) 6593 32 0.49%
German DAX (cash) 8257 65 0.79%
Japan 225 (cash) 14357 71 0.50%
Rio Tinto Plc (London) 31.01 0.29 0.94%
BHP Billiton Plc (London) 19.08 0.26 1.37%
BHP Billiton Ltd. ADR (US) (AUD) 34.60 0.30 0.87%
US Light Crude Oil (June) 96.64 0.94 0.98%
Gold (spot) 1474.05 20.9 1.43%
Aluminium (London) 1908 26 1.38%
Copper (London) 7419 154 2.12%
Nickel (London) 15404 210 1.38%
Zinc (London) 1895 22 1.17%
Iron Ore 130.2 0.2 0.15%

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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