IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Markets continued to rally on the back of Fed chief Ben Bernanke’s comments, with some investors repositioning themselves for an extended period of easy monetary.

A disappointing unemployment claims reading also contributed to the rally, as investors felt perhaps the economy isn’t in a strong enough position to warrant tapering. It is clear Ben Bernanke doesn’t want to derail the economic recovery and wants the economy to get back to a sustainable level before changing his stance.

While the US dollar finally managed to find some stability, US equities roared higher as investors got the first opportunity to react to Ben Bernanke’s comments which hit the wires post US trade yesterday. This saw the S&P finish the session with a record closing high and showed just how quickly sentiment shifts in these markets. The S&P is within touching distance of the all-time high set recently at 1687, with the overnight high eleven points off. 26.6% of stocks hit 52-week highs, which is the largest number of new highs since May 22.

Some of the risk currencies actually lost ground to the USD after having rallied significantly in Asian trade yesterday. EUR/USD retreated to lows in the 1.30 region before finding buyers as volatility ramped up on recurring Portugal and Greece issues. AUD/USD retreated quite sharply from its Asian trade highs and is back in the 0.92 region. On the local economic calendar today we have home loans data due out, with a 2.3% rise expected. This reading tends to be a significant indicator of domestic sentiment and affects a wide range of sectors in the domestic economy as most families’ wealth is highly correlated to property.

USD/JPY also seems to have found some stability and is hanging around the 99 level ahead of today’s Asian trade. Japan’s Nikkei is pointing to a 0.4% gain today and we have industrial production data along with the BoJ monthly report due out.

Ahead of the open we are now calling the Aussie market up 0.5% at 4988. This leaves the local market within striking distance of the psychologically important 5000 level, which we might test as early as today. For the week, an open at that level would see the local market 3% higher. China will be key, as it has the last few days and the bulls will be keen to see if the strong rally continues. Key resistance kicks in at 5012, which is the 61.8% retracement of the recent sell-off from 5246 to 4632. A closing break here would be very positive.

With the USD regaining its footing, the rally in the commodities stalled with profit taking on gold and oil also driving weakness. However, iron ore marched higher yet again with China strength aiding it to a 1.1% gain to 125.2. BHP’s ADR is pointing to a 2.3% advance to 33.61. Gold miners are likely to pullback today after a monster rally yesterday which saw the likes of Newcrest advance 12%. Lynas rallied yesterday and has now been upgraded to overweight by JP Morgan. Near-term resistance for the stock is at 50 cents. The banks will be in focus on the back of home loans data due out later this morning. A strong print would be positive for the banks with the biggest home loan books.

Market Price at 6:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9193 -0.0085 -0.92%
USD/JPY 98.8300 -0.0200 -0.02%
ASX (cash) 4988 22 0.45%
US DOW (cash) 15458 -8 -0.05%
US S&P (cash) 1674.2 3.4 0.20%
UK FTSE (cash) 6566 -37 -0.56%
German DAX (cash) 8190 4 0.04%
Japan 225 (cash) 14524 51 0.35%
Rio Tinto Plc (London) 28.55 1.46 5.37%
BHP Billiton Plc (London) 17.83 0.61 3.54%
BHP Billiton Ltd. ADR (US) (AUD) 33.61 0.77 2.34%
US Light Crude Oil (June) 104.60 -2.59 -2.41%
Gold (spot) 1286.60 -6.4 -0.49%
Aluminium (London) 1831 -5 -0.28%
Copper (London) 7004 -23 -0.33%
Nickel (London) 13656 -196 -1.42%
Zinc (London) 1899 -12 -0.62%
Iron Ore 125.2 1.3 1.05%

IG 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 if you require market commentary or the latest dealing price.

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