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IG Markets - Morning thoughts and opening prices

Good morning,

Risk assets had yet another volatile session, as headline risk remained rampant, particularly on the Greece issue. Wednesday’s EU Summit produced no hard decisions on any substantive issues, as widely expected. The early part of US trade was relatively steady, with risk assets posting some mild gains. However, reports that some of China’s biggest banks may fall short of loan targets saw risk assets come off in the middle part of US trade. An economic slowdown in China is reducing demand for credit, and we saw the Aussie dollar drop on the back of the news. AUD/USD traded as low as 0.97118 and seems to be stuck in a range between 0.97 and 0.98 at the moment. It wasn’t long before headlines that Italian PM Mario Monti said he believed Greece would stay in the eurozone crossed the wires. This resulted in a broad recovery in risk assets, with US markets posting modest gains.

Ahead of the open, we are calling the Aussie market up 0.3% at 4068 after US markets erased early losses to finish the session higher. We expect to see the positive momentum into the close of US trade filter through to the ASX 200 at the open. The market found support at the 4050 level yesterday after drifting lower in the afternoon session. There is no local economic data to look out for, but we feel China will be in focus today. Reports suggesting that China's major banks may miss their annual loan targets for the first time in seven years amid weak demand will not appease investors. However, this could also pressure China to take action as soon as possible. With this in mind, we wouldn’t be surprised to see China announce some new investment projects soon. Growth concerns will also be heightened by below-consensus eurozone PMI and German IFO figures. Elsewhere in the region, Japan’s inflation will be in focus with CPI numbers due out.

On a stock level, we expect a strong start for BHP with its ADR pointing to a 0.6% gain to $32.17. The rest of the resource space is also likely to benefit from the recovery in risk sentiment towards the end of US trade. Elsewhere in the mining space, Aquarius Platinum is likely to remain under pressure after suffering a big sell-off in London and Johannesburg due to a loss at its Mimosa Mine. AGL Energy has been downgraded to neutral (from buy) by Nomura after the stock halted trading yesterday due to a 1-for-6 offer priced at $11.60 a share. We expect to see the banks recover today after some of their European peers posted some solid gains yesterday. The recent sell-off has left several stocks at very attractive valuations, and as soon as investors feel the slightest of confidence, we feel we will see a pickup in the buying.

MarketPrice at 6:30am AESTChange Since Australian Market ClosePercentage Change
AUD/USD0.97610.0009 0.09%
ASX (cash)406812 0.30%
US DOW (cash)1258499 0.79%
US S&P (cash)1326.210.4 0.79%
UK FTSE (cash)536056 1.06%
German DAX (cash)6304-24 -0.37%
Japan 225 (cash)8563.3811 0.13%
Rio Tinto Plc (London)28.400.49 1.76%
BHP Billiton Plc (London)17.180.37 2.22%
BHP Billiton Ltd. ADR (US) (AUD)32.170.18 0.56%
US Light Crude Oil (July)90.870.60 0.67%
Gold (spot)1559.32.3 0.14%
Aluminium (London)2011-2 -0.09%
Copper (London)7566-21 -0.28%
Nickel (London)16957115 0.68%
Zinc (London)19488 0.39%

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.

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

Kind regards,
Stan Shamu
Market Strategist
IG Markets


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