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IG - Afternoon thoughts November 13, 2012

FTSE 5758 -9
DAX 7152 -17
CAC 3401 -11
IBEX 7564 -4
DOW 12771 -44
NAS 2569 -14
S&P 1375 -5

Oil 85.12
Gold 1724

The Asian region is weaker as Greece concerns continue to cap markets and dent confidence. After having been in a holding pattern, markets have finally given up their grip on some key support levels. There weren’t many fresh catalysts throughout European and US trade as market participants continued to monitor the wires for any headlines on Greece. Concerns about the fiscal cliff have also been at the forefront of investors’ minds as we approach the end of the year. The most interesting moves have been in the currency space, where the euro has led the decline. EUR/USD dropped to 1.268, its lowest level since 7 September, when it charged higher in the lead up to the ECB announcing the bond buying programme. Many would have thought the OMT would have been activated by now, but it is becoming clear that Spain is in no rush to request a bailout and Greece is in a very bad place. AUD/USD has also given up significant ground after testing the 1.044 level in US trade. The pair is now sitting near 1.041 as it tracks the euro lower. These two currency pairs are a good indicator of risk sentiment and we have seen equities subsequently head lower.

Looking at the equities in the region, the Nikkei is outperforming after the yen weakened in Asian trade. The Nikkei is down 0.3% after USD/JPY broke out of the top part of its recent range at 79.50 and went on to print a high of 79.65. The rest of the region has slumped with the ASX 200, the Shanghai Composite and the Hang Seng trading at least 1% lower each. European markets are facing a soft open with Greece no doubt in focus. The country will be conducting a one and three month bill auction, raising around €3 billion, as it looks to pay down some debt maturing on Friday. The market will want to see this auction get away with no problems before the euro is bid higher. Also on the calendar will be German and European ZEW economic sentiment. US markets are also facing a weaker open, with the federal budget balance on the calendar.

The ASX 200 has dropped 1.1% and is now trading just below the 4400 level, with the financial sector dragging the index lower. After having outperformed for a while, the banks have finally lost their grip today and have been largely responsible for the pullback we are seeing. Westpac has declined 1.7%, Commonwealth Bank has shed 0.8% and Macquarie is down 2.9%. QBE has extended its losses by 7.1% after S&P revised its outlook on the insurer to negative from stable. Resource names are also weaker, with BHP Billiton and Rio Tinto both trading lower. Incitec Pivot has surged 4.3% on the back of its full-year results. The healthcare sector is outperforming with a few bright spots like Cochclear, which has climbed 1.6%. Seven West Media shares have jumped 15% on the back of some comments from its AGM, suggesting it is looking to pay down debt and cut costs.


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