IG Markets - Afternoon Thoughts

IG Markets - Afternoon Thoughts

FTSE 5760 -26
DAX 7147 -22
CAC 3412 -19
IBEX 7551 -42
DOW 12787 +31
NAS 2577 +15
S&P 1378 +3

Oil 85.37
Gold 1728

Markets in the Asian region have edged higher today, despite a slump in sentiment into the close of the US session. Risk assets enjoyed a strong bounce in European trade on the back of Greece’s successful bond auction. Greece was looking to raise around €3 billion from a one and three month bill auction and managed to raise €4 billion, which will help to pay down some debt maturing on Friday. Greece was also granted an extra two years to reach its austerity and budget goals. However, the rally from this news was short lived as we saw a sharp reversal on Wall Street and US equities finished in negative territory. Asian markets have defied the negative tone in US trade, with some feeling the conclusion of the leadership change in China is the driver. In the risk currency space, AUD/USD has been the standout as it charged to a high of 1.0456 lifted by some positive local consumer sentiment figures. The pair now has the November 7 high of 1.048 in sight with near-term support at 1.044. EUR/USD bounced off 1.27 and climbed to 1.273 but remains stuck in the recent range.

Looking at the equities in the region, the Hang Seng is outperforming the region with a 0.7% gain led by the financial sector. Japan’s Nikkei is only marginally higher, while the ASX 200 has firmed 0.3%. Ahead of the European open, we are calling the major bourses weaker as they give back some of the gains from yesterday’s session. On the economic front, we have French CPI, European industrial production and an Italian 10-year bond auction. Despite yesterday’s developments on the European front, it is hard to get excited about the EUR at present. Clearly if you were a fiscally-conservative nation in Europe, the idea that the goal posts will once again be moved would be disgruntling and a burden on your taxpayers. As a result, some key policies are likely to get harder to push through down the track, particularly when some governments seek re-election. US markets are facing a modestly higher open as they recuperate some of the sharp losses they experienced into the close. Retail sales and PPI will be in focus ahead of the FOMC meeting minutes. After Fed member Janet Yellen’s ultra-dovish comments on the optimal path for US monetary policy, the minutes will deserve some attention. With these economic releases on the calendar, the greenback might be in for some volatility later.

The ASX 200 has climbed 0.2% and is now trading at 4390 after a choppy morning that saw it briefly venture into negative territory and print a low of 4372. Financial names are enjoying a recovery today after having plunged yesterday. National Bank has risen 1.4% and ANZ Bank is 0.9% higher. The defensives are continuing to do well with the utilities, telecoms and consumer staples sectors among the leaders. Lagging the market are materials, energy and industrial names, although some of the big miners are enjoying reasonable gains. BHP Billiton has edged up 0.2%, while Fortescue Metals has added 1%. Energy stocks are struggling as talk of LNG cost blowouts dampens sentiment. Santos has declined 3.7% and Woodside Petroleum is down 0.4%. Leighton Holdings has dropped 1.7% after an announcement regarding its investment in BrisConnections. CSR Limited has surged 6.4% on the back of its first-half report. Although the earnings were hardly inspiring, CSR has maintained its FY13 guidance and expects to report net profit after tax pre-significant items within the range of $35 to $54 million. Seven West Media has seen some follow-through buying today and is 3% higher after yesterday’s AGM comments.

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