IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets extended their losses in European and US trade as market participants remained cautious on the looming fiscal cliff. Equities drifted lower despite some mildly positive economic releases, particularly in Europe. However in the US, the Philly Fed manufacturing index disappointed and contributed to the negative tone. It seems investors remain sceptical that a headline regarding the fiscal cliff could hit the wires at any time and cause some volatility in price action. There were some big moves in the currency space, with the Aussie dollar and yen among the big movers. AUD/USD managed a minor recovery into 1.039 only to be greeted by further selling and dropping to lows near 1.03. This is quite a dramatic move considering the pair was trading as high as 1.046 just a couple of days ago. AUD/USD also broke below an uptrend support line which had been in place since the beginning of June. USD/JPY extended its gains, jumping to a top of 81.46, which is its strongest level since April 27. The pair traded as high as 84.18 in March this year and this would be the level to watch as investors anticipate a looser monetary policy from Japan’s main opposition party.

Ahead of the open, we are calling the Aussie market down 0.2% at 4342. Equity markets remain in the post US election lull, which has mainly been a result of fiscal cliff and Greece concerns. For the week so far, the local market has dropped 2.7% and has endured a 3% decline since the election results. There is nothing on the local economic front to look out for. In the absence of fresh catalysts, we are likely to see the local market remain subdued today. Elsewhere in the region, Japan’s Nikkei will be in focus on the back of another big move in the yen.

On a stock level, we expect to see a relatively flat start for BHP Billiton, with its ADR pointing to an open of $33.13. There are plenty of AGMs taking place in the small and mid-cap mining space and this could result in some unexpected big moves from some of these miners. Iluka has had a bad run with the brokers this week and has now been downgraded by Macquarie to Underperform (from Neutral). Myer, Qantas and Seven West Media will be interesting to watch today after they had a big day yesterday and could see some follow through buying.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0326 -0.0040 -0.39%
ASX (cash) 4342 -7 -0.16%
US DOW (cash) 12540 -49 -0.39%
US S&P (cash) 1353.8 -5.8 -0.42%
UK FTSE (cash) 5670 -17 -0.29%
German DAX (cash) 7032 -29 -0.41%
Japan 225 (cash) 8868 56 0.63%
Rio Tinto Plc (London) 30.00 -0.25 -0.83%
BHP Billiton Plc (London) 18.98 -0.15 -0.78%
BHP Billiton Ltd. ADR (US) (AUD) 33.13 0.00 0.01%
US Light Crude Oil (December) 85.96 -0.79 -0.91%
Gold (spot) 1714.4 -10.8 -0.63%
Aluminium (London) 1962 -8 -0.40%
Copper (London) 7651 16 0.21%
Nickel (London) 15975 -132 -0.82%
Zinc (London) 2196 23 1.06%
Iron Ore 122.8 0.40 0.33%

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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