IG - Morning thoughts and opening prices
After having been sharply sold off into the close of the Asian session, risk assets managed to find some stability in European and US trade. European finance ministers will continue Greece discussions at their next meeting on November 26, after failing to come up with an agreement in yesterday’s meeting. The negotiations are reported to have stalled as creditors refused to put up fresh funds for Greece. However, it still seems leaders are confident a deal will be ironed out after sorting out a few technical issues, which is hardly surprising considering what is at stake. Optimism that an agreement will be reached on November 26 seems to be what helped stabilise sentiment.
In US trade, better-than-expected unemployment claims and flash manufacturing PMI data encouraged investors, while a cease fire in the Middle-East also buoyed sentiment. Unemployment claims fell to 410,000 (versus consensus of 415,000), while flash manufacturing PMI rose to 52.4 (versus consensus of 51.2). As a result, US and European equities managed to edge higher. However, with the Thanksgiving holiday coming up, volume remained relatively light. Looking at the risk currencies, the euro managed to reverse all its losses from the Asian session. EUR/USD slumped from 1.282 down to 1.274 in Asia, only to rally back to 1.283 in US trade. The single currency is facing significant event risk today with plenty of PMIs set to be released in Europe, while the EU economic summit also commences in Brussels where the budget will be discuss. There is also a Spanish bond auction to keep an eye on as Spain looks to boost its funding further.
Ahead of the open, we are calling the Aussie market up 0.6% at 4395; we have been calling the local market just shy of 4400 at the open for the past few sessions. That is now the key level to look out for in the near term, should the market manage to hold on to its early gains. We don’t have any local economic data to look out for but China’s HSBC flash manufacturing PMI will be in focus. Of course, if we get a strong reading (better than last month’s 49.5), this would help support the notion that China has stabilised and lift risk assets in Asian trade. Elsewhere in the region, Japan will remain firmly in focus after USD/JPY pushed higher in US trade. USD/JPY printed a seven-month high of 82.54 as the market bets on an LDP victory. The LDP is expected to implement ultra-loose monetary policy.
On a stock
level, we expect to see a firmer start for BHP Billiton,
with its ADR pointing to a 0.5% rise to $33.53. Gold
recovered in line with the euro and this might support
precious metals miners today. David Jones will remain in
focus after a sharp drop in its shares yesterday on the back
of its first quarter sales report. Defensive sectors will be
interesting to watch after some big moves in Telstra and CSL
Limited recently. These two stocks are pivotal to the
performance of telecoms and healthcare sectors.
|Market||Price at 8:00am AEST||Change Since Australian Market Close||Percentage Change|
|US DOW (cash)||12836||99||0.77%|
|US S&P (cash)||1392.3||9.5||0.69%|
|UK FTSE (cash)||5762||36||0.63%|
|German DAX (cash)||7188||45||0.62%|
|Japan 225 (cash)||9318||141||1.54%|
|Rio Tinto Plc (London)||29.97||-0.31||-1.03%|
|BHP Billiton Plc (London)||19.30||-0.07||-0.37%|
|BHP Billiton Ltd. ADR (US) (AUD)||33.55||0.19||0.56%|
|US Light Crude Oil (December)||87.64||0.89||1.03%|
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