IG Markets - Morning Thoughts
IG Markets - Morning Thoughts
Risk assets edged higher as some positive comments from US leaders calmed heightening concerns that the US had made little progress in fiscal cliff negotiations. Comments by US Speaker of the House John Boehner that he is optimistic about US budget talks saw markets pare earlier losses. President Obama was also quoted as saying he hopes to get the budget talks done by Christmas and he remains confident something will be done by year-end. This was in sharp contrast to comments by Senate majority leader Harry Reid suggesting little progress had been made in the previous session. With positive comments about the fiscal cliff negotiations hitting the wires, US equities brushed off some disappointing new home sales data. Sales fell to 368,000 while consensus was for them to rise to 387,000. EUR/USD had dipped below 1.28 but managed to bounce back to 1.294, while AUD/USD bounced off 1.043 and made its way back up to the 1.047 level.
Ahead of the open, we are calling the Aussie market up 0.3% at 4459. The ASX 200 traded at a high of 4461.7 this week and that will be the level to watch in the near term. On the local economic front, today we have private capital expenditure data due out with a 2.1% quarterly rise expected. As we approach the RBA’s interest rate decision next week, any local piece of data will be closely scrutinised. At the moment it seems like the decision will be a line-ball call. However, with all the recent developments in the global economy, the RBA seems more likely to take a wait and see approach. Following the moves in US trade, it is clear that any comments by US leaders on the fiscal cliff will result in some volatility and that we are in a headline risk environment. Once all the noise is taken out, it certainly seems like the global economy is in a better place and we are likely to start seeing markets mount a recovery into the end of the year.
On a stock level, we expect to see a softer start for BHP Billiton, with its ADR pointing to a relatively flat open at $33.98. The mining giant also has its annual general meeting today and this will be in focus as everyone looks for clues on the miner’s growth prospects, its opinion on the mining boom cycle and a potential leadership change. It was a tough session for commodities with a sharp drop in gold prices. The precious metal fell to a low of $1706 but has since recovered to around $1718. This is bound to affect some of the local gold plays in today’s session. However, most commodities finished well off their lows on the Boehner and Obama comments. Aristocrat Leisure will be one to watch today after a big move yesterday following the report of a strong result yesterday. The stock has been upgraded to outperform (from underperform) by Credit Suisse.
Market Price at 8:00am AEST Change Since Australian
Market Close Percentage Change
AUD/USD 1.0480 0.0026 0.25%
ASX (cash) 4459 11 0.26%
US DOW (cash) 12980 101 0.78%
US S&P (cash) 1411.6 11.3 0.80%
UK FTSE (cash) 5820 29 0.50%
German DAX (cash) 7374 49 0.67%
Japan 225 (cash) 9338 19 0.20%
Rio Tinto Plc (London) 29.40 -0.39 -1.29%
BHP Billiton Plc (London) 19.34 -0.10 -0.50%
BHP Billiton Ltd. ADR (US) (AUD) 33.98 -0.02 -0.05%
US Light Crude Oil (January) 86.69 -0.52 -0.60%
Gold (spot) 1720.2 -20.5 -1.17%
Aluminium (London) 1999.5 -8 -0.39%
Copper (London) 7749 -33 -0.43%
Nickel (London) 16954 97 0.58%
Zinc (London) 2187 -15 -0.66%
Iron Ore 117.9 0.00 0.00%
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