IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Overnight, US stocks edged lower on the back of ongoing concerns about the US fiscal cliff predicament and a weaker-than-expected ISM manufacturing report.

In a setback to the US economic recovery thematic, US manufacturing unexpectedly contracted in November, coming in at 49.5, its lowest level in nearly three years and below the consensus estimate of 51.3. Like most November data, this reading is likely to have been impacted by Hurricane Sandy. On a balancing note however, construction spending rose 1.4% in October to an annualised rate of $872 billion.

Once again, there were few tangible signs of any material progress on the fiscal cliff, the single biggest issue in markets right now and one that will influence how all asset classes trade into year-end. Late in the US session there were some reports of a Republican plan to save US$2.2 trillion over ten years, but it did not involve higher taxes on the wealthy and hence failed to gain any traction.

European shares meandered through a relatively lacklustre session, finishing modestly higher after Greece announced its debt buyback plans and European manufacturing levels came out in-line with expectations (46.2), but still in contractionary territory.

Turning to the local market, the ASX 200 is expected to open modestly weaker, with the benchmark index currently called down seven points or 0.15% at 4524. While a softer open is on the cards this morning, most of the day’s action will come this afternoon when the RBA announces its interest rate decision at 2.30pm today. After the Bank left rates on hold at the November meeting, most economists had already been tipping a December cut with that view further strengthened yesterday after a flat retail sales print. Retail sales had been expected to grow at 0.4% in October, so the flat reading was confirmation that retailers, despite the string of rate cuts in recent months, are yet to see any material improvement in consumer spending. Building approval number are also due out today (11.30pm) and are expected to have fallen 1.8%.

Losses this morning are anticipated to be relatively broad based, but probably led by the major miners. Despite the USD weakening marginally overnight, the performance of base metals was mixed. BHP’s ADR is currently suggesting the local stock will open down 15 cents or 0.4% at $34.54.
Expect a fairly subdued morning of trade with activity levels potentially picking up around the time of the RBA announcement.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0420 0.0007 0.07%
ASX (cash) 4526 -6 -0.12%
US DOW (cash) 12972 -76 -0.58%
US S&P (cash) 1412.3 -8.7 -0.61%
UK FTSE (cash) 5863 -7 -0.12%
German DAX (cash) 7426 5 0.06%
Japan 225 (cash) 9448 -11 -0.11%
Rio Tinto Plc (London) 31.20 0.27 0.86%
BHP Billiton Plc (London) 19.65 0.03 0.15%
BHP Billiton Ltd. ADR (US) (AUD) 34.38 -0.16 -0.46%
US Light Crude Oil (January) 89.09 -0.09 -0.10%
Gold (spot) 1716.02 -3.0 -0.17%
Aluminium (London) 2113.50 20 0.93%
Copper (London) 8011.38 16 0.20%
Nickel (London) 17505.00 -145 -0.82%
Zinc (London) 2041.00 -5 -0.24%
Iron Ore 115.3 -0.30 -0.26%

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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