IG Markets - Morning Prices Dec 24
Risk assets continued to drift lower on Friday with no signs of political leaders reaching a deal. Following House Speaker John Boehner’s decision to pull the pin on the Plan B vote, we have seen risk decline from the previous highs posted in anticipation of a deal. With negotiations stalling, investors are happy to sit on the sidelines and lock in recent gains. Looking at the forex markets, AUD/USD dipped below 1.04 to a low of 1.0395 while EUR/USD tested 1.316. The euro is mildly weaker this morning with some pinning this to PM Mario Monti’s decision to not run for government at the upcoming February elections. However, if there is an opportunity for him to run for a party that aligns itself with his policies then he will be available. USD/JPY remained resilient after finding support at around 83.90 and pushed back above 84 to a high of 84.4 this morning.
Ahead of the open, we are calling the Aussie market up 0.4% at 4643. This is mainly a result of US futures being down significantly in Friday’s Asian session, only to recover after the local market closed. With US futures up around half a per cent from Friday’s close, it’s not surprising for our market to be called up. Regardless, we expect a fairly quiet session with no major data releases on the calendar. It is also a shortened trading day, with the ASX closing two hours early at 2pm today. Elsewhere in the region, Japanese markets will be closed for the Emperor’s birthday while other markets are likely to be quiet ahead of the Christmas holiday.
On a stock level, we expect to see a firmer start for BHP Billiton, with its ADR pointing to a 0.8% rise to $37. Iron ore remained steady above $135 and this will help underpin some of the heavyweights. We expect to see most risk assets treading water in today’s session with investors exercising some caution on the back of fiscal cliff concerns. Gold fell yet again and this will keep the local gold plays on the back foot. Yield plays are likely to remain in favour along with some of the defensive names.