IG Markets - Morning Thoughts
IG Markets - Morning Thoughts
After having been negative throughout most of the US session, equities recovered in the last hour of trade on reports that US leaders will return to work on the fiscal cliff negotiations this weekend. Risk assets declined in US trade as the latest headlines from the negotiations suggest leaders are still far from a solution. Senate Majority Leader Harry Reid was on the wires saying that a resolution before January 1 seems unlikely. This spooked market participants along with a weaker-than-expected consumer confidence reading. New home sales data (377,000 versus 382,000) also missed estimates while unemployment claims (350,000 versus 365,000) beat consensus. Sentiment was actually positive in Europe, with both equities and the single currency managing to gain some ground. EUR/USD pushed to a high of 1.328 before falling sharply in US trade to 1.32. Strength in Europe was attributed to improving French consumer confidence and Italian business sentiment. AUD/USD remains stuck in a range between around 1.036 and 1.038, while USD/JPY extended its gains and printed a fresh high of 86.15.
Ahead of the open, we are calling the Aussie market 0.2% firmer at 4657. This will see the local market up 0.6% so far in the shortened trading week and trade at last week’s high of 4658.7. Once again, there is not much in it at all and we expect to see a relatively subdued session until we get further leads on the fiscal cliff negotiations heading into the end of the year. There is nothing to look out for on the local economic calendar, but once again Japan is likely to be the main point of focus for the region. Today is another big day for Japan with plenty of economic releases on the calendar including manufacturing PMI, industrial production, jobs numbers and CPI. With the new government looking to impose an inflation target, a CPI reading below expectations will only mean there is significant room to ease. At the same time, should these various readings show weakness, more pressure will be on the government and BoJ to act imminently. Should this be the case, we could see USD/JPY retest the overnight highs and possibly trade beyond that. As it stands, we are calling the Nikkei up 0.5% at 10377.
On a stock level, we expect to see mildly firmer start for BHP Billiton, with its ADR pointing to a 0.4% rise to $37.14. Iron ore extended its gains to 139.40 and this is likely to be a big factor for the local market heading into the end of the week. Gold and oil also enjoyed some gains and this might lift some of the energy and gold names today. The financial sector is likely to underperform as market participants digest the fiscal cliff developments. Retailers will remain in focus after a fairly solid day yesterday.
Market Price at 8:00am
AEST Change Since Australian Market Close Percentage
AUD/USD 1.0379 0.0044 0.43%
ASX (cash) 4657 9 0.19%
US DOW (cash) 13070 -47 -0.36%
US S&P (cash) 1415.1 -3.3 -0.23%
UK FTSE (cash) 5968 9 0.16%
German DAX (cash) 7645 22 0.28%
Japan 225 (cash) 10390 52 0.50%
Rio Tinto Plc (London) 35.42 0.33 0.94%
BHP Billiton Plc (London) 21.57 0.18 0.84%
BHP Billiton Ltd. ADR (US) (AUD) 37.14 0.15 0.40%
US Light Crude Oil (February) 91.14 0.22 0.24%
Gold (spot) 1663.80 5.8 0.35%
Aluminium (London) 2081 5 0.23%
Copper (London) 7917 105 1.34%
Nickel (London) 17290 -31 -0.18%
Zinc (London) 2333 30 1.30%
Iron Ore 139.4 4 2.95%
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.
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