IG Morning Throught and Opening Calls
IG Morning Throught and Opening Calls
Overnight, US stocks followed their Asian and European counterparts and retreated for the second straight day as investors gear up for the US fourth quarter reporting season. With news thin on the ground, most investors treaded cautiously which caused the S&P 500 to stumble and finish the day down 0.36% to 1456 points. With equities trading lower, most investors moved to US treasuries and gold with US 10-year bonds yields falling back under 1.90% to 1.87%, while gold rallied 0.8% to $1660 an ounce after four straight days of trading lower. With Alcoa releasing its earnings this morning and it typically being a gauge for the rest of the season, investors in both Asia and US will wait for clarity over the coming days.
Over in Europe and even with the release of a consumer sentiment report that showed confidence in the 17-nation eurozone had increased in December to 87 compared to 85.7 in November, most major indices retreated. European markets instead turned their attention to German export data which declined in November and lead most investors to speculate that the recent gains in the region may in fact be overdone. This follows on from German Chancellor Angela Merkel’s comments that Europe’s debt crisis was far from over and that the region was only just starting to see the effects of stabilisation projects negotiated over the previous years. This saw the DAX retreat for the second straight day down 0.48% to 7695 points and it has now erased all of its gains in 2013. In London the FTSE followed suit and lost a further 0.18% 6053 points. The export data also affected EUR/USD and caused the euro to lose 0.23% to $1.3085 after three days of gains.
In other currency news, after reaching a two and half low against the green back, the yen has now recovered almost 1.3% in two days to be at 87.114. With investors now having digested the news from the Bank of Japan and Prime Minister Shinzo Abe that Japan will stimulate its economy later this month, the yen has now appreciated against all but one major trading pair, showing that more may need to be done to hold the currency down.
Moving to the Australian market, domestic news is expected to have a big impact on us with the release of retail sales for December coming out later today as well as the Housing Industry Association’s new home sales. We expect both reports to be positive with retail sales anticipated to have grown around 3.3% for December. We are therefore calling the ASX 200 up 0.14% to 4697 points with the consumer discretionary sector the one to watch. Iron ore continues to rocket upwards reaching $158.50 a tonne overnight, however with most mining companies forecasting a median price of $120 a tonne, most investors see current prices as overheated and overdone. This sees BHP’s ADR down 0.27% to $37.10 as investors reassess the current run up in the materials sector. What is encouraging for the local market is the Aussie dollar. After falling yesterday due to the release of Australia’s terms of trade, the dollar has recovered to be back above $1.05, showing overseas investors are looking to cash in on recent Chinese and US economic data. AUD/USD is currently $1.0507
|Market||Price at 8:00am AEST||Change Since Australian Market Close||Percentage Change|
|US DOW (cash)||13335||-27||-0.20%|
|US S&P (cash)||1456.6||-2.0||-0.14%|
|UK FTSE (cash)||6067||6||0.10%|
|German DAX (cash)||7705||-15||-0.20%|
|Japan 225 (cash)||10423||-83||-0.79%|
|Rio Tinto Plc (London)||35.47||-0.28||-0.78%|
|BHP Billiton Plc (London)||21.49||-0.20||-0.93%|
|BHP Billiton Ltd. ADR (US) (AUD)||37.40||-0.10||-0.27%|
|US Light Crude Oil (February)||93.29||0.08||0.09%|
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