IG Morning Thoughts And Opening Calls
IG Morning Thoughts And Opening Calls
US stocks advanced for the first time this week, breaking a two-day decline with the S&P 500 and advancing 0.15% to 1459 points. The gain come on the back of investor optimism for the coming reporting season based on better-than-expected results from aluminium giant Alcoa as they anticipated US corporate earnings growing for a third straight year. The Alcoa result also jolted copper and aluminium prices as demand from China and the US increased and record amounts of the metals are stock piled for future dealings. US treasuries remained relatively unchanged with 10-year bond yields holding their gains from yesterday at 1.87%. Gold slumped again down 0.4% to $1655 an ounce, after a small bounce yesterday with investors preferring risk assets such as the dollar and US equities over the precious metal.
Overall, risk consolidated heading into the main reporting week, but bid volumes were high illustrating risk assets are on the move. Risk currency pair EUR/USD remains steady as the increase in demand for commodities again put upward pressure on AUD/USD, which rose back above $1.05 in overnight trade, while the USD/JPY jumped back up after dipping below ¥87. The fall in the yen came after Prime Minister Shinzo Abe told Bank of Japan officials to double its inflation targets to two per cent as the Japanese government looks to pull additional policy levers to get the predominately export-driven economy moving. The yen lost one per cent in overnight trade to ¥87.89 after the announcement. This is a pair we would look to buy during dips as more downward pressure should be expected.
EUR/USD remains steady heading into tonight’s first ECB meeting for the year, with EU rates expected to hold at 0.75%. The main event will be ECB President Mario Draghi’s press speech where he will lay out his plans for the eurozone in 2013. On the local front, and the AUD will be waiting to see the results of the buildings approvals data for November. Consensus views see approvals increasing by 4% after a poor result in October. If this is the case the AUD should finally hold above $1.05 after dropping below this line twice this week due to disappointing retail sales and high-than-expected terms of trade. Other news to affect the local market will be the release of China’s balance of trade figures; a positive result here will see risk switch on and set the tone for the remainder of the day.
Moving to the open and we are calling the ASX 200 up 0.2% to 4718 points with the industrial sector the one to watch ahead of the building approvals result, with building stocks such as James Hardie and Boral the main focus. We expect the rest of the market to be mixed with investors firmly fixing their attention on the 4700 level. If this is broken to the downside we can expect a larger pull-back after several strong weeks during the Christmas period. To the commodities space and although copper and aluminium were stronger on the back of the Alcoa result other commodities were mixed, with oil retreating after official US data showed that supply had surged last week to its highest level in almost 20 years. This mixed lead has carried through to the opening calls with BHP set to open around 5 cents lower at $37.53, with iron ore holding at around $156 a tonne. Retail stocks are also set for a mixed day after disappointing retail sales for November.
|Market||Price at 8:00am AEST||Change Since Australian Market Close||Percentage Change|
|US DOW (cash)||13385||42||0.32%|
|US S&P (cash)||1459.3||3.3||0.23%|
|UK FTSE (cash)||6094||34||0.55%|
|German DAX (cash)||7710||0||0.00%|
|Japan 225 (cash)||10628||50||0.47%|
|Rio Tinto Plc (London)||35.48||0.01||0.02%|
|BHP Billiton Plc (London)||21.57||0.08||0.35%|
|BHP Billiton Ltd. ADR (US) (AUD)||37.54||-0.04||-0.10%|
|US Light Crude Oil (February)||93.16||0.20||0.21%|
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