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IG - Morning thoughts and opening prices 15/1/13

All eyes are firmly on Federal Reserve Chairman Ben Bernanke this morning, as investors look to take leads from his directives. The S&P 500 was little changed overnight, snapping a two-week uptrend to finish slightly lower, down 0.07% to 1470 points as US tech stocks opened the door to the US reporting season. Apple had the biggest effect on the S&P 500, with the world’s most valuable company falling 3.2% on reports it’s curbing its production of the new iPhone 5 due to weak demand. Personal computer company Dell on the other hand pared the losses after the company announced it was in buy-out talk with private equity firms. We see Dell as one of the first of many M&A deals for 2013 after two-years of very low volumes. Increased M&A activity brings additional capital to the table and moves dormant funds back to the markets that have otherwise been parked on the sideline. In the medium-term, watch for data showing increases in consumer spending and demand, as well as advances in energy and raw materials; M&A activity will pick on these indicators. Known take-over targets are already being pursued again this year, with Australian surf wear company Billabong receiving a $526.8 million from a consortium of private investors, including clothing giant VF Corp after-market. Watch for increased M&A activity in energy and materials with the likes Beach Petroleum (BPT), Fortescue Metals (FMG) and Atlas Iron (AGO) all looking cheap on fundamentals.

Risk currencies continue to be supported, with AUD/USD rising further overnight, up 0.3% to $1.0567 ahead of Bernanke’s speech. Technical trades have repositioned their support with resistance levels for the Aussie dollar moving to $1.0494 and $1.0625, with bullish views on better-than-expected export results from China and data showing the US is self-healing. Remember AUD/USD is a quasi-play on China and the new-look leadership team is seeking to start its tenure on the front foot. With currency markets continuing to lead equities, we would look to buy dips in AUD/USD for short-terms trades. The euro has broken out even further this morning as short positions continue to unwind. The euro is up against all its major trading pairs as the ECB looks to continue to stabilise the region and sees ’positive-contagion‘ as a constant theme for 2013. EUR/USD is currently up 0.3% to $1.338 and EUR/GBP is higher by 0.64% to £0.8324. The pound however continues to fall as investors speculate that Britain’s CPI figures will underperform when released later today and a speech from BOE governor Mervyn King is likely to show slightly bearish views. GBP/USD is off 0.33% to $1.0608 and is trending lower as the British economy stutters.

Moving to the open and Asian markets will have one eye on the Fed this morning and the other firmly on China’s fourth-quarter growth figures being released on Friday. We are calling the ASX 200 flat this morning as the market continues to tread water, potentially opening at 4717 points. There are no real additional newswires expected to move the market either way today. We see it moving lower today with mining stock continuing to drag the market down, with the 4700 level to be tested later on. Commodities were down heavily in London overnight with Copper and Aluminium falling after four days of gains. BHP’s ADR is currently matching down 0.43% this morning at $36.41, as investors wait for further news from China. One sector to keep an eye on this morning will be energy, as WTI crude continues to surge ahead, up 0.6% to $94.14 a barrel. The energy sector has been a major laggard on the Australian market and the upward movement in oil may see some increased movement here in the short term.

MarketPrice at 8:30am AESTChange Since Australian Market ClosePercentage Change
AUD/USD1.05670.0010 0.10%
ASX (cash)4719-1 -0.02%
US DOW (cash)13504-5 -0.03%
US S&P (cash)1469.7-3.9 -0.26%
UK FTSE (cash)6113-24 -0.39%
German DAX (cash)7735-3 -0.04%
Japan 225 (cash)10999197 1.82%
Rio Tinto Plc (London)34.750.06 0.19%
BHP Billiton Plc (London)20.760.00 0.02%
BHP Billiton Ltd. ADR (US) (AUD)36.41-0.16 -0.43%
US Light Crude Oil (February)94.660.53 0.56%
Gold (spot)1667.402.2 0.13%
Aluminium (London)2057-50 -2.38%
Copper (London)8008-76 -0.94%
Nickel (London)17333-262 -1.49%
Zinc (London)2297-19 -0.81%
Iron Ore154.6-0.3 -0.19%

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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