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IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Overnight US retail sales figures for December showed the actuals were stronger than forecasted, up 0.1% and this added additional weight to the self-healing tag the US economy now has. This managed to pull the S&P 500 out of its early hole after data of New York-area manufacturing was sluggish and Apple continued to slide on poor iPhone uptake. The S&P 500 was up 0.11% to 1472 points heading into to close. Consumer staples shares rose on the data and should have a positive effect on our sector this morning. Watch for short positions in JBH being unwound - it is the most shorted stock on the ASX. In other US news, Fed board member Eric Rosengren was quoted as saying QE should remain until the jobless rate in the US reaches 7.25%. This is actually an upgrade, as the original view was 6.5%, and with US unemployment at 7.8%, QE ‘discussions as to when, if and how’ are going to continue to affect global markets.

The term ’currency wars‘ was back on everyone’s lips overnight as Luxembourg’s Prime Minsiter Jean-Claude Junker stated the region’s currency was at ’dangerously high‘ levels. The euro has surged in recent days on the back of the ECB meeting last Thursday and led short traders to unwind their positions. Mr Junker’s comment that the currency’s current high would lead to zero growth in the eurozone coincided with poor export data from the region’s biggest nation, Germany, last week. EUR/USD fell 0.9% on the back of these comments, which was the biggest decline since January 3.
USD/JPY took off overnight after Japan’s Economy Minister Akira Amari’s comments that its currency has rebounded to fundamental levels. This was a key catalyst for shorters of the very over-crowed trade to cash in, which saw USD/JPY climbing 0.9% to 88.65. We continue to reiterate our view that trader would be looking to buy dips in USD/JPY as Japan continues to ramp up rhetoric on stimulus. We would look to cut out at 90 until real bold action is taken. AUD/USD fell overnight as traders look to the unemployment data which will be released on Thursday and to any additional signs of weakness in the domestic economy. AUD/USD is currently trading at $1.056 before the open of Asian trade.

To domestic news, and late last night Rio Tinto released its fourth-quarter production results. They showed that iron ore was stronger and headed most forecasts. However, RIO still sees production costs as a major concern and that further cost-cutting may be required to keep the company’s profits intact. The results were not enough to drag it into the black at the end of trade. However, over in London, RIO traded higher on the result, moving up 0.5% and should see its listing here follow suit.

This morning we see the ASX 200 opening flat at 4716 points as investors look to the release of Westpac’s consumer sentiment report later today and process the RIO results. Watch for movement in the consumer staples space as investor watch for positive leads in the Westpac data and US retail sales; shorters will be particularly edgy in JBH and HVN, as explained earlier. Iron ore fell overnight down to $152.90 a tonne and looks like it will override the RIO results in the mining sector, with BHP’s ADR currently matching down at $36.38 off 0.8%. We expect another day of treading water as investors see no major leads for the market to move another leg up.

Market Price at 8:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0559 0.0014 0.13%
ASX (cash) 4718 2 0.04%
US DOW (cash) 13537 56 0.41%
US S&P (cash) 1471.2 5.4 0.37%
UK FTSE (cash) 6130 28 0.46%
German DAX (cash) 7708 -13 -0.17%
Japan 225 (cash) 10869 -12 -0.11%
Rio Tinto Plc (London) 34.90 0.17 0.48%
BHP Billiton Plc (London) 20.70 -0.05 -0.22%
BHP Billiton Ltd. ADR (US) (AUD) 36.38 -0.15 -0.40%
US Light Crude Oil (February) 93.87 -0.38 -0.40%
Gold (spot) 1679.55 8.5 0.51%
Aluminium (London) 2052 -2 -0.10%
Copper (London) 7994 -14 -0.18%
Nickel (London) 17500 167 0.96%
Zinc (London) 2288 -1 -0.03%
Iron Ore 152.9 -2.0 -1.29%

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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