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IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

On Friday, the US capped off the week slightly up, with the S&P 500 finishing 0.34% higher at 1485 points to end the week 1% firmer. It also saw the S&P 500 establish a new resistance level at 1475 points. The industrial sector led the gains and this should carry over to the local market with industrials here lagging the current uptrend.

In other major US news over the weekend, House Majority Leader Eric Cantor was quoted as saying that the House of Representatives will vote this week to authorise a short-term solution to the US ‘debt ceiling’. The House will look to pass a vote to increase the debt ceiling for three additional months to give Congress time to pass the budget measures. This saw the dollar fall against AUD/USD and EUR/USD as rising appetite continues to improve. AUD/USD is still bouncing off $1.049, with the Aussie dollar seeing strong bidding coming in at this level. With the passing of the ‘debt ceiling’ deal, we would except this level to hold in the medium term. AUD/USD is currently at $1.0509 to start the week.

In other currency news, an advisor to Prime Minister Shinzo Abe stated that the BoJ will need to ‘slow monetary easing if it adversely affects prices and the yen depreciates too much’. Over the weekend, USD/JPY again jumped through the 90 resistance level to be at 90.13. We have continued to harp on about watching for dips here, and with USD/JPY now being over-crowded and passing through the publically-stated resistance level, plus policy makers actively showing concern it may have gone too far, expect to see USD/JPY easing today. With the BoJ meeting tomorrow, all eyes will be on Australia’s second largest export market as it looks to stimulate itself out of two decades of decline.

Looking to the week ahead and several major news events will be watched with eagerness here in Australia. One being the BoJ’s meeting tomorrow; watch for good stimulus measures to have an effect on local energy stocks, as Japan is one of their biggest markets. The other news event is our consumer price index released on Wednesday. With all major economic data coming in on the downside so far this month, expectations are low, with forecasts expecting CPI to come in at +0.4%, down from +1.4% the previous month. Watch for AUD/USD to test the $1.049 support level if it does disappoint.

Moving to the open of the week and we are calling the ASX 200 up 0.37% to 4789 points. Being aware that this is based on Saturday’s prices, we would expect a slight consolidation to start the week, as investors look to consolidate on last week’s gains. With the US closed for Martin Luther King Day tonight, soft leads are expected for the first part of the week, meaning the local market will have to make its own way. We are expecting a stronger start for BHP with its ADR pointing to a 0.17% rise to 36.56 ahead of its four-quarter earnings on Wednesday night. However, the materials sector may be dragged down with SGM reporting this morning that it may have overstated its inventory levels by A$60 million. To commodities and gold, aluminium and copper all fell over the weekend, with zinc the only metal to escape the slide; watch of a pull-back in stocks that have raced ahead (i.e. AWC). The iron ore price also eased over the weekend to drop below the $150 a tonne mark to be currently trading at $145.10. With the news week ahead being soft until Tuesday night, we expect investors to tread water over the coming days as they look for signs of strengths both globally and domestically.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0513 -0.0010 -0.09%
ASX (cash) 4789 18 0.37%
US DOW (cash) 13635 42 0.31%
US S&P (cash) 1483.3 4.3 0.29%
UK FTSE (cash) 6182 50 0.82%
German DAX (cash) 7726 2 0.02%
Japan 225 (cash) 10969 118 1.09%
Rio Tinto Plc (London) 35.02 0.62 1.80%
BHP Billiton Plc (London) 20.53 -0.09 -0.44%
BHP Billiton Ltd. ADR (US) (AUD) 36.56 0.06 0.17%
US Light Crude Oil (March) 95.79 -0.25 -0.27%
Gold (spot) 1684.90 -4.9 -0.29%
Aluminium (London) 2042 -12 -0.57%
Copper (London) 8061 -6 -0.07%
Nickel (London) 17550 -45 -0.25%
Zinc (London) 2034 24 1.19%
Iron Ore 145.1 -0.3 -0.21%

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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