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IG - Morning Thoughts and Opening Calls

IG - Morning Thoughts and Opening Calls

Good Morning

All eyes are on Apple Inc. this morning, with the world’s largest (and most glamorous) company reporting after the close of the market in the US.

Pressure is mounting for Apple Inc. to really light it up after Google and IBM both shot the lights out with earnings coming in on the top-end of guidance. Google surged 6.4% on increased advertisement sales and the uptake of Android - Apple’s major software competitor. We all know the trouble Apple has had with iOS6 in its new iPhone 5 and iPad (third generation). We believe that the rhetoric over the last few weeks that iPhone sales are down is actually just Apple regulating production and that sales of the iPhones and iPads will indeed exceed expectations.

All this stellar fourth-quarter news continued to heap pressure on the 1500 mark, with the S&P 500 rising 0.22% to 1495 points heading into the close. Apple is up 1.2% ahead of its result.

Although our technology stocks are no way near being the behemoths that Google, IBM or Apple are, what will be a positive for our markets is if Apple does light up the screens with positive guidance, Dow futures may spike up as people look to jump into tech stocks. The increase in Dow futures will flow through to our market and the Aussie dollar, which should help us punch through the 4800 mark.

Other news that may drive our market further today is the HSBC Flash manufacturing PMI data. A good result here will see the fear of the so called ‘hard-landing’ in China abating as manufacturing ramps up. Watch for materials to switch on.

On the materials space, yesterday we saw BHP come out with a very solid result. The biggest take out from the report was there was no bad news. RIO had given BHP a free kick after its $14 billion impairments. A downgrade to its aluminium business, which is not a core business unit of BHP was possible, however this didn’t eventuate. Its petroleum and iron ore businesses are continuing to hit forecasts (iron ore particularly), and also note that these two divisions makes up 70% of EBIT. US shale-gas is on the up again, and with the Petrohawk deal still weighing on BHP’s share price, Petrohawk’s peers are now trading back at the same levels they were when the deal was done. Watch this space; if BHP can get clean air in its shale-gas business, seeing it back at $39-$40 is not out of the question.

Locally, all eyes will turn to the pure-plays. FMG and NCM (yes there is some copper here) reporting during the session. Results in FMG are well flagged, its Port Headland operations are well known, and the Christmas Creek expansion deal now done has its 155 million tonnes per annum target is back on the cards. The issue with FMG is debt. Goldman Sachs notes that with every $10 drop in the iron ore price, FMG’s year-end debt position rises by about $640 million; this can explain the volatility we see in the share price.

AUD/USD has held up pretty well overnight even with the surprise downgrade in the consumer price index yesterday. The paid was trading around $1.0553 in late US trade, so watch for positive news out of China today for a possible move up to $1.057/8.

Moving to the open and we are calling the ASX 200 up 0.15% to 4795 points. With the market testing the 4800 mark for the last two trading days, positive news from Apple could see us finish the day above this level and on our way to two-year highs. We are however, expecting a weaker start for BHP with its ADR pointing down 0.16% to 36.90 on the back of the downgrade by Citi. As we head into the last two trading days of the week and the 4800 mark in sight, resistance levels are going to kick in; we expected a positive day, however watch for profit taking as we enter 4800 to 4810.

MarketPrice at 8:00am AESTChange Since Australian Market ClosePercentage Change
AUD/USD1.05520.0012 0.12%
ASX (cash)47957 0.15%
US DOW (cash)1377634 0.25%
US S&P (cash)1493.62.3 0.15%
UK FTSE (cash)62072 0.03%
German DAX (cash)7715-4 -0.05%
Japan 225 (cash)10513-35 -0.33%
Rio Tinto Plc (London)35.01-0.37 -1.05%
BHP Billiton Plc (London)21.100.29 1.38%
BHP Billiton Ltd. ADR (US) (AUD)36.90-0.16 -0.42%
US Light Crude Oil (March)95.62-0.98 -1.01%
Gold (spot)1685.85-7.0 -0.41%
Aluminium (London)20763 0.16%
Copper (London)8106-9 -0.12%
Nickel (London)1752649 0.28%
Zinc (London)236724 1.03%
Iron Ore147.71.8 1.23%

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.

Market Strategist


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