Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

The S&P 500 had a very quiet night with most of Asia offline for either Chinese New Year or Foundation Day. Volumes were lower than average and the index only moved through a four point window. Heading to the close the S&P was down one point to 1517.

Europe was again a distraction, as shares slipped and peripheral bonds gained after European finance chiefs met to discuss aid for Cyprus and Greece. Growing political unrest in Spain and Italy continues to stoke the embers of the debt crisis, with Italian 10-year bond yields increasing seven basis points to 4.62% (nearly a two-month high) as the Italian election heats up. The concern with Italy’s bonds is that they sit third behind the US and Japan for total bond on issue. Unlike Japan where most of its bonds are owned by the domestic population, Italy’s bonds are spread far and wide. We believe Europe will continue to be a distraction this year. There are signs that central Europe in particular is growing and that southern Europe is stabilising, however the political arena will continue to stoke fears of economic mismanagement. Mario Draghi has made it abundantly clear that the ECB will do whatever it takes to provide stability to the region and he looks likely to hold his word.

Moving to our region and today and we will see Japan come back online after Foundation Day. Over the weekend USD/JPY moved back below 93 before rebounding hard overnight in US trade to 93.90 (up 1.32%) and is now at the same level it finished on Friday. The correlation between the yen depreciating and the Nikkei appreciating is still holding true, however this has been accelerated by comments from Akira Amari (a candidate for the Governor role) believing the Nikkei should be around 13,000 points come the end of the financial year. That’s three months from now and is a 17% increase from the current point. The Nikkei is following the rhetoric today, pointing to a 2.2% gain to 11,400.

The race for the now-vacant Governor of the Bank of Japan igniting the yen/Nikkei correlation will heat up. The most aggressive of the front runners, Haruhiko Kuroda (currently the head of the Asian Development Bank) is advocating for increases in stimulus and ending deflation to ‘usher in a growth spurt unseen in a generation’. He also believes that a two per cent inflation target is very reachable for 2013 and for some years to come.

If we do see a BoJ Governor of Mr Kuroda’s calibre, USD/JPY could well punch through 95 and would head to 100 very quickly. It would also signal to Japanese consumers and investors alike that the government is finally taking action.

For our market this link will be vital, exports are increasing as noted by the last terms of trade figures and if our market is to ride Japan’s economic revival, Japan needs to increase its own consumption of goods. Remember, Japan is looking at using gas as its major source of energy longer-term (WPL and STO well positioned), it is looking to ramp up manufacturing of its major industries (steel and iron ore will be required) and it wants to return to sustained GDP growth. As Japan’s third major trading partner, the Aussie market is well positioned to take full advantage of this.

Moving to the open, we are calling the ASX 200 up 15 points to 4972, as all eyes turn to one of the largest reporting days. Tomorrow sees the likes of CBA, CSL Computer Share, Leighton Holdings, Oz Minerals and Worley Parsons reporting half-year profits. This will make or break the week and possibly the current rally, as our market does look slightly over brought. CBA and CSL will be the main points of interest, as the fundamentals of these companies look to match up with the current values. Inline results are likely to see both shares holding on to their current gains as the dividend on offer is still a major selling point. It is expected to be a flat day for BHP, with its ADR suggesting it will be unchanged at $37.71 ahead of the Rio result on Thursday. Today will be very interesting to see how much influence Japan has on our market as the local market looks to tomorrow’s reports for leads.
Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0273 -0.0028 -0.27%
ASX (cash) 4975 15 0.30%
US DOW (cash) 13973 -8 -0.06%
US S&P (cash) 1517.6 0.5 0.03%
UK FTSE (cash) 6278 13 0.21%
German DAX (cash) 7629 -20 -0.27%
Japan 225 (cash) 11403 249 2.24%
Rio Tinto Plc (London) 36.56 -0.02 -0.05%
BHP Billiton Plc (London) 21.59 0.03 0.12%
BHP Billiton Ltd. ADR (US) (AUD) 37.71 0.00 0.00%
US Light Crude Oil (March) 97.00 1.33 1.38%
Gold (spot) 1649.55 -18.9 -1.13%
Aluminium (London) 2103 -19 -0.88%
Copper (London) 8199 -86 -1.04%
Nickel (London) 18200 -165 -0.90%
Zinc (London) 2388 -30 -1.25%
Iron Ore 155.1 0.0 0.00%

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.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Postnatal Depression: 'The Thief That Steals Motherhood' - Alison McCulloch

Post-natal depression is a sly and cruel illness, described by one expert as ‘the thief that steals motherhood’, it creeps up on its victims, hiding behind the stress and exhaustion of being a new parent, catching many women unaware and unprepared. More>>


DIY: Kiwi Ingenuity And Masking Tape Saves Chick

Kiwi ingenuity and masking tape has saved a Kiwi chick after its egg was badly damaged endangering the chick's life. The egg was delivered to Kiwi Encounter at Rainbow Springs in Rotorua 14 days ago by a DOC worker with a large hole in its shell and against all odds has just successfully hatched. More>>


Trade: Key To Lead Mission To India; ASEAN FTA Review Announced

Prime Minister John Key will lead a trade delegation to India next week, saying the pursuit of a free trade agreement with the protectionist giant is "the primary reason we're going" but playing down the likelihood of early progress. More>>



MYOB: Digital Signatures Go Live

From today, Inland Revenue will begin accepting “digital signatures”, saving businesses and their accountants a huge amount of administration time and further reducing the need for pen and paper in the workplace. More>>

Oil Searches: Norway's Statoil Quits Reinga Basin

Statoil, the Norwegian state-owned oil company, has given up oil and gas exploration in Northland's Reinga Basin, saying the probably of a find was 'too low'. More>>


Modern Living: Auckland Development Blowouts Reminiscent Of Run Up To GFC

The collapse of property developments in Auckland is "almost groundhog day" to the run-up of the global financial crisis in 2007/2008 as banks refuse to fund projects due to blowouts in construction and labour costs, says John Kensington, the author of KPMG's Financial Institutions Performance Survey. More>>


Health: New Zealand's First ‘No Sugary Drinks’ Logo Unveiled

New Zealand’s first “no sugary drinks logo” has been unveiled at an event in Wellington... It will empower communities around New Zealand to lift their health and wellbeing and send a clear message about the damage caused by too much sugar in our diets. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news