IG - Morning Thoughts and Opening Calls
IG - Morning Thoughts and Opening Calls
Commodities dominated markets overnight with oil, gold and silver all falling like a stone. Oil and gold tumbled, losing 2.3% respectively to 94.46 a barrel and $1,562 per ounce while silver plummeted, dropping 3.5% to $28.43. This lead dragged stocks and indices with it and saw the S&P pulled back from a five-year high to be down 1.04% to 1515 points heading into the close. There was also a rumour flying around that a major commodities hedge fund was forced to sell out of long positions as it had found itself with liquidly troubles.
Currencies were the other big movers overnight, with pairs shifting in full percentages as the ‘currency wars’ moved into the minor crosses. NZD/USD dropped like a stone, down 1.4% to $0.8353 after RBNZ Governor Graeme Wheeler stated that the bank stood ready to influence the exchange rate, while GPB/USD fell 1.3% to $1.5235 on the release of the latest Bank of England minutes; this showed that board members are backing the plan to expand on the current asset purchase strategy.
At the same time, the FOMC minutes where released in the US, showing the Fed board are divided on the current strategy and that the board is starting to turn slightly hawkish. Policy-makers were voicing opinions that the current asset purchase plan should be able to vary its pace in response to the changing economic environment. This saw the US dollar shoot up; AUD/USD dropped 1.09% to $1.0243, and EUR/USD dropped 0.8% to $1.3279. The minutes did show that the main sticking point was the stubbornly high unemployment rate of 7.9%, which caused some to suggest that pulling the current plan would adversely affect this figure, while others believe exiting the purchase plan early is needed for long-term prosperity.
Global leads aside; 31 individual companies are reporting to the market today. The most notable will be AMP, ASX, Alumina, Brambles, Fairfax, IAG, Iluka, Origin, Qantas and Tatts Group. A very large array of stocks and as we saw yesterday, if you don’t hit your mark, prepare for some short-term pain. Yesterday Suncorp, Fortescue Metals and Sonic Healthcare all missed key figures and were promptly dealt with. Guidance is also a key to investors’ hearts at the moment and no more is that seen than with Monadelphous. The stock has lost $4.30 (-15%) in two days after FY14 guidance suggested the company is in for a consolidation period. This means big swings will be the order of the day today; watch the results of Fairfax, Qantas and Iluka in particular.
Moving to the open, we are calling the ASX 200 down 32 points to 5067 (-0.62%). So today could be the biggest fall of the year, with the largest drop so far being the 0.57% decline in early January. Not that a 0.6% fall is big in comparison to some of the monsters we have had over the last few years. BHP’s ADR is pointing to a 2.73% dive this morning to $37.60 after being hammered in London overnight. With BHP making up a massive 12% of the market, this will no doubt see RIO, FMG and the rest of the materials space following suit. However with a predicted 0.6% drop in the market, the yield-play seven (the big four banks, Telstra, Wesfarmers and Woolworths) look like continuing to outperform and should stop our market from falling further. So it will be a very busy day again today as we approach the middle-to-end of the local reporting season, with investors again weighing up whether stocks are ahead or lagging the market.
|Market||Price at 8:00am AEST||Change Since Australian Market Close||Percentage Change|
|US DOW (cash)||13925||-110||-0.78%|
|US S&P (cash)||1513.1||-20.0||-1.30%|
|UK FTSE (cash)||6368||-3||-0.05%|
|German DAX (cash)||7709||-50||-0.64%|
|Japan 225 (cash)||11423||-52||-0.46%|
|Rio Tinto Plc (London)||36.46||-0.67||-1.81%|
|BHP Billiton Plc (London)||21.83||-0.53||-2.36%|
|BHP Billiton Ltd. ADR (US) (AUD)||37.60||-1.05||-2.73%|
|US Light Crude Oil (April)||94.90||-2.13||-2.19%|
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