IG Markets - Morning Prices March 12

No major economic data was released last night.

However Italy was downgraded by a second ratings agency inside a week; this time Fitch cut Italy’s debt down a notch.

China data impacted on European markets with investors concentrating on retail sales figures which reported slightly lower-than-forecasted growth at 12.3%, versus 14.5%. This is its weakest start since 2009, and not on the fact that year-on-year CPI figures were up 20 basis points (bps) to 3.2% versus 3.0%and fixed asset investment (spending on roads, factories, power girds etc.) was up 60 bps on forecasts at 21.2% versus 20.6%. This should see cyclical stocks moving higher later in the year as funds spent on infrastructure filters through.

US markets on the other hand continued on their liquidity-fuelled fear of ‘missing out’, euphoric run up another 0.4% as US 10-year bond yields head towards an 11-month high at 2.06%. All three major indices have continued to move ahead, with the Dow making it five consecutive record-breaking days. The S&P 500 is now nine points from its all-time high, as investors scramble to join the bull market the US is currently experiencing. The Nasdaq (Apple index) also rose with the rumour on the street that Apple is considering a special dividend.

Heading into the close, the S&P was up 5 (0.31%) points to 1556 (another 52-week high).

Yesterday the Australian market added an additional 23 points despite the fact that Victorians, South Australians and Tasmanians were all away from their desks for varies public holidays. The ASX is now up 10.7% for the year and last Friday’s close marked the 14th northward moving week out of the last 16 that’s a total of three and half months and shows how strong the local market has moved and why it is one of the top three returning markets this year.

What makes this rally even more amazing is that once again yield-play stocks continue to hold their shine, despite their ever-shrinking yields. Yesterday CBA broke through $70 to close at $70.13, a new all-time high. Mr Ian Narev must be smiling from ear to ear knowing he can attract investors with a net yield of 5.1%. Consumer staples continue to run away, with Woolworths making another all-time high inside 10-trading-days and now only offers a net yield of 3.53%, that is 9bps lower than a 10-year Australian government bond. Coca-Cola Amatil also hit an all-time high as investors bank on increased soft drink consumption due to the extended summer most of Australia is experiencing.
Moving to the open of the local market, we are calling the ASX 200 up 15 points to 5160 (+0.29%) as South-East Australia returns to work and plays catch-up on yesterday’s moves. Miners look like moving forward after coming under pressure yesterday from light Chinese data. Overnight BHP and RIO were up strongly in London, with BHP’s ADR suggesting it will follow suit locally with the stock set to add 23 cents to $36.02 (0.64%).
The market is poised to head towards our mid-year projection of 5463 points having now closed well above 5100, having played jump rope with this mark five times over the past two weeks. With the only major news today being NAB’s business confidence survey, most stocks will have to go it alone today; watch for yield-plays to ease slightly on profit taking.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0282 0.0059 0.58%
ASX (cash) 5160 15 0.29%
US DOW (cash) 14441 49 0.34%
US S&P (cash) 1554.9 1.4 0.09%
UK FTSE (cash) 6511 22 0.33%
German DAX (cash) 7995 -2 -0.03%
Japan 225 (cash) 12409 77 0.63%
Rio Tinto Plc (London) 34.38 0.12 0.35%
BHP Billiton Plc (London) 21.26 0.29 1.37%
BHP Billiton Ltd. ADR (US) (AUD) 36.02 0.23 0.64%
US Light Crude Oil (April) 91.96 0.24 0.27%
Gold (spot) 1581.28 0.6 0.04%
Aluminium (London) 1959 -1 -0.04%
Copper (London) 7767 17 0.22%
Nickel (London) 16857 217 1.30%
Zinc (London) 2202 -9 -0.42%
Iron Ore 144.10 -4.1 -2.77%

www.igmarkets.com

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