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IG Markets: Morning Thoughts

IG Markets: Morning Thoughts

Risk assets had an interesting session with a definitively risk-off European trading day, which saw the euro move down to a two-year low (1.2545) on reports that eurozone governments were asked to prepare individual contingency plans for the possibility of a Grexit. This resulted in a sharp sell-off across the risk space before a recovery in the US session. The Aussie dollar recovered from a six-month low of 0.96898 against the greenback in US trade, as some fairly positive US economic data helped sentiment. There is plenty of event risk on the way and risk currencies are likely to continue experiencing these wild swings. AUD/USD is facing near term resistance in the 0.97798-0.98 region. The improvement in risk assets also saw a recovery of our opening call for the Aussie market from a low of 4029 to a high of 4083.

Ahead of the open, we are calling the ASX 200 up 0.2% at 4077 after US markets erased early losses to finish the session higher. We expect to see the positive momentum into the close of US trade filter through to the local market at the open. Investors will continue to monitor the wires for any comments out of the EU summit. As a result, we wouldn’t be surprised to see a fairly choppy session, with volatility driven by headlines out of Europe. On the economic data front, there is nothing to look out for locally. However, China’s HSBC flash manufacturing PMI number will be in focus. With growth continuing to be an issue, it is highly likely this number will be under the microscope. The data really ramps up later on with flash manufacturing and services PMI numbers due out in Europe.

On a stock level, we expect a strong start for BHP with its ADR pointing to a 1.2% gain to $32.33. Elsewhere in the mining space, Aquarius Platinum is in for a tough day after suffering a big sell-off in Johannesburg due to a loss at its Mimosa Mine. Sundance Resources will also be in focus after an update on its takeover with Hanlong aiming to complete the deal in November. The deal values SDL at $0.57 per share and the stock closed at $0.40 yesterday. James Hardie is likely to outperform yet again today, after new home sales data in the US exceeded expectations. The stock had a good day yesterday after a positive home builders index reading and strong existing home sales data. As we said yesterday, stocks with high US dollar/economy earnings exposure continue to outperform. Apart from JHX, some of the ones to look out for are Resmed, CSL Limited and Newscorp. Myer and Graincorp have investor day presentations, and the stocks will be of interest following this week’s earnings updates. GNC has had some positive broker reviews following its earnings update, while MYR continues to attract negative press.

Market

Price at 6:30am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

0.9766

0.0003

0.04%

ASX (cash)

4077

10

0.24%

US DOW (cash)

12517

51

0.41%

US S&P (cash)

1319.3

8.0

0.61%

UK FTSE (cash)

5321

-16

-0.31%

German DAX (cash)

6359

21

0.33%

Japan 225 (cash)

8556.60

-11

-0.13%

Rio Tinto Plc (London)

27.93

-1.44

-4.89%

BHP Billiton Plc (London)

16.82

-0.76

-4.34%

BHP Billiton Ltd. ADR (US) (AUD)

32.33

0.40

1.24%

US Light Crude Oil (July)

90.45

-0.57

-0.63%

Gold (spot)

1561.1

3.9

0.25%

Aluminium (London)

2010

-15

-0.75%

Copper (London)

7556

-79

-1.03%

Nickel (London)

16776

-52

-0.31%

Zinc (London)

1933

-2

-0.10%

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.

ends

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