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IG Markets - Afternoon Thoughts


IG Markets - Afternoon Thoughts

FTSE 5852 0
DAX 7063 +22
CAC 3489 +1
IBEX 7552 -9
DOW 13272 -3
NAS 2777 -3
S&P 1417 -1

Oil 96.32
Gold 1619

Across Asia, markets are mixed despite gains in offshore markets on Friday. Risk sentiment was largely positive on Friday with low levels of volatility and tight ranges being the dominant theme. Data in the US remained positive with the University of Michigan consumer sentiment index rising above consensus to 73.6 in early August and the index of leading economic indicators advancing 0.4% (consensus 0.2%). The current account balance in the eurozone registered a surplus of €15.7 billion in June. This suggests that Europe remains quite competitive, helped by falling oil prices and a weaker euro. There certainly hasn’t been a set risk theme in today’s Asian session, with the Aussie dollar finding some stability while the euro has slightly declined.

Japan’s Nikkei is outperforming the region with a 0.1% gain driven by a weaker yen. USD/JPY generally remained bid during the offshore session, and has continued its ascent in the Asian session. The pair printed a high of 79.66 today and continues to look quite bullish with the 80 level in sight. The weaker yen has seen the exporters well supported, with some big gains for Pioneer and Panasonic. There are concerns that China will increase property curbs after its new home prices gained in the largest number of cities in 14 months and weighed on the Hang Seng (-0.8%) and Shanghai Composite (-0.9%). After a weak start, the ASX 200 (-0.1%) came off its lows to trade in positive territory, but has since lost its momentum and is relatively flat. With mixed leads in the Asian session, European and US markets are facing a relatively flat to mildly weaker open.

Data releases are limited today but the week gets busier with eurozone PMIs and RBA minutes due on Tuesday and Fed minutes on Wednesday. The political scene in the eurozone also gets active this week with German Chancellor Angela Merkel and French president Francois Hollande meeting on August 23 followed by Greek Prime Minister Antonis Samaras meetings with Ms Merkel and Mr Hollande on August 24 and 25 respectively. The wires have also been buzzing with rumours that Angela Merkel is considering easing Greece's bailout terms. Eurogroup meetings in September could be a more appropriate forum for developments in this regard. As a result, there is plenty of event risk on the way.

After a soft start, the local market recovered to trade as high as 4375. Should the market manage to clear this high, which is now near-term resistance, the bulls will then be eyeing the 4400 psychological resistance ahead of May’s high of 4448.5. This was its new highest trading level since May 7. Ex-dividend falls in Commonwealth Bank of Australia, Telstra and others have weighed on the index today, with 22 points coming out of the local market. Apart from the stocks trading ex-dividend, some of the biggest movers of the day are Macmahon (+6.7%), Western Areas (+3.3%) and Challenger (-2.1%). MAH has surged after its earnings came within guidance and it said it sees 20% profit growth for the year ahead. Reporting tomorrow we have Amcor, Monadelphous Group and Oil Search.

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