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IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk assets rallied towards the end of the US session after the minutes of the last FOMC meeting were more dovish than the market expected. This triggered a broad-based USD sell-off and lifted risk currencies and commodities. Committee members considered several policy tools to provide additional monetary stimulus, including ‘a new large-scale asset purchase programme’ and an extension of the rate guidance beyond 2014. As a result, it seems the minutes have heightened QE expectations heading into the Jackson Hole symposium on August 31. EUR/USD charged through 1.25 and AUD/USD reclaimed the 1.05 handle. USD/JPY was the major mover, falling from 79.20 to 78.29 as multiple rounds of systematic stops were triggered This will undoubtedly have a big effect on the Nikkei today.
Ahead of the open, we are calling the Aussie market up 0.2% at 4384. The momentum is definitely to the upside considering the sharp reversal in risk currencies in the US afternoon session. As a result, we could see the 4400 level challenged again today. Locally, there is no economic data to look out for. However, it is the busiest day on the earnings calendar with plenty of big names reporting. Some of the ones to look for are Fortescue Metals, IAG, Fairfax, Qantas, Iluka, and QR National. The key event in the Asian session today will be China HSBC flash PMI number release. China remains a major growth concern and therefore these numbers could be a source of further volatility today, particularly in the FX space.

On a stock level, we expect a fairly flat start for BHP Billiton, with its ADR pointing to a 0.1% rise to $33.19. The mining giant will be very much in focus today after posting its earnings report yesterday. BHP traded lower on the back of its results yesterday but it seems the general consensus is the numbers were solid. The decision to halt the Olympic Dam project was initially seen as negative but many analysts are impressed by BHP’s decision to only commit to economically viable projects. Its future growth strategy will be to focus on higher returning 15% plus internal rate of return. Gold enjoyed a sharp move higher as QE talk returned following the FOMC minutes. We could see gold miners lifted by this today

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0501 0.0058 0.55%
ASX (cash) 4384 8 0.17%
US DOW (cash) 13177 -19 -0.14%
US S&P (cash) 1416.4 3.4 0.24%
UK FTSE (cash) 5792 -31 -0.53%
German DAX (cash) 7049 4 0.05%
Japan 225 (cash) 9081 -51 -0.56%
Rio Tinto Plc (London) 29.79 -0.83 -2.72%
BHP Billiton Plc (London) 19.46 -0.34 -1.72%
BHP Billiton Ltd. ADR (US) (AUD) 33.19 0.03 0.09%
US Light Crude Oil (October) 97.35 0.58 0.60%
Gold (spot) 1654.1 14.2 0.86%
Aluminium (London) 1871 13 0.72%
Copper (London) 7597 29 0.38%
Nickel (London) 16041 214 1.35%
Zinc (London) 1916 2 0.12%

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.


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