IG Markets - Morning Thoughts
IG Markets - Morning Thoughts
Overnight, US equities experienced a convincing pullback as investors tempered their expectations of further quantitative easing, which were elevated during the previous session after the release of the Fed’s latest FOMC meeting minutes. While the minutes had suggested many committee members thought more QE would be warranted should the pace of the US recovery not substantially improve, St. Louis Fed President James Bullard suggested those minutes were ‘stale’ and current economic conditions were not weak enough to warrant further easing.
There now once again appears to be a state of confusion as to what the market can expect from the Fed at its next meeting in mid-September and what Ben Bernanke might say in his speech at Jackson Hole at the end of the month. One market strategist may have best summed up last’s night’s uncertainty and price action by saying – ‘The list of options that are actively being discussed probably suggest that the Fed is seeing that QE itself has not been necessarily the solution and perhaps they need to move in a different direction or combination,’ and ‘at the same time, there’s been some profit taking as investors wait for the next catalyst.’
The mood overnight was not helped by an unexpected gain in US weekly jobless claims (which rose to a 5-week high), continuing recessionary manufacturing PMI data out of Europe, and yesterday’s slump in the HSBC Chinese manufacturing PMI report.
Having retreated from north of 4400 yesterday after the release of the abovementioned Chinese data, the local market is today set to finish the week on the back foot, with the ASX 200 currently called down 32 points or 0.7% at 4352. Today’s losses are likely to be broad based, but led by the high beta materials and energy sectors. After yesterday’s soft economic data (out of China and Europe) and the doused expectations of QE3, oil prices sold off sharply, falling 2.2% to around the US$96 level, while BHP’s ADR is called down 1% after spot iron ore prices dropped below US$100 per tonne for the first time since December 2009.
On the economic front, Glenn Stevens speaks today and is likely to field plenty of questions about the state of the global and domestic economy, potential currency intervention and the outlook for interest rates. His comments will no doubt be carefully scrutinised and could have some local influence. On the earnings front we hear from Woolworths, Whitehaven Coal, Iress, AGL and Atlas Iron.
at 6:30am AEST Change Since Australian Market
Close Percentage Change
AUD/USD 1.0438 -0.0077 -0.73%
ASX (cash) 4352 -32 -0.73%
US DOW (cash) 13060 -154 -1.17%
US S&P (cash) 1403.7 -16.6 -1.17%
UK FTSE (cash) 5768 -38 -0.65%
German DAX (cash) 6942 -127 -1.79%
Japan 225 (cash) 9076 -102 -1.11%
Rio Tinto Plc (London) 29.57 -0.23 -0.76%
BHP Billiton Plc (London) 19.61 0.14 0.72%
BHP Billiton Ltd. ADR (US) (AUD) 33.08 -0.33 -1.00%
US Light Crude Oil (October) 95.93 -2.23 -2.27%
Gold (spot) 1670.8 6.6 0.39%
Aluminium (London) 1896 16 0.82%
Copper (London) 7643 -26 -0.34%
Nickel (London) 16334 160 0.99%
Zinc (London) 1943 11 0.54%
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