IG Markets - Morning Thoughts
IG Markets - Morning Thoughts
The positive risk tone from the Asian session continued into European trade with risk assets remaining well bid. European equities gained ground despite some relatively mixed PMI readings. US markets were closed for the Labor Day holiday and this limits the leads going into today’s Asian session. Speculation that central banks will act to provide further easing continues to support investor risk appetite. With China posting some disappointing PMI numbers, market participants have grown increasingly optimistic this will force Chinese policymakers to take fresh steps to stimulate the economy. At the same time, optimism around Fed easing has ramped up following Fed Chief Ben Bernanke’s speech in Jackson Hole. EUR/USD managed to push through 1.26 again and is currently consolidating just below 1.26. However, the Aussie dollar has not quite mirrored the performance in the rest of the risk space, with AUD/USD continuing to be sold into strength.
Ahead of the open, we are calling the Aussie market up 0.5% at 4349. The highlight of today’s session will be the RBA’s interest rate decision at 2.30pm. The Central Bank is widely expected to keep rates on hold at 3.5% and we suspect the accompanying statement will carry more weight. The market is pricing in another rate cut by the end of the year and therefore any change in tone in the statement could be a major market mover. A key concern for the RBA will be a high Aussie dollar relative to lower commodity prices (iron ore). The Aussie dollar and interest-rate sensitive stocks will be in focus on the back of the statement. We also have current account numbers due out at 11.30am ahead of tomorrow’s GDP figures.
On a stock level, we expect a firmer start for the resource names after a positive session for commodities during European trade. Gold stocks will remain in focus after the precious metal held at elevated levels and even printed a new high of around $1695. We saw some impressive gains in the mid-tier gold space yesterday and we wouldn’t be surprised to see that run continue today. The retailers could remain under pressure leading up to the interest rate decision. We already saw the sector struggle yesterday on the back of the weaker-than-expected retail sales data.
Market Price at 6:30am AEST Change
Since Australian Market Close Percentage
AUD/USD 1.0247 -0.0026 -0.25%
ASX (cash) 4349 20 0.45%
US DOW (cash) 13114 50 0.38%
US S&P (cash) 1412.4 6.1 0.44%
UK FTSE (cash) 5756 57 0.99%
German DAX (cash) 7015 58 0.83%
Japan 225 (cash) 8797 13 0.14%
Rio Tinto Plc (London) 27.96 0.61 2.21%
BHP Billiton Plc (London) 18.55 0.19 1.05%
BHP Billiton Ltd. ADR (US) (AUD) - - -
US Light Crude Oil (October) 97.05 0.77 0.79%
Gold (spot) 1692.4 3.6 0.21%
Aluminium (London) 1925 23 1.19%
Copper (London) 7665 4 0.05%
Nickel (London) 16196 54 0.33%
Zinc (London) 1990 6 0.30%
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