IG Markets - Morning Thoughts
IG Markets - Morning Thoughts
Overnight, global equities were mostly lower as investors remained cautious ahead of Thursday’s ECB meeting and courtesy of data revealing US manufacturing has contracted for a third straight month.
Solid gains in Europe in the first trading session of the week were quickly overturned last night as investors sought the safety of the sidelines ahead of the ECB’s highly-anticipated meeting on Thursday, where it is hoped that Mario Draghi, will, at the very least outline a basic framework for the Central Bank’s intended bond purchase programme. There are fears that the level of detail to be released from Mr Draghi on Thursday will fall short of market expectations, hence the retreat in both equities and a modest overnight pull-back in the euro. Also weighing on European equities was Moody’s placing the EU’s AAA rating on negative watch. This outlook downgrade was released after Monday’s session, so last night was the market’s first chance to react to this news. These same issues spilled into US trade and led to another fairly lacklustre session with a slight negative bias. This was not helped by the release of ISM manufacturing data, which showed US manufacturing contracting at its sharpest rate in more than three years, coming in at a reading of 49.6, down from 49.8 in July and below the consensus estimate of 50.
Looking ahead to the local trading day, we are currently expecting a marginally weaker open with the ASX 200 set to unwind down 8 points or 0.2% at 4295. With caution evident in European and US markets, risk assets were clearly out of favour. Money flowed into the US dollar at the expense of most commodities and risk currencies with gold benefitting from some safe-haven buying to now be trading just shy of US$1700 per ounce. Iron ore prices were again lower overnight and are now trading at approximately US$86.90 per tonne, which will no doubt keep major producers such as BHP, Rio Tinto and Fortescue Metals under some duress.
On the economic front, today’s feature data point is Australian Q2 GDP data. Expectations are for growth of 0.7%, but this number should not be given undue attention. It is a backwards looking indicator and does not recognise the more recent falls in commodity prices, and the expected widening budget deficit that will no doubt detract from future growth predictions.
Market Price at 6:30am AEST Change
Since Australian Market Close Percentage
AUD/USD 1.0225 -0.0050 -0.48%
ASX (cash) 4295 -8 -0.18%
US DOW (cash) 13042 -76 -0.58%
US S&P (cash) 1407.9 -4.1 -0.29%
UK FTSE (cash) 5683 -74 -1.28%
German DAX (cash) 6959 -53 -0.75%
Japan 225 (cash) 8777 1 0.02%
Rio Tinto Plc (London) 27.23 -0.73 -2.60%
BHP Billiton Plc (London) 18.27 -0.28 -1.50%
BHP Billiton Ltd. ADR (US) (AUD) 31.77 0.21 0.67%
US Light Crude Oil (October) 95.63 -1.53 -1.57%
Gold (spot) 1696.4 2.1 0.13%
Aluminium (London) 1937 17 0.88%
Copper (London) 7630 -23 -0.30%
Nickel (London) 15996 -251 -1.54%
Zinc (London) 1989 -5 -0.25%
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