IG Markets - Morning Thoughts
IG Markets - Morning Thoughts
Risk assets rallied after ECB President Mario Draghi announced the modalities of the ECB's new bond-buying programme. The Outright Monetary Transactions (OMT) will be open-ended and the liquidity created by it will be fully sterilised. It will focus on buying bonds with maturities of between one and three years. Mr Draghi stressed the strict conditionality of the EFSF/ESM programme, noting that the Governing Council could suspend the programme for a member state in case of non-compliance. The details of the programme more or less lived up to market expectations, with EUR/USD rallying to a high of around 1.265. In the US, the non-manufacturing ISM index rose to 53.7 in August, beating consensus of 52.5, with the employment index bouncing back to 53.7 from 49.3 in July. A stronger August ADP employment report and lower jobless claims last week also helped sustain risk appetite.
Ahead of the open, we are calling the Aussie market up 1.3% at 4367. We are likely to see a massively risk-on session today with a recovery in the cyclical space driving gains into the end of the week. This will see 4400 firmly in sight for the local market, and traders will be eyeing this level after the market faltered there in August. AUD/USD continued its positive momentum from the reversal following the jobs numbers yesterday. The pair printed highs near 1.03 and seems to be consolidating ahead of the trade balance figures.
On a stock level, we expect a firmer start for BHP Billiton with its ADR pointing to a 1.2% rise to $31.72. Iron ore’s losing streak finally came to a halt and this might lift the iron ore miners today. Fortescue Metals could be a big gainer at the open after having underperformed its peers all week. Gold stocks are likely to extend their gains after the precious metal rallied through US$1700.
Market Price at
6:30am AEST Change Since Australian Market
Close Percentage Change
AUD/USD 1.0285 0.0057 0.56%
ASX (cash) 4367 54 1.25%
US DOW (cash) 13293 212 1.62%
US S&P (cash) 1436.2 25.1 1.78%
UK FTSE (cash) 5780 107 1.89%
German DAX (cash) 7170 188 2.69%
Japan 225 (cash) 8839 158 1.83%
Rio Tinto Plc (London) 28.47 1.29 4.74%
BHP Billiton Plc (London) 18.43 0.65 3.67%
BHP Billiton Ltd. ADR (US) (AUD) 31.72 0.38 1.22%
US Light Crude Oil (October) 94.86 -1.19 -1.23%
Gold (spot) 1701.4 1.2 0.07%
Aluminium (London) 1974 2 0.12%
Copper (London) 7710 -25 -0.32%
Nickel (London) 16080 -21 -0.13%
Zinc (London) 1909 19 1.01%
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