IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

There were some pretty sharp reversals in key markets after yesterday’s dismal Asian session that resulted in a hefty sell-off across the board. Investors focused on housing and unemployment claims data out of the US, along with more comments from Fed members. New home sales came in at 454,000, beating a consensus of 429,000 while unemployment claims dropped to 340,000 (versus 347,000 expected). Fed member Williams was on the wires with some dovish comments, emphasising that the bond purchases would be flexible depending on economic changes. Mr Williams was quoted as saying ‘the Fed won’t go on autopilot after tapering begins’.

Meanwhile Mr Bullard suggested the Fed wasn’t that close to start tapering off. The result was a recovery in risk currencies and US equities, as most asset classes pared losses. AUD/USD finally halted its slide after printing a low of $0.9594, which was at the close of the Australian session yesterday. The pair recovered all the way to a high of $0.978, along with risk.

EUR/USD experienced a similar move as it rallied from $1.282 to a high of $1.296, helped by some fairly positive PMI readings out of the eurozone. However, the main point of focus in Asia today will be Japan after the sharp sell-off experienced yesterday. USD/JPY dropped to a low of ¥100.83, but has now bounced back to ¥102 with JGBs still in focus. The recovery in USD/JPY is likely to drive the Nikkei higher at the open today. We are currently calling the Nikkei up 2.1% at 14,793, and with BoJ Governor Kuroda set to hit the wires today, we might see further volatility. The market will be looking for comments around instability in the JGBs and this will likely be a key event in Asia, as it’ll have an impact on the banking sector. Should Kuroda manage to restore some stability and confidence in JGBs, then we could finish the week off on a good note.

Ahead of the open, we are calling the ASX 200 up 0.4% at 5082. We might see pockets of strength today following the risk recovery in US trade. Gold miners are likely to be at the forefront of the recovery after the precious metal climbed over 1%. The pullback in the US dollar will certainly aid a commodities recovery and some of the resource names. However, there will still be concerns about China following yesterday’s disappointing HSBC PMI reading.

BHP’s ADR is pointing to a 0.7% fall to 34.63 after iron ore remained flat and following big falls in its UK listed stock. The banks will be interesting to watch today after being offloaded yesterday and weighing on the market. They should bounce at the open, but whether they can hold on to early gains remains debatable. Equity market moves today are more likely to be macro driven given the volatility emanating from Japan, US and China.
Market Price at 6:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9750 0.0140 1.45%
USD/JPY 101.9350 0.0000 0.00%
ASX (cash) 5082 19 0.38%
US DOW (cash) 15314 62 0.41%
US S&P (cash) 1655.2 5.9 0.36%
UK FTSE (cash) 6709 -32 -0.48%
German DAX (cash) 8387 -20 -0.24%
Japan 225 (cash) 14793 309 2.13%
Rio Tinto Plc (London) 29.14 -1.29 -4.23%
BHP Billiton Plc (London) 19.43 -0.58 -2.90%
BHP Billiton Ltd. ADR (US) (AUD) 34.63 -0.25 -0.71%
US Light Crude Oil (June) 94.41 1.10 1.17%
Gold (spot) 1391.35 16.5 1.20%
Aluminium (London) 1853 -7 -0.36%
Copper (London) 7303 17 0.23%
Nickel (London) 14936 76 0.51%
Zinc (London) 1853 4 0.23%
Iron Ore 123.60 0 0.00%

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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