IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Markets remain quite choppy as investors are still uncertain about the future of QE. Fed member Esther George was on the wires urging the Fed to taper off on asset purchases. This was one of the key factors around mild USD strength and the decline in US equities. While recent US data disappointed, rhetoric from most Fed members seems to be pointing in the direction of tapering sooner, rather than later.

We are also approaching the business end of the week on the data front, with ADP non-farm employment change, US non-manufacturing PMI and the Beige Book due out later today. This data will keep the QE repricing trade in full force heading into the end of the week. Tomorrow we have central bank meetings for the UK and Europe set to hit the wires. Currencies were relatively steady through US trade and this highlights the level of uncertainty and caution being exercised by investors.

USD/JPY managed to hold its ground above 100 and is currently sidelined at around 100.20 early in Asia. The Nikkei is pointing up 0.2%, with USD/JPY back above ¥100. With Japan’s Prime Minister Shinzo Abe on the wirers later today, we could easily see further volatility in the yen and Nikkei. The market will be looking to hear more about his comments urging Japan’s public pension funds to increase their investments in equities and overseas assets.

AUD/USD had a mixed reaction to the RBA’s statement yesterday, initially rising before dropping to a low of 0.961 in US trade. The pair found some support at that level and will be back in focus again today with GDP data due out at 11.30am AEST. Consensus is for quarterly GDP to show a 0.8% rise and any signs that we might be headed for a deep fiscal hole will result in another round of AUD selling. Traders are likely to be still eyeing to sell the pair into strength and we might see a near-term recovery, particularly following the strong bounce in iron ore prices.

Ahead of the open we are calling the Aussie market down 0.7% at 4867. This is significantly weaker compared to what we saw in US trade. As a result we might continue to see an unwinding of some of the big financial and other defensive names (Telstra, Wesfarmers, Woolworths etc). So far it looks like some of the big resource names will get off to a mildly firmer start, with BHP’s ADR pointing to a 0.2% rise to 34.32. Iron ore popped up 4.2% to 116.6 and this might support some of the iron ore names today. However, in the current environment it’ll be interesting to see if they can hold on to these early gains. Gold dropped back below 1,400 and this will be negative for the local gold names today.

Billabong will be interesting to watch yet again after a sharp drop yesterday as it returned to trade with a profit warning and abandoned takeover. The company’s options certainly seem to be limited now and investors would have lost confidence in management’s ability to get things done. BBG also continues to be hit by downgrades, with Deutsche Bank cutting it to a sell (from hold), with a 0.15 price target. One of the best performing stocks in the market this year, Newscorp, has an investor day, and this will attract significant attention as the company is looking to make significant changes around its structure going forward.
Market Price at 6:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9651 -0.0080 -0.83%
USD/JPY 100.0300 0.1150 0.12%
ASX (cash) 4867 -34 -0.68%
US DOW (cash) 15183 -49 -0.32%
US S&P (cash) 1634.4 -6.6 -0.40%
UK FTSE (cash) 6529 -38 -0.57%
German DAX (cash) 8270 -84 -1.00%
Japan 225 (cash) 13565 31 0.23%
Rio Tinto Plc (London) 28.82 0.02 0.06%
BHP Billiton Plc (London) 18.94 -0.09 -0.47%
BHP Billiton Ltd. ADR (US) (AUD) 34.32 0.06 0.18%
US Light Crude Oil (June) 93.83 0.69 0.74%
Gold (spot) 1399.65 -10.3 -0.73%
Aluminium (London) 1943 21 1.10%
Copper (London) 7432 67 0.90%
Nickel (London) 15244 26 0.17%
Zinc (London) 1953 21 1.09%
Iron Ore 116.6 4.7 4.20%

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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