IG Markets Afternoon thoughts   7 May 2012

In US trade, markets declined amid another round of disappointing economic data. The US economy added 115,000 jobs in April, which was well below expectations of around 160,000 jobs added. Investors were also cautious ahead of a pivotal weekend in Europe with French and Greek elections taking place.

Among the major averages, the Dow Jones Industrial Average was down 1.3% at 13038. The S&P was 1.6% lower at 1369, whilst the NASDAQ shed 2.3% to finish at 2956.

Risk sentiment has taken a further hit this morning with risk currencies slumping following the developments out of Europe. With the Socialist Party winning elections in France and pro-bailout parties falling short in Greece, it seems we could see the situation unravel in Europe. Risk currencies have fallen sharply this morning in reaction to the news, with AUD/USD opening at around 1.0158 and EUR/USD testing 1.03, only to breach it shortly after. As a result, we expect to see a tough start to the week, with risk aversion the dominant theme. BHP’s ADR is pointing to a 1.7% drop to $35.43. The defensive sectors are likely to outperform but not by much, with a broad sell-off expected.

Ahead of the open, we are calling the Aussie market down 1.8% at 4317. This basically erases all of last week’s gains and leaves the market right near support from a few weeks ago. Several traders are likely to attempt buying this market after the sharp drop we have seen from last week’s high. However, trying to pick a bottom is always a particularly risky strategy, and following the trend might just be the favoured strategy. There is likely to be significant volatility in today’s session as traders look to reposition themselves. On the economic front, investors can look forward to building approvals and retail sales data at 11.30am. We will also have ANZ job ads and NAB business confidence data out at the same time. However, all this data is unlikely to influence today’s trading by much, with the European issues likely to take centre stage over the next few days.

Market Price at 8:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0124 -0.0142 -1.38%
ASX (cash) 4317 -79 -1.80%
US DOW (cash) 12879 -321 -2.43%
US S&P (cash) 1352.1 -39.0 -2.80%
UK FTSE (cash) 5570 -174 -3.04%
German DAX (cash) 6415 -254 -3.81%
Japan 225 (cash) 9083 -297 -3.16%
Rio Tinto Plc (London) 32.15 -1.49 -4.42%
BHP Billiton Plc (London) 19.18 -0.79 -3.94%
BHP Billiton Ltd. ADR (US) (AUD) 35.43 -0.60 -1.67%
US Light Crude Oil (June) 96.18 -6.37 -6.21%
Gold (spot) 1640.3 5.5 0.33%
Aluminium (London) 2075 -21 -0.98%
Copper (London) 8194 -66 -0.79%
Nickel (London) 17592 21 0.12%
Zinc (London) 2105 11 0.51%

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.

www.igmarkets.com.au

(IG Markets)

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