IG Markets - morning thoughts and opening prices   28 May 2012

Risk assets had a tough session on Friday, drifting lower through US trade. Sentiment remained fragile, with concerns over Spanish banks weighing. This vulnerability of sentiment was made even more evident by the EUR/USD’s move below 1.25 on Friday. S&P said late on Friday that it believes the country is entering a double-dip recession as it cut the ratings on five Spanish banks. Despite all the negative tape on Friday, the Aussie dollar held up fairly well and remained within the 0.97-0.98 trading range against the greenback. The pair actually popped above the 0.98 level this morning, printing a high of 0.98248, with risk fairly buoyant to start off the week. With bank holidays for France, Germany and the US today, Asia is left to fend for itself in terms of leads.

Based on Friday’s close, we were calling the market lower this morning but this has since changed following some developments from the weekend. Ahead of the open, we are calling the Aussie market up 0.3% at 4040 after risk currencies enjoyed a positive start to the week with the euro and Aussie gapping higher. US markets drifted lower through Friday’s session along with most risk assets. This reversal is mainly as a result of the latest polls suggesting Greek pro-bailout conservatives have regained the lead against the far-left Syriza Party. There are also reports that the EU is working on plans to set up a rescue fund for ailing banks and a six-point plan to aid growth. On the local economic front, RBA Governor Glen Stevens is speaking this morning, and his comments might have some bearing on monetary policy/Aussie dollar.

On a stock level, we expect a relatively flat start for BHP, with its ADR pointing to a 0.1% fall to $31.57. However, we could see some upside to this call as it doesn’t incorporate developments from this morning. Elsewhere in the mining space, Fortescue Metals has been upgraded to buy (from hold) by Deutsche Bank after the recent sell-off. This might help support the stock today. Atlas Iron will also be in focus after the company said its share price weakness has left it vulnerable to takeover bids, and the board said it is preparing for a rapid growth phase. Hastie Group has appointed voluntary administrators after some accounting irregularities in their Queensland division. An employee was found to have falsified company accounts and its lenders include ANZ, CBA, NAB and WBC.

Market Price at 6:30am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9792 0.0045 0.47%
ASX (cash) 4040 11 0.3%
US DOW (cash) 12478 -91 -0.72%
US S&P (cash) 1319.1 -5.3 -0.40%
UK FTSE (cash) 5333 -18 -0.33%
German DAX (cash) 6313 11 0.18%
Japan 225 (cash) 8580.39 3 0.03%
Rio Tinto Plc (London) 27.95 -0.44 -1.54%
BHP Billiton Plc (London) 17.03 -0.15 -0.89%
BHP Billiton Ltd. ADR (US) (AUD) 31.57 -0.04 -0.12%
US Light Crude Oil (July) 90.72 0.08 0.08%
Gold (spot) 1574.1 19.8 1.28%
Aluminium (London) 2014 -4 -0.18%
Copper (London) 7639 29 0.38%
Nickel (London) 17050 -50 -0.29%
Zinc (London) 1908 22 1.17%

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.


(IG Markets)

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