Markets hibernate ahead of the ECB

It was another mixed session for European equities, while US markets stormed to another record high. 

The S&P 500 printed an intraday record high of 1928.63 and closed just a touch below this level. Driving the gains was yet another encouraging round of economic data as many had predicted for this week. A much better-than-expected ISM non-manufacturing PMI print actually set the tone overnight, along with more encouraging comments from the Fed’s Beige Book. The employment component of the ISM reading showed a solid gain, while the Beige Book remained consistent with a rebound in growth. The ADP non-farm payrolls fell well short of consensus along with the US trade balance. However, I don’t think this will deter the US economy from a strong payrolls reading.

While equities in the US marched on, price action in Europe remained choppy as ever on the eve of the all-important ECB meeting. The first announcement from the meeting will be at 21.45 AEST when we get the minimum bid rate. Then at 22.30 AEST will be the ECB conference where any unconventional measures will be announced if in fact it is planning on delivering them. This makes for a very busy couple of hours for global markets.

After a pop higher yesterday, the euro has been greeted by sellers and has started to drop away again with EUR/USD back down to 1.36. I’m very hesitant to sell the single currency at these levels and would prefer waiting for a move higher before initiating shorts. However, there is also potential for a momentum play on a close below 1.36.    

Japan to lead Asia yet again

AUD/USD popped higher on the back of a surprise in GDP yesterday. The pair is currently sidelined at 0.9277 and will remain in focus today ahead of trade balance numbers at 11.30 AEST. The market is looking for a trade surplus of $0.4 billion for April. This will be followed by China’s HSBC services PMI reading at 11.45 AEST, which isn’t really expected to bring any fireworks. However, any data out of China is important as it gives an indication of how the economy is tracking over there.

 Meanwhile Japan is set to lead the market yet again with current indications suggesting the Nikkei will open 0.6% higher at 15,155. USD/JPY has been resilient all week largely on the back of a positive week for US economic data. The pair is in a good position to test 103 in the near term and such a move would probably see the Nikkei extend its gains.

Iron ore bounce might not necessarily lead to gains

The ASX 200 is facing a flat open at 5445 with uncertainty continuing to keep volume at a low. Iron ore bounced yet again to 94.60, but it remains uncertain whether this will lift the local iron ore names. As I said yesterday, investors are likely to wait for a more sustained recovery in iron ore prices for confidence to return. BHP announced job cuts in its iron ore division and some analysts feel this increases the probability of cash returns from the miner.

I expect to see another confusing day from the materials plays with mixed performances across the board. Meanwhile, Oil Search has raised its 2014 production guidance to 17-20 million boe, up from 14.5-17.5 million boe. This could see the stock extend its gains today. Meanwhile, Santos remains confident on the outlook for LNG demand. As a result, the energy space might be interesting to watch today. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik wens per e-mail informatie van IG Group bedrijven te ontvangen over handelsideeën en IG's producten en diensten.

Voor meer informatie over hoe wij uw gegevens mogelijk kunnen gebruiken, bekijkt u ons Privacy- en toegangsbeleid en onze privacy website.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.