Australia Stock Market: Set For Modest Gains

Australia is seen to post modest gains on Wednesday's trading day. Here's a first look at the markets as it opens today:

Market view from IG Markets Analyst Ben Potter:

In the US overnight, the Dow Jones Industrial Average and S&P 500 snapped their five-day winning streak on light volume as investors largely shrugged a Moody's downgrade of Portugal's credit rating to junk status. Nonetheless, the markets were basically flat as traders took a breather following last week's strong gains and ahead of key employment data later in the week.

The tech-heavy NASDAQ was the best performer, rising 0.4% while both the Dow Jones Industrial Average and S&P 500 gave up 0.1%.

Locally, the ASX 200 is called to open the session 0.3% firmer at 4612 following our underperformance during yesterday's session. Given the overnight leads from commodities, it looks like the energy and materials sectors will be likely outperformers.

The US energy sector was the top performer, adding 0.6% after crude oil futures soared. Crude oil for August delivery jumped 2.2% to US$96.83/bbl on expectations the recent sell off was overdone and that the supply/demand equation will become tighter as the second half progresses. Chevron was the standout performer, up 1%.

The US basic materials sector added 0.1% as base metals on the LME were higher between 1.1% and 2.6%. However, in London equities trade Rio Tinto and BHP Billiton fell 1.3% and 0.6% respectively. Nonetheless, BHP's ADR is still calling the local stock to open 0.3% stronger at $44.34.

Precious metal names should see strong buying interest after gold jumped significantly, finishing 1.4% higher from yesterday's 4.30pm close at US$1515.30/oz. Silver rose too to be trading around the US$35.45/oz level.

Elsewhere, consumer discretionary names may see some support after the US sector added 0.4% and the RBA is largely seen as being on hold longer than initially thought. There may be some weakness in financials after the US sector retreated 0.9% following news Citigroup had cut targets on the lenders, citing earnings pressure from continued low interest rates.

In summary, it looks like the local market is set for modest gains on the open following a breather in overnight markets. With little on the economic calendar, traders will be focussed on Asian markets and how they respond ahead of key US jobs data later in the week.

In currency markets, the EUR/USD sold off significantly following the Moody's downgrade to Portugal's credit rating. It traded to lows of 1.4396 before ending the session at 1.4427. The AUD/USD also saw modest selling pressure in line with the euro and following yesterday's dovish comments from the RBA; it's currently trading at 1.0685.

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.

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