Australian Stock Market Report-OPENING (7/22/2011)

US, EU Markets Overnight

On Wall Street overnight, it was a very strong session as a number of positives combined to send stocks higher. Outside of the jobless claims number, economic data was stronger-than-anticipated and earnings from giants Microsoft and Morgan Stanley topped estimates. The big news, however was an agreement from the EU emergency summit on a final bailout package for Greece worth EUR160 billion; they also empowered their bailout fund to buy debt of stressed nations and offer emergency credit lines.

The broad-based S&P 500 was the top performer, adding 1.4% while the Dow Jones Industrial Average and NASDAQ added 1.2% and 0.7% respectively.

Locally, the ASX 200 is called to open Friday's session 1.2% stronger at 4602 in what's likely to be broad-based gains. All US sectors finished firmly in the black, although it was the financial and energy sectors that performed the best, adding 2.4% and 2% respectively.

Some of the positive sentiment among US financials should flow to our local names. The sector was buoyed by Morgan Stanley's Q2 result which saw the bank report a smaller-than-expected loss and beat revenue estimates. In response, the stock surged 11.4% while the likes of Bank of America, JP Morgan, Citigroup and Wells Fargo were all up between 2.4% and 4.4%.

Energy names also look set for a good day after crude oil futures jumped 1.3%, briefly trading above the US$100/bbl mark before finishing US trade at US$99.77/bbl. The likes of ExxonMobil, ConocoPhillips and Chevron were all up more than 0.9%.

The industrial and materials sectors had strong sessions too, rising 1.5% and 1.2% respectively. Material names should be well bid after leads from the base metals market were mostly higher, although Rio Tinto and BHP in London were flat and 0.2% lower respectively. Nonetheless, BHP's ADR is calling the locally listed stock to open 0.8% higher at $43.73.

Precious metal names may see some modest downside after gold futures saw some profit taking, declining 0.7% from yesterday's 4.30pm close to US$1591/oz.

Australian Stock Market Ahead

In summary, it looks like we're set for a positive end to the trading week. Hopefully, the bulk of the gains can be maintained right through until the close as traders become happier holding the position over the weekend. With nothing of note on the economic calendar, trading will be driven by the positive sentiment created by the positive overnight developments.

In currency markets, the EUR/USD surged to the highest levels in a month following the Greek bailout news. It hit highs of 1.4432 before settling back a little around the 1.4420 mark. The AUD/USD surged as well as risk appetite picked up across the board; it traded to highs of 1.0854 before settling around the 1.0835 level.

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.

(From Ben Potter, Market Strategist, IG Markets)