Global Markets Overview - 11/17/2011

Global markets were weaker overnight in a choppy session which saw headline risk prevail. US markets had pared losses on the back of comments from Boston Fed President, Eric Rosengren, which suggested that we may see coordinated action by the Fed and the ECB to help solve Europe's problems. However, US markets stalled their recovery into the close after Moody's downgraded the senior debt and deposit ratings of 10 German banks, and reports that the Super Committee talks have stalled. Fitch also came out to say that eurozone contagion poses a threat to US banks' ratings outlook.

Among the major averages the Dow Jones Industrial Average declined 1.6% to end at 11906. The S&P shed 1.7% to close at 1237 and the NASDAQ also dropped 1.7% to close at 2640. The losses in US markets came despite yet another round of strong US economic data. Industrial production in the US rose 0.7% in October, beating forecasts for a 0.4% increase.

Europe continues to hold global markets back in an environment where the US seems to have made significant progress. Initial losses had been triggered by comments from Bank of England Governor, Mervyn King, who said Britain faces a markedly weaker outlook for the economy as Europe's crisis threatens global growth. A recovery had been triggered by hopes of coordinated action by the Fed and the ECB, but this was swept away by some of the comments from the ratings agencies. Elsewhere in Europe, Greece's new coalition government won a confidence vote in parliament as Prime Minister Lucas Papademos vowed to quicken the pace of long-term reforms and ensure the nation receives its next tranche of aid. In Italy, new Prime Minister Mario Monti was sworn in and will also serve as Finance Minister.

Oil rallied 3.2% to a five-month high, closing at US$102.59 a barrel. Some now feel the higher oil prices will hamper growth. Our energy sector will pick up the positive lead. However, the refiners and some of the transport stocks are likely to come under pressure due to the oil price rally. Caltex will be one to watch as the stock is already struggling on the back of a high Aussie dollar and competition from large, low-cost Asian rivals. The rise in oil prices will only add to its woes as it squeezes margins further. Apart from oil, commodities are now looking generally weaker, which will weigh on some of our resource majors. The ratings agencies' comments regarding US banks will weigh on the financial sector. We are currently calling the Aussie market down 0.6% at 4222.

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.