Global Markets Overview – 11/4/13

The US dollar continues to enjoy a steady recovery with some positive readings on Friday helping it extend its gains. Driving the greenback was a strong ISM report (56.4 versus 55 expected) which saw the US dollar index rise to 80.72. Tapering is the main topic at the moment and every time we receive positive economic readings, expectations of tapering by the end of the year gain momentum. Fed speakers were also a key theme in Friday's trade; with one of the well documented doves, James Bullard, hitting the wires. Bullard did not rule out tapering and emphasized that a decision to modestly reduce the pace of asset purchases can still leave a very accommodative policy in place and that tapering will still be data dependant. The recent move through 80 has really seen a fresh round of confidence for the greenback in the near term. While the greenback rallied, equities were relatively mixed but the S&P still managed to edge higher.

However, the interesting moves were in the FX space as the USD rallied against the yen and the risk currencies. USD/JPY rallied off lows at 97.80 and posted a high of 98.85 in US trade. This move will be a key driver of sentiment in Asia today as yen weakness generally supports the Nikkei which we are currently calling up 0.7% at 14,300.

Looking at the risk currency pairs, AUD/USD and EUR/USD both significantly declined on Friday. AUD/USD dropped to a low of 0.942 and will be one to watch this week with the RBA decision and statement due out tomorrow. The RBA is expected to remain on hold with a wait and see approach going forward. Today we have retail sales, house prices and ANZ job ads due out at 11.30 AEDST. Retail sales are expected up 0.5% and a beat on this figure could see the AUD come off its lows today. We also have local jobs numbers due out later in the week.

The single currency has been under immense pressure over the past few sessions in the aftermath of that poor inflation reading from last week. EUR/USD has now slumped below 1.35 and is currently in the 1.348 region. There has been consolidation in the 1.345 region in the past and perhaps we might see it find near term support around here. Selling into strength is likely to be the preferred strategy heading into the ECB meeting and perhaps for the region due out later today will provide some short term strength. One of the ECB's prime objectives is inflation stability and analysts feel last week's poor reading will prompt some action. A growing number of analysts feel the ECB will cut rates and perhaps even strengthen forward guidance after inflation came in at the lowest level since 2009.

Ahead of the open we are calling the ASX 200 a touch lower at 5,409. However, this is based on Saturday morning's close and we will get a clearer indication once futures reopen. Currency markets are open now and we are seeing a mild improvement in the risk tone. A major talking point will be Westpac's FY13 report which was released this morning. Westpac has put on 33.2% this year, and like its peers that reported last week, needed to come out with good numbers today if it is to justify the valuation premium it currently holds. Cash earnings for the bank were expected at $7.08 billion, so the $7.097 billion print looks OK. The dividend at 88c is in-line with consensus and up from 84c in the previous corresponding period, while the bank also announced a special dividend of 10c; again expected. Net interest margins of 2.15% are below the expectations of 2.19% and perhaps will disappoint a few. All-in-all looking at the headline numbers they is nothing to really excite the bulls.

Market	Price at 6:00am AEST	Change Since Australian Market Close	Percentage Change
AUD/USD	0.9444	-0.0034	-0.36%
USD/JPY	98.7800	0.8450	0.86%
ASX (cash)	5409	-2	-0.03%
US DOW (cash)	15605	43	0.28%
US S&P (cash)	1759.7	2.4	0.13%
UK FTSE (cash)	6751	14	0.21%
German DAX (cash)	9027	6	0.06%
Japan 225 (cash)	14304	110	0.77%
Rio Tinto Plc (London)	31.80	0.22	0.70%
BHP Billiton Plc (London)	19.33	0.02	0.10%
BHP Billiton Ltd. ADR (US) (AUD)	37.57	0.04	0.10%
US Light Crude Oil (September)	94.61	-1.90	-1.96%
Gold (spot)	1315.35	-10.2	-0.77%
Aluminium (London)	1843	-29	-1.56%
Copper (London)	7245	-14	-0.19%
Nickel (London)	14570	-56	-0.38%
Zinc (London)	1940	-20	-1.01%
Iron Ore	135.3	3.4	2.58%

IG 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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