Global Markets Overview – 11/6/13

We continue to see a cautious tone in global equities, with the bulls sceptical about adding to longs as the tapering debate ramps up. A better-than-expected ISM non-manufacturing PMI (55.4 versus 54.2 expected) set the tone for the tapering argument.

The US dollar index remains within striking distance of the 81 mark and continues to attract buyers after the recent break above 80. There were also some comments from Fed member James Rosengren questioning the costs of maintaining QE.

USD/JPY is hanging at around 98.56 ahead of the BoJ's monetary policy meeting minutes from last week's meeting. This should give more insight on when we can expect further stimulus from Japan. We are currently expecting the Nikkei down 0.2% at 14,200.

Local currency holding at 0.95 against the greenback

AUD/USD is pushing higher early in Asia and still remains stuck around the 0.95 level. It's been a big week for the local currency with the RBA statement setting the tone yesterday. Yesterday the RBA highlighted that the AUD remains uncomfortably high and added it needs to come down for the local economy to achieve balanced growth.

Today we have trade balance data due out with a trade deficit of around half a billion dollars expected. This is an improvement on the previous reading and perhaps the recent strength in PMIs globally might be a positive for this data today. I expect to see some consolidation heading into tomorrow's jobs data. Selling into strength remains the preferred strategy; particularly moves into the 0.96 region.

Big dividends in focus

Ahead of the open we are calling the local market up two points at 5,434. Today's trade will be ahead of some big dividends coming out of the market, with nearly 20 points tomorrow and 11.2 points on Friday. As a result I feel the local market will be underpinned by investors using today as an opportunity to buy up stocks like ANZ and NAB which are about to go ex-dividend. Commonwealth Bank has its first quarter update today in which it said cash earnings were about $2.1 billion; significantly better than $1.85 billion year-on-year. Just like Westpac, CBA also had some positive commentary on borrowing with mortgage growth slightly ahead of trend. However, net interest margins are under pressure and were marginally lower than the previous half. The iron ore miners are also in for a good start to the session after iron ore added further ground to 136.80. BHP's ADR is pointing up 0.4% to 38.02 and the stock last traded above $38 back in February. FMG has been upgraded to a Buy (from Neutral) by UBS.

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