Global Markets Overview – 11/7/13

Global equities managed to push higher despite some key event risk approaching. Some positive data prints from Europe and more taper talk were at the forefront of the equity price moves. Fed member Williams said he wants to see a fairly convincing case that the economy can grow faster than recent trend before reducing asset purchases. Meanwhile Pianalto hopes the recovery will accelerate to allow the Fed to taper. This is probably the most dovish we've heard Fed members since the meeting and as a result helped drive US equities higher.

While equities drifted higher, FX markets remained subdued, with traders sceptical about adding on to positions heading into US GDP, unemployment claims and non-farm payrolls. For the first time in a week, the greenback actually traded poorly against the majors, with the US dollar index losing around 0.2%. This move is mainly attributable to the euro which managed to regain some ground heading into the ECB decision. Euro positioning will be a dominant theme today as the market feels the ECB is gearing up for a rate cut next month.

Meanwhile, USD/JPY remains elevated with the pair trading at around ¥98.70 heading into the US Q3 GDP data. Near-term resistance for the pair is in the ¥99 region with positioning seemingly skewed to the upside. This should underpin the Nikkei today which we are currently calling up 0.3% at 14,393.

AUD in focus ahead of the jobs numbers

AUD/USD continues to hold on to the 0.95 handle heading into the jobs numbers which will be released at 11.30 AEDT. We have seen a prolonged period of consolidation for the pair but the next couple of days have the potential to see some big moves in the pair. The market is expecting unemployment to tick higher to 5.7%, with 10,000 jobs added. The mix between full time and part time employment, along with the participation rate, will be key measures of the health of the jobs market. The participation rate is expected to remain flat at 64.9%. While it is difficult to make a call on which way the data will be skewed, I feel selling into strength is a preferred short term strategy for the pair. Any rallies into 0.96 will be a good opportunity to sell.

Big dividends to weigh on Aussie market

Ahead of the open we are calling the ASX 200 down 0.2% to 5,424. While global equities were mostly firmer, we aren't surprised by the negative opening call given the big dividends coming out of the market today. Nearly 20 points will come out of the market today with companies including ANZ, BOQ and NAB trading ex-div. The upgrades are already starting to roll in for CBA with JP Morgan upgrading it to Overweight (from Neutral).

There might be some bright spots in the resource space as metals had a fairly solid session with gains for gold and iron ore. BHP's ADR is pointing to a 0.3% rise at the open to 38.19 and also enjoyed some good gains in London trade. Gold has been a serial underperformer recently and yesterday's gains will be well received by precious metals names. There are a few AGMs to keep an eye on including Wesfarmers and Fairfax.

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