Global Markets Overview – 4-10-13

It was another quiet night for macro data; French and German trade balances are the only talking points, with French balances disappointing, and German data was just in-line, which was expected. These figures led to mixed trading results in Europe.

The S&P on the other hand had clear-air and found itself moving higher once more (first back-to-back gains in three weeks), getting within two points of the intraday all-time high before sliding into the close as investors locked in profits - finishing at 1569.

The advantage for the Australian market from overnight trading was the rise in commodities. With Chinese inflation cooling yesterday, fears that Chinese policy makers will tighten the credit markets also cooled. This led to a jump in the major commodities and will drive the local market higher today, as the US earnings season starts in earnest tonight. Bottom-up views are finally back as the order of the day.

Alcoa started things off yesterday, and if you took after-market trading at face value, you would believe it missed the boat. However, as I stated yesterday, the first quarter earnings jumped 59%, and most importantly beat estimates, as cost savings at the larger miners takes precedence.

Material companies continue to evolve in the high cost, low value world; BHP and RIO are in the process of it others are not far behind. The upcoming Q3 results for BHP and Q1 results for RIO will be watched on two fronts: firstly, the retrospective earnings of the quarter, and secondly, the forward-looking guidance. Both companies have new CEOs, and further cost cutting and shedding of non-core assets will help BHP and RIO to continue rallying off their year-to-date lows.

Looking at the open, we are calling the ASX 200 up six points to 4982 (0.12%). Commodity prices were the order the day last night; gold added $8.90 (+0.56%) to $1584, copper advanced 1.14% and iron ore is higher by 1.09% to $139.10. All this positive underlying news sent BHP and RIO off to the races in London, adding 3.53% and 4.82% respectively. We understand the London listings were playing catch up to the Australian listing, with both stocks performing very well yesterday. However, Chinese data has not been factored into the underlying commodities during the Australian session. This point would explain why BHP's ADR is pointing higher by 78 cents to $33.89 - that's a 2.36% gain. Materials plays are in for some strong positive g-forces today.

So the question is, where are the points going to come out?

The banks had a very large run yesterday, adding 1% to 2% at the intraday highs. They may see a pull-back today, however we note that ANZ, NAB and WBC are all due to turn ex-dividend in the next five weeks, so the pull-back in these stocks may be muted.

The other players that ran up hard yesterday were defensives, such as WOW and WES. However, WOW is due to report Q3 earnings tomorrow and it is expected to be stronger, and again this might mute a possible sell off. It's a tough call, but this space is the most likely to see selling as valuations and technicals all suggest both stocks are overpriced.

China data will again be on everyone's lips today, with the release of its trade balance. Bloomberg is expecting a slight contraction from the month before; forecasts show the balance may expand by $15.2 billion versus $15.3 billion the month before; the key for our market will be the export figures.

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.

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