Global Markets Overview –4-11-13

Risk assets extended their gains with US markets closing at fresh closing highs. There were several factors at play yesterday, but the move in risk was certainly triggered by some positive developments in Europe. The major European bourses traded sharply higher on hopes that Italy is closer to forming a government, and a successful Italian bond auction. The Fed minutes didn't have too much of an impact on sentiment, as investors feel the recent signs of strain in the US labour market will be enough to keep the Fed in QE mode.

AUD/USD has been one of the standout performers in the past 48 hours. The pair managed to break above 1.05 yesterday on the back of China's trade balance numbers which showed a big jump in imports. AUD/USD continued its rally in-line with risk overnight, and managed to print a high of $1.0553. The pair is relatively sidelined at the moment ahead of the local jobs numbers which are due out at 11.30am. The unemployment rate is expected to remain steady at 5.4% with 7,500 jobs lost. Following the recent surprises in the employment change reading, many traders would be positioning themselves for a surprise to the upside. The previous reading was a shock 71,500 jump, and we wouldn't be surprised to at least get a positive reading today. Taking a closer look at AUD/USD, there is nothing much in the way between yesterday's break above 1.05 and January highs in the 1.06 region. Should AUD/USD fall ahead of, or after the jobs numbers, then buying at support around 1.05 is likely to be the preferred strategy. Alternatively, a rapid spike into 1.06 is likely to be greeted by sellers.

Elsewhere in the FX space, USD/JPY continues to drift north, and managed a fresh high of 99.87. We wouldn't be surprised to see the pair finally trade at ¥100 as early as today, particularly with some data due out of Japan. We have core machinery orders from Japan this morning and the data is expected to show a strong improvement (+6.9%). With the yen remaining weak, the Nikkei is pointing to a 1.6% gain at 13,498.

Ahead of the open, we are calling the ASX 200 up 0.6% at 4999. The key today will be whether or not the local market can close above 5000 following the jobs numbers. Recently it has been a tug of war between cyclical names and yield plays. This week, cyclical names have shown strong signs of coming back to life led by the resources. Once again we are expecting a strong start for the iron ore names, with BHP's ADR pointing to a 1.1% gain to 33.47. Fortescue Metals will be an interesting one to watch as it continues its recovery following the bounce off $3.50. FMG is currently hanging around $4 and a move to $4.30 in the short term is likely, given the level was previous support in a number of pullbacks.

Gold names are likely to give up some of their recent gains after the precious metal slumped overnight. We continue to hear comments about a gold bubble and as a result investors should be wary about being caught in a value trap with gold stocks. Mining services companies enjoyed a day in the sun yesterday as they fed off strength in the miners. Some of those companies are coming off a really low base and we wouldn't be surprised if the run continues in the near term. Elsewhere, Woolworths reports third quarter sales this morning with sales expected to be up around 5.6% to $14.4 billion.

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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