Global Markets Overview

Looking at the graph of the ASX 200 from the last two weeks, the term 'don't catch a falling knife' certainly springs to mind.

The index has shed over 289 points from the high on May 20, which was a momentum shifting day in defensive stocks. All four banks reversed their gains on that day as AUD/USD continued to slide from big falls two days before. The lead from the currency saw financial index smashed, as ANZ, WBC and NAB were shed left right and centre by international investors.

Talk on the street is that investment fund BlackRock shed 2.15 million shares in ANZ and 440,000 shares in CBA over this time. BlackRock is the third largest shareholder in Australia. This news explains why foreign investors have been winning the battle versus yield hunters.

The glaring profits in ANZ and NAB are too good to ignore, and a falling AUD has seen the repatriation of profits overriding yield returns. This illustrates why the knife has fallen, as Australian financial stocks are very top-heavy and now make up 33% of the ASX.

However, the shedding in the defensives stocks will soon run out. The volumes through the market have been very strong, well above the normal averages. This means the market is approaching the end of the international repatriation stage, and could see the knife hitting the floor as yield-hunters jump back in.

The yield value in the market is starting to hit a point where yield-hunters will overwhelm the selling international funds. The current net yields on offer were snapped up without blinking over the last 12 months, and we believe it will happen again in the coming days and weeks. Watch WBC again today; it jumped 1.2% yesterday and has been the most popular bank over the last year and it may pop up again this morning.

What could benefit the ASX even more over the coming days is US data. Last night consumer confidence hit its highest level since 2008 and smashed expectations by six points. That was coupled with better-than-expected housing price data, which hit a seven-year high. This is all very good news for commodities. Overnight, industrial metals popped up on the news and saw strong performance from US material stocks.

If the ASX is going to double-back on itself over the next few months, a rebalancing in cyclical stocks is a must. BHP has managed to hold onto most of the ground it made up over the last six weeks since hitting low $31 ranges, and even dropping into high $30 ranges.

If the current sell-off in the ASX is about capitulations in the Australian market, the 6% to 10% gains in the materials plays would have followed the defensive stocks, but they haven't, and this gives us confidence that this is a correction and profit-taking, not a bearish move event.

Ahead of the open, the futures and cash markets are calling the ASX 200 down 14 points to 4957 (-0.29%). The call is based on China concerns, which have being hanging around like a bad smell for months. We see this abating; the silver-lining out of China is that tightening is now off the cards, with the flash PMI data on Monday showing contraction. This will see confidence returning to the material sector over the coming months.

BHP's ADR market was re-opened last night and the deposit receipts are suggesting the security will be up today by 33 cents to $34.31 (+0.96%) and this should support the materials sector. NAB is cum-dividend today; it has struggle to rally into its dividend, and with a guaranteed 93 cents coming out tomorrow, it may finally have the support it needs before turning ex-dividend tomorrow.

Finally Governor Kuroda is back on the newswires today. Any positive talk about JGBs should support the Japanese markets and the Asian region. If this is the case, we could make it two-out-of-two up days.

Market	Price at 6:00am AEST	Change Since Australian Market Close	Percentage Change
AUD/USD	0.9620	-0.0026	-0.27%
USD/JPY	102.3000	0.3200	0.31%
ASX (cash)	4957	-14	-0.29%
US DOW (cash)	15393	17	0.11%
US S&P (cash)	1659.2	-1.4	-0.08%
UK FTSE (cash)	6734	20	0.30%
German DAX (cash)	8451	30	0.36%
Japan 225 (cash)	14394	82	0.57%
Rio Tinto Plc (London)	28.81	0.14	0.49%
BHP Billiton Plc (London)	19.39	0.16	0.82%
BHP Billiton Ltd. ADR (US) (AUD)	34.31	0.33	0.96%
US Light Crude Oil (June)	95.13	1.49	1.59%
Gold (spot)	1381.40	-8.4	-0.60%
Aluminium (London)	1851	6	0.35%
Copper (London)	7303	34	0.46%
Nickel (London)	14872	64	0.43%
Zinc (London)	1869	11	0.61%
Iron Ore	117.8	-3.1	2.56%

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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