IG Markets Morning Prices

Overnight, US markets posted convincing gains on the back of better-than-expected earnings from Citigroup and a subsiding of fears over a foreclosure crisis, with financial stocks leading the market higher.

The USD resumed its downwards trend after a weaker-than-expected read on industrial production confirmed the need for more stimulus from the Fed. The Dow Jones Industrial Average advanced 0.7%, as did the S&P 500. The NASDAQ saw more muted gains of 0.3% having significantly outperformed in the previous session.

Whilst we saw the cash session providing a positive lead for the Australian market, the after hour's action on the US futures may have a slight negative bearing. IBM (who have a 10% weight on the Dow Jones) pulled back more than 3%, despite beating the market's forecasts on third-quarter estimates. Traders focused more on its reported drop in new services contracts. Apple as well was sold off after it reported a poor outlook on first quarter earnings.

Locally, we're seeing a slight rebound from yesterday's losses with the ASX 200 called to open 12 points or 0.25% higher at 4663. Materials names are likely to resume their positive trend after a weaker USD saw commodity prices advancing. This morning's release of the RBA's monetary policy meeting minutes will be closely scrutinised for further insight behind its decision to hold rates steady earlier in the month.

It was impressive to see the Australian dollar stabilise with some traders using the weakness as a buying opportunity. At the close of the Australian market yesterday, the A$ was trading at 98.52, trading down to 98.01. However, in early European trade, as risk came back into the market, the A$ rallied pushing back to an overnight high of 99.46. Perversely the weaker-than-expected industrial production numbers provided further support to the A$ as again it heightened expectations of quantitative easing by the Federal Reserve.

The weakness we have seen in the US futures after hours (provided by some weaker-than-expected results) has however weighed on risk, and has pushed the Australian dollar back below 99c. How it trades for the rest of the day will be down the RBA's minutes, if the market gets the impression they may not raise in November, we could see the A$ trade convincingly below 99c. As it stands, the market is pricing in about 35% chance of a 25 basis point move by the RBA.