IG Markets - Opening calls

Good morning

Overnight, US stocks retreated on the back of a disappointing earnings report from Dow component Boeing and the latest Beige Book report which suggested several districts were experiencing softening growth.

The Dow Jones Industrial Average snapped its four-session winning streak ending lower by 0.4%, the NASDAQ was weaker by 1%, while the S&P slipped 0.7% but held itself above the key 1100 level.

After Bernanke's comment last week that the economic outlook was "unusually uncertain", the Beige Book would seemed to have confirmed this notion with some districts reporting that the pace of expansion had slowed over the last month, dragged down by commercial real estate and the expiration of tax credits for home buyers. If nothing else, the report underscored the Fed's view that while an economic recovery is still underway, it is progressing at a slower pace than earlier in the year.

In the day's other economic news, durable goods orders unexpectedly fell by 1% in June, while mortgage application fell 4.4% from a week earlier.

In terms of sector performance, losses were broad based with all but the telecommunications sector ending the day in negative territory.

The financial sector was the worst performer on the day, largely due to Moody's lowering its outlook on heavyweight names, Bank of America, Citigroup and Wells Fargo to "negative" from "stable" citing lower government support for financial institutions under the new regulations. The negative outlook is seen as increasing the companies' chances of a downgrade over the next 12 months.

Energy prices were softer while base metal prices were fractionally firmer yet both the energy and materials sectors were modestly lower.

Looking to the Australian market, we're seeing a slightly softer open, with the market set to unwind 17 points or 0.4% lower at 4512.

Based on US leads you'd expect the financials to be the major drag on our market today with some possible relative strength coming from the materials space. While the US materials sector finished 0.5% lower, both BHP Billiton and Rio Tinto were approximately 1% higher in London overnight and the BHP ADR is pointing to a 23c gain on the open. If the materials sector can hold relatively firm that may help stem the expected losses on the open.

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