World Sharemarkets Overview (7/14/2011)

On Wall Street overnight, US stocks snapped their three day losing streak to finish moderately higher, albeit well off session highs as little progress was made in talks over the raising of the debt ceiling and a Fed official said he is against providing further stimulus to the economy, opposing earlier comments from Ben Bernanke.

The NASDAQ was the best performer, up 0.5% while the Dow and S&P 500 rose 0.4% and 0.3% respectively.

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Locally, the ASX 200 is called to open the session 0.5% weaker at 4592 following the fall from the highs on Wall Street as well as Moody's putting the US credit rating on review for downgrade after hours. Given these developments after hours, it is very difficult to tell how our market is going to open, although we can expect some support for US dollar denominated commodities given the weakness seen in the US dollar.

Materials should see some relative support following a mostly stronger session for LME quoted base metals. In London Stock Exchange trade, Rio Tinto and BHP Billiton rallied 1.2% and 1.6%, with BHP's ADR calling the local stock higher by 0.2% to $43.73. However, there is likely to be some downside risk to this call given the weakness seen in after hours trade.

Precious metals will be the place to be today after both gold and silver soared. Gold rallied to all-time highs, touching US$1587.60/oz following the comments from Ben Bernanke that said the Fed will provide extra stimulus if the economy warrants it. Silver also jumped more than 7% to US$38.30/oz. Keep an eye on the likes of Newcrest and Cobar Consolidated.

Energy stocks are likely to see relative strength today after crude oil futures benefitted from the weakening US dollar, rising 0.5% to US$97.80/bbl. ExxonMobil, Chevron and ConocoPhillips were all up between 0.1%.

Elsewhere, consumer discretionary names are likely to come under pressure after sector heavyweight David Jones announced a shock profit downgrade late yesterday. They said trading conditions had deteriorated sharply; these comments will likely weigh heavily on the other retailers like Harvey Norman, JB HiFi and Myers.

In summary, it looks like the local will open slightly lower following the late session sell off in the US. We'll likely see some buying come in at some stage; the big question will be whether or not traders sell into the strength or if it can actually follow through into the close.

In currency markets, both the EUR/USD and AUD/USD continued their push higher on the back of broad-based US dollar weakness. The euro has pushed higher to highs of 1.4238 in Asian morning trade after closing the overnight session at 1.4157. The AUD/USD was last at 1.0755, up from yesterday's lows of 1.0576.

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.

Please contact IG Markets if you require market commentary or the latest dealing price.

(From Ben Potter, IG Markets Strategist)

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