Global Markets Overview - 4/3/14

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By Evan Lucas, IG Markets Strategist | April 4, 2014 11:47 AM EST

NFP Friday, with QE possibilities 

The EUR has crossed below its 50-day moving average for the first time since February, as Mario Draghi and the ECB board uses much grittier and direct language, giving the market a real sense that QE is coming.

However, the question is, what form of QE? It can't really be the QE in its traditional sense like what has been seen in the US, as Europe uses bank funding rather than bonds. So as Draghi mentioned, the discussions centred on possible negative real deposit rates and other forms of unconventional monetary policy. The ECB really is looking at all possibilities as it looks to close the gap in the periphery.

We still think it is unlikely to see QE in the eurozone, despite what was suggested overnight considering the forward estimates from the bank itself. The bank is forecasting inflation to moderate in the coming two month before returning to 1% by the end of the northern summer. This timeframe should be fast enough to see the bank holding firm - however if this doesn't happen we will see QE enacted.  

Moving to the other side of the Atlantic, the story seems to be a lot brighter; the ISM services PMI index came in at 53.1 up from 51.6 in the previous month; it was however was below the consensus estimate of 53.5 and was the slowest expansion pace in four years. The silver lining though - the jobs component of the survey had its largest jump on record from a strong contraction of 47.5 to expansion of 53.6.

Considering services are the biggest component of the US economy and also the largest employment sector in the US, this really does put the non-farm payrolls figure tonight on target for the forecasted number of 200,000 jobs added.

The NFP are gearing up for a big figure and the movements in the USD suggest the market is really looking for a beat. Trading in USD/JPY was a real indication that tonight's read will be positive; the pair rallied to 104.10 in Asian trade and has held just below this level (103.95) through European and American trade. It will be the pair to watch today as Asian investors position for what is building up to be one of the more influential NFP report for 2014. 

Ahead of the Australian Open

We have very little leads coming from overnight markets; we are currently calling the ASX up a solitary point on the 10am bell (AEDT) to 5411. However, as mentioned yesterday, the index over the past two weeks has been struggling to find support above 5400 points where strong resistance kicks in; yesterday's leads were not enough for the market to really break away from the 5400 point mark, and with most international investors concentrating on NFP and US market, it would not be surprising to see the ASX in the red come 4.10pm AEDT.

The iron ore futures once more correctly called the spot iron ore market with Fe62% moving slightly higher to 115.50, adding 20 cents; it looks to be supportive of the materials sector with BHP's ADR pointing higher, however once again gold fell and is likely to see gold stocks coming under increased pressure.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,411.00

1

0.02%

Japan 225 (Nikkei)

15,060.00

-12

-0.08%

Hong Kong HS 50 cash (Hang Seng)

22,498.80

-66

-0.29%

China H-shares cash

10,016.60

-76

-0.76%

Singapore Blue Chip cash (MSCI Singapore)

364.10

0

0.10%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,579.30

13

0.08%

US 500 (cash) (S&P)

1,890.14

1

0.04%

UK FTSE (cash)

6,660.70

-8

-0.12%

German DAX (cash)

9,640.70

9

0.10%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (June)

16,503.00

14.00

0.08%

S&P Futures (June)

1,883.25

1.13

0.06%

ASX SPI Futures (June)

5,404.00

-2.50

-0.05%

NKY 225 Futures  (June)

15,120.00

-62.50

-0.41%

Key inputs for the upcoming Australian trading session (Change are from 16:00 AEDT)

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

AUD/USD

$0.9229

0.0012

0.13%

USD/JPY

¥103.920

-0.045

-0.04%

Rio Tinto Plc (London)

£33.40

-0.37

-1.10%

BHP Billiton Plc (London)

£18.73

-0.45

-2.32%

BHP Billiton Ltd. ADR (US) (AUD)

$37.70

0.17

0.44%

Gold (spot)

$1,286.60

-5.30

-0.41%

Aluminium (London)

1833.00

5.00

0.27%

Copper (London)

6639.00

-31.50

-0.47%

Nickel (London)

16275.0

92.00

0.57%

Zinc (London)

1984.00

15.00

0.76%

Iron Ore (62%Fe)

115.50

0.20

0.17%

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The European Union is racing to create a banking union that will make banks and tax payers safe from crises (Reuters)
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