Global Markets Overview – 5/28/14

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By Stan Shamu, IG Markets Strategist | May 28, 2014 9:09 AM EST

US markets returned to trade on a positive note, with the S&P rallying to yet another record of 1,912. Not only did the S&P print a record high, it also closed right at the highs, which is a positive sign and says a lot about momentum. Sentiment was lifted by a string of positive data releases out of the US, including durable goods orders and the Case Shiller house price index.  Both indicators were quite positive and confirmed the US continues to bounce back after a tough start to the year. As a result analysts feel we will see a good Q2 rebound from a very disappointing Q1.

While US data was positive, the USD didn't quite gain the traction we would have expected to see. USD/JPY just continues to hang around 102, with activity on the economic calendar set to ramp up in Japan. There has been a lot of commentary from Japan this week and this is set to continue with BoJ Governor Kuroda on the wires at 10.00 AEST this morning. As it stands we are calling the Nikkei up 0.2% to 14,637.

Commentary from Japanese officials this week has included deputy governor Iwata saying tapering might be necessary to prevent the economy from overheating. Meanwhile, the consumption tax hike remains a big debate and Abe will have quite a task in setting the economic strategy in June.

Industrial profits in focus

China will also be in focus today, with industrial profits data due out at 11.30 AEST. While there is no indication of what to expect, the March reading came in at 10.1% and as a result the market will be looking for an improvement in this figure.

A reading that a lot of analysts watch closely in the industrial profits data is electricity consumption. Just in March, electricity consumption was up a whopping 32.3%. While this was a slight improvement from February, it was still significantly down from last year's readings which were north of 40%. After the recent China concerns, every reading will be watched closely and of course its implications on stimulus.

AUD/USD remains sidelined at 0.926 and perhaps this data might finally see the pair move out of this tight range today. On the local economic front, we have construction work done due out at 11.30 AEST where the market will be looking for an improvement in construction activity. 

Gold names in for a tough session

Ahead of the local market open we are calling the ASX 200 up 0.2% at 5523. Iron ore dropped to 98.10, from 98.60 and this might be a source of concern for the iron ore pure plays today. They have been showing signs of improvement this week and this might stall today. Gold was also on the losing end, dropping a big figure to a 15-week low of around 1264. Analysts have blamed this on a sharp drop in China imports of the metal and some on India easing hedging restrictions on imports/exports. Gold names could be in for a tough day today. From a technical perspective, gold has been in a compressing triangle over the past week or so and finally got squeezed to the downside.

On the company news front, we have Aristocrat Leisure 1H results due out today and a Wesfarmers strategy briefing. Also look out for Iluka's AGM after a slowing in demand for mineral sands from China. Big losers yesterday were Suncorp and Ozforex; these stocks may be looking to extend losses in the near term.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,523.10

11

0.21%

Japan 225 (Nikkei)

14,676.50

40

0.27%

Hong Kong HS 50 cash (Hang Seng)

22,953.00

9

0.04%

China H-shares cash

10,045.60

24

0.24%

Singapore Blue Chip cash (MSCI Singapore)

372.00

0

0.08%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,675.80

26

0.15%

US 500 (cash) (S&P)

1,912.04

7

0.34%

UK FTSE (cash)

6,841.40

1

0.01%

German DAX (cash)

9,946.60

59

0.60%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (June)

16,657.50

28.50

0.17%

S&P Futures (June)

1,909.63

6.75

0.35%

ASX SPI Futures (June)

5,534.00

7.50

0.14%

NKY 225 Futures  (June)

14,687.50

70.00

0.48%

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

$0.9260

-0.0003

-0.03%

USD/JPY

¥101.990

0.115

0.11%

Rio Tinto Plc (London)

£32.51

-0.07

-0.20%

BHP Billiton Plc (London)

£19.34

-0.14

-0.69%

BHP Billiton Ltd. ADR (US) (AUD)

$37.85

-0.04

-0.12%

Gold (spot)

$1,265.20

-21.63

-1.68%

Aluminium (London)

1821

3.75

0.21%

Copper (London)

6938.75

25.25

0.37%

Nickel (London)

19674

24.00

0.12%

Zinc (London)

2084

3.00

0.14%

Iron Ore (62%Fe)

98.1

-0.50

-0.51%

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