Global Markets Overview – June 6, 2014

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By Stan Shamu, IG Markets Strategist | June 6, 2014 9:26 AM EST

Equities rallied with the S&P and the DAX printing fresh record highs on the back of the ECB decision. The most anticipated event of the week has been and gone and markets are now left to digest the results. While Mario Draghi seems to have thrown absolutely everything at it, markets have not quite had the euphoric reaction many would have expected. This could be largely in part due to the fact that the market already expected a comprehensive package that included a combination of a refinance rate cut, negative deposit rates and a targeted LTRO. The refinance rate was cut by 10 basis points to 0.15%, while the deposit rate was dropped to -0.1%. Additionally the ECB announced a EUR400 billion LTRO which will take place in September and December. Even the commentary was dovish with Draghi pledging to keep rates low for longer than initially thought.

The initial reaction to the data and comments was as expected, with EUR/USD dropping sharply and equities rising as the DAX even traded above 10,000 for the first time. EUR/USD tested 1.3500, but this was short lived as buyers swooped and the pair has since recovered to trade above where it was all week. The 200-day moving average comes in just short of 1.3700 and I feel it'll present some resistance. Perhaps some offers will start coming in at around those levels.

Payrolls data the next key event

The market now looks ahead to US non-farm payrolls data for May, which is the other key event of the week. Expectations are for 214,000 jobs to be added and for the unemployment rate to tick higher to 6.4%. While jobs added will be the key reading, it's also important to keep an eye on labour cost inflation.

Generally a solid reading tonight is likely to lead to some US dollar gains, which would put USD/JPY in focus. The pair stuttered near 103 this week but remains resilient and is in a short-term uptrend. Anticipation of a strong payrolls reading could actually see traders push the pair higher in Asia today. As it stands, we are expecting the Nikkei to lead the region with a 0.7% gain at the open to 15,158.

Mildly positive start for the ASX 200

Ahead of the local market open we are calling the ASX 200 0.2% firmer at 5447. It'll be interesting to see if the positive sentiment from Europe will feed through to the region and see us finish the week off on a positive note. Overall for the week, we are quite far off a positive finish and are likely to finish the week off in the red.

Iron ore ticked a bit lower to 94.30, which will keep investor confidence in the iron ore names low. Gold finally popped higher, helped by the stimulus measures announced by the ECB. This might light up some of the gold names today. Santos might get a positive feed from the recent share price appreciation we've been seeing in Oil Search. Some brokers now feel a rotation from the outperforming OSH to the underperforming STO might not be a bad move. Additionally, STO's CEO was quoted as saying he sees output upside potential from PNG LNG.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,446.70

10

0.18%

Japan 225 (Nikkei)

15,152.00

73

0.48%

Hong Kong HS 50 cash (Hang Seng)

23,241.10

131

0.57%

China H-shares cash

10,459.30

96

0.93%

Singapore Blue Chip cash (MSCI Singapore)

374.20

3

0.68%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,827.90

92

0.55%

US 500 (cash) (S&P)

1,939.85

13

0.66%

UK FTSE (cash)

6,819.90

13

0.18%

German DAX (cash)

9,967.30

44

0.45%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (June)

16,828.00

100.00

0.60%

S&P Futures (June)

1,938.63

12.75

0.66%

ASX SPI Futures (June)

5,452.00

17.50

0.32%

NKY 225 Futures  (June)

15,157.50

100.00

0.66%

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

$0.9333

0.0052

0.58%

USD/JPY

¥102.435

-0.120

-0.12%

Rio Tinto Plc (London)

£31.38

0.09

0.29%

BHP Billiton Plc (London)

£19.01

0.18

0.93%

BHP Billiton Ltd. ADR (US) (AUD)

$36.26

0.06

0.16%

Gold (spot)

$1,253.45

10.05

0.81%

Aluminium (London)

1848

16.00

0.87%

Copper (London)

6783

-2.00

-0.03%

Nickel (London)

19032

-124.00

-0.65%

Zinc (London)

2087.75

5.25

0.25%

Iron Ore (62%Fe)

94.3

-0.30

-0.32%

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Germany Still Propping Up The Currency Bloc: EURUSD And Dax
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