Global Markets Overview – June 27, 2014

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By Stan Shamu, IG Markets Strategist | June 27, 2014 10:47 AM EST

Equities were relatively sidelined in a quiet US trade. Most of the releases from the US were in-line with estimates and this resulted in an overall lack of direction. There was also some Fedspeak with Lacker and Bullard on the wires. Lacker commented on inflation, suggesting it was rising faster than expected with the move not being entirely noise.

Meanwhile, Bullard said he doesn't think markets have internalised how close the Fed is to its goals. Given Janet Yellen's last comments highlighted 'noise' in the inflation reading, then these comments have some significance. In fact, most of the Fed comments this week have been quite hawkish and perhaps this resulted in the subdued performance in equities.

Pound remains firm

Moves in the FX space were also quite limited with a bit of focus on the pound following the financial stability report. The report mainly focused on house prices and essentially suggested more stringent stress tests and limits to borrowing. Traders saw this as mildly hawkish and this saw the sterling bid mildly higher. GBP/USD remains above 1.7000 in Asia today and will be in focus ahead of current account, final GDP and revised business investment data.

Data likely to show Japan on track

In Asia, attention returns to Japan where a raft of economic releases are expected today. The data kicks off at 9.30 AEST when we get household spending, CPI and the unemployment rate. Recent comments by officials suggested inflation is well on track for the BoJ's target and I expect this data to confirm that today. There will also be Japan retail sales at 9.50 AEST which is expected to remain in contraction post the sales tax hike.

The key for Japan at the moment is to monitor if the economy can make a swift recovery from the impact of the sales tax hike. As usual USD/JPY will be the pair to watch after having found support in the 101.50 region. USD/JPY has just been struggling to find traction this week, but this hasn't stopped equities from rallying with the Nikkei continuing to edge higher. We are currently calling the Nikkei flat at the open.

Iron ore plays and China industrial profits in focus

Ahead of the local market open, we are calling the ASX 200 down 0.1% at 5460. There have been a lot of unusual moves this week, most probably as a result of window dressing heading into the end of the financial year.

Yesterday's sharp reversal from the lows was very impressive and could encourage some near-term buying. For FY14 so far the ASX 200 is around 14% higher with a couple of trading days left. The improvement in iron ore prices will remain in focus and could see the pure plays maintain their recovery in the near term. Some investors might focus on comments by FMG Director Meurs who suggested paying debt will take longer following the iron ore price slide although the company remains profitable. China's May industrial profits will also be in focus and could have an impact on how risk trades in Asia today. Judging by the rebound we've seen in most of China's May readings, this number could also impress when it's released at 11.30 AEST.  Meanwhile the CBA advice case will remain in focus and could have an impact on some of the financials.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,461.50

-3

-0.05%

Japan 225 (Nikkei)

15,308.90

1

0.01%

Hong Kong HS 50 cash (Hang Seng)

23,193.70

-4

-0.02%

China H-shares cash

10,327.30

7

0.07%

Singapore Blue Chip cash (MSCI Singapore)

372.05

-1

-0.14%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,846.50

93

0.55%

US 500 (cash) (S&P)

1,955.95

-2

-0.13%

UK FTSE (cash)

6,746.10

-6

-0.09%

German DAX (cash)

9,826.40

-69

-0.70%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (June)

16,823.00

-4.00

-0.02%

S&P Futures (June)

1,949.00

10.00

0.52%

ASX SPI Futures (June)

5,425.00

15.00

0.28%

NKY 225 Futures  (June)

15,333.00

70.00

0.46%

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

$0.9412

0.0010

0.11%

USD/JPY

¥101.700

-0.095

-0.09%

Rio Tinto Plc (London)

£31.02

0.04

0.15%

BHP Billiton Plc (London)

£19.05

0.05

0.26%

BHP Billiton Ltd. ADR (US) (AUD)

$36.46

0.11

0.30%

Gold (spot)

$1,316.95

0.99

0.08%

Aluminium (London)

1898

-1.50

-0.08%

Copper (London)

6947

25.00

0.36%

Nickel (London)

18904

294.00

1.58%

Zinc (London)

2193

10.25

0.47%

Iron Ore (62%Fe)

95.3

1.60

1.71%

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(Photo: Reuters / )
A man is reflected in a window as he walks past the indicator boards at the Australian Stock Exchange in Sydney August 11, 2011.
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