Global Markets Overview – July 9, 2014

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By Evan Lucas, IG Markets Strategist | July 9, 2014 9:30 AM EST

The tantalising position

Pedestrians look at an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo June 25, 2014. Asian shares were on the back foot early on Wednesday, taking their cue from Wall Street as the deepening crisis in Iraq and a report that the U.S. could be loosening restrictions on crude exports triggered a rally in oil prices. REUTERS/Yuya Shino (JAPAN - Tags: BUSINESS)
Pedestrians look at an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo June 25, 2014. Asian shares were on the back foot early on Wednesday, taking their cue from Wall Street as the deepening crisis in Iraq and a report that the U.S. could be loosening restrictions on crude exports triggered a rally in oil prices. REUTERS/Yuya Shino (JAPAN - Tags: BUSINESS)

However the old adage that 'the market can be irrationally wrong longer than you can be solvent' is certainly one line to remember here as these predictions have been talked about now for over six months.

What is interesting about drawing a fundamentals conclusion ahead of earnings season, particularly when price and multiples are not in line is the narrowing that occurs on earning releases.

On current analyst estimates are some double-digit earnings. That would see the multiple expansions being justified and another reason for the market to grind higher.

I am certainly nervous about the fact that volumes are low, volatility is low by historical standards (however has jumped up 16% in the last week) and the hot money is slowing. However it is yet to take flight and having seen Alcoa record better-than-expected EPS and NPAT numbers overnight, the analysts' prediction look to be on the money.

This puts the next four months of market trading in a tantalising position. Will we see markets grind higher due to the US seeing bottom up support for the 'self-sustaining economy' data and comments of the past six months?

Will the end of the asset purchase program prompt further questions about lofty price premiums? And will that trigger the sell-off most are predicting?

Europe may already be starting to show signs of strain with three consecutive trading sessions in the red. However again the future estimates for earnings are quite positive for Europe and will that allow the market to shrug off the concern?

What is clear is that the calmness in the volume of trading and the nervousness around direction will continue to make trade difficult, however the trend is your friend and therefore with the uptrend still in place the grind looks still to be on.

Ahead of the Australian Open

The moves in the Europe and the US are finally pulling on the market. I am currently calling the Australian market down, by 24 points to 5487 on the 10:00am (AEST) bell off 0.4%.

Iron ore bounced back overnight to $96.50 and with China's CPI due this morning further signs of growth may help the red ore higher however stockpiling is heading back to oversupply levels and Chinese steel mills are now running much leaner ships than 12 months again as fiscal regulation hits home.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,487.20

-24

-0.43%

Japan 225 (Nikkei)

15,246.50

-68

-0.44%

Hong Kong HS 50 cash (Hang Seng)

23,472.50

-69

-0.29%

China H-shares cash

10,456.60

-41

-0.39%

Singapore Blue Chip cash (MSCI Singapore)

373.10

-1

-0.13%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,931.10

-125

-0.74%

US 500 (cash) (S&P)

1,966.66

-17

-0.85%

UK FTSE (cash)

6,737.90

-75

-1.10%

German DAX (cash)

9,796.20

-91

-0.92%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (September)

16,857.00

-118.50

-0.70%

S&P Futures (September)

1,960.38

-15.75

-0.80%

ASX SPI Futures (September)

5,447.00

-39.50

-0.72%

NKY 225 Futures  (September)

15,272.50

-205.00

-1.32%

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

$0.9404

0.0042

0.47%

USD/JPY

¥101.540

-0.505

-0.49%

Rio Tinto Plc (London)

£32.65

-0.33

-0.99%

BHP Billiton Plc (London)

£19.73

-0.27

-1.35%

BHP Billiton Ltd. ADR (US) (AUD)

$37.39

-0.18

-0.47%

Gold (spot)

$1,318.85

-2.06

-0.16%

Aluminium (London)

1937

7.00

0.36%

Copper (London)

7140.75

-32.25

-0.45%

Nickel (London)

19726

-94.00

-0.47%

Zinc (London)

2276

33.00

1.47%

Iron Ore (62%Fe)

96.5

0.60

0.63%

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(Photo: / )
Pedestrians look at an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo June 25, 2014. Asian shares were on the back foot early on Wednesday, taking their cue from Wall Street as the deepening crisis in Iraq and a report that the U.S. could be loosening restrictions on crude exports triggered a rally in oil prices. REUTERS/Yuya Shino (JAPAN - Tags: BUSINESS)
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