Global Markets Overview – July 10, 2014

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By EvanLucas, IG Markets Strategist | July 10, 2014 9:37 AM EST

The FOMC in the driving seat again

The FOMC minutes have provided further reason for the market to grind higher.

There was nothing that really broke with the current policy settings, however the discussions from the minutes had some very interesting revelations, with the most interesting of those coming from the 'exit strategy' of the asset purchase program .

The minutes revealed that is it likely to exit with the final month with a final US$15 billion this therefore locks in October as the end of the program barring extenuating circumstances (on current territories and economic projections this is unlikely).

The other part of the report that was influential is the first real sign the board is actively discussing the handling of the fed funds rate. No indications as to when this will be, however the minutes revealed that the bank will use overnight repos and interest rates to create a ceiling and floor around its target interest rate. Considering there has been talk of a possible run-on on the first tweak higher, this is probably expected,but the minutes went further than just proposing this mechanism - it gave a spread range of 20 basis points.

Some also expressed a want to see employment stabilise well below the Fed target to offset the lack of responsiveness in inflation.

All this has been taken as slightly dovish and the market reacted accordingly, with all US bourses adding points as earnings season approaches. On the reaction to the Alcoa report we could see good upside; having rallied 5.9%.    

Ahead of the Australian Open

There are two majors on the radar today in the China trade balance and the unemployment data. Consensus estimates have the unemployment rate ticking higher to 5.9% however I don't see this happening, but rather see it holding flat. The trade balance looks be key to today's trade and the size of the surplus. The China rebound is tied to its stimulus measures, and having seen more efforts to push it further this week, a bounce for China is key to the region.

We are currently calling the Australian market up on open, by 13 points to 5465; set to recover some of the losses from yesterday.

Iron ore has continued to edge higher overnight to $96.60 and will be influenced further by the news from China at 12.00pm AEST.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,465.20

13

0.23%

Japan 225 (Nikkei)

15,361.50

59

0.38%

Hong Kong HS 50 cash (Hang Seng)

23,261.00

85

0.37%

China H-shares cash

10,388.00

47

0.45%

Singapore Blue Chip cash (MSCI Singapore)

373.00

1

0.14%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,985.00

52

0.31%

US 500 (cash) (S&P)

1,973.38

6

0.30%

UK FTSE (cash)

6,731.50

-7

-0.10%

German DAX (cash)

9,825.90

34

0.35%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (September)

16,911.50

52.50

0.31%

S&P Futures (September)

1,967.13

6.00

0.31%

ASX SPI Futures (September)

5,424.00

10.00

0.18%

NKY 225 Futures  (September)

15,387.50

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

$0.9414

0.0011

0.12%

USD/JPY

¥101.615

-0.010

-0.01%

Rio Tinto Plc (London)

£32.72

0.14

0.42%

BHP Billiton Plc (London)

£19.73

-0.02

-0.13%

BHP Billiton Ltd. ADR (US) (AUD)

$37.44

0.19

0.51%

Gold (spot)

$1,327.55

2.55

0.19%

Aluminium (London)

1931.75

-5.25

-0.27%

Copper (London)

7117

-23.75

-0.33%

Nickel (London)

19400

-326.00

-1.65%

Zinc (London)

2270

-6.00

-0.26%

Iron Ore (62%Fe)

96.6

0.10

0.10%

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(Photo: / )
U.S. Federal Reserve Chair Janet Yellen holds a news conference following two-day Federal Open Market Committee meeting at the Federal Reserve in Washington June 18, 2014. REUTERS/Jonathan Ernst
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