Global Markets Overview – July 22, 2014

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By Evan Lucas, IG Markets Strategist | July 22, 2014 9:36 AM EST

Traders work on the floor of the New York Stock Exchange July 17, 2014. U.S. stocks fell sharply lower on Thursday, with the S&P 500 posting its biggest one-day percentage drop since April 10 on news that a Malaysian Airlines passenger jet crashed near the Ukraine-Russia border. The Dow Jones industrial average fell 161.39 points or 0.94 percent, to end at 16,976.81. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS DISASTER TRANSPORT)
Traders work on the floor of the New York Stock Exchange July 17, 2014. U.S. stocks fell sharply lower on Thursday, with the S&P 500 posting its biggest one-day percentage drop since April 10 on news that a Malaysian Airlines passenger jet crashed near the Ukraine-Russia border. The Dow Jones industrial average fell 161.39 points or 0.94 percent, to end at 16,976.81. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS DISASTER TRANSPORT)

Politics hits market confidence

Global macro concerns outweighed further bottom-up strength from US earnings overnight, as the Gaza-Israel conflict raged on and the squeeze on Russia politically saw its index take a further pounding.

The Russian market has now logged its sixth consecutive contraction and is suffering particularly from traders and investors dumping exchange traded funds with Russian exposure. The likely outcome from the Ukrainian crisis is that the politicians will act to pressure Russia to de-escalate the situation through economic sanctions, on current movements. The market is pre-empting these expectations making the current situation all the more painful for investors in Russia, with funds draining from the region.

This trading pattern is unlikely to slow over the coming weeks as the push-pull factors from the political negotiations add uncertainly to trading and the Russian ruble; bonds and equities are unlikely to find support in the interim and are likely to contract even further.

Moving back to Asia, politics will also dominate this region with Indonesia expected to announce its election results today. There is growing unrest in the country as both candidates have been unwilling to concede defeat, and considering the passion Indonesian has for politics, outgoing president Yudhoyono has had to put additional police forces on standby if the situation escalates and slips into the streets.

The unofficial poll has Jakarta Governor Joko Widodo (also known as Jokowi) ahead after securing 52.9% of vote; his appointment will be a milestone for the nation as he would be the first President without links to the Suharto era.

The JSE Composite and the rupiah were bid up in yesterday's trade on speculation that the results will fall Jokowi's way. The market is hoping for a smooth transition as is outgoing President Yudhoyono, who will look to instil calm if needed. However, considering Indonesia is currently experiencing its slowest growth rate since 2009, any tensions that spill over could see further weakening and may unwind the last 16 years of growth in the country.

Ahead of the Australian open

The AUD will be glued to every word from Glenn Stevens today as he addresses the Anika Foundation in Sydney at 1:00pm AEST. Compounding the intrigue is that the name of the speech has not been released. Keep this in mind considering his previous address in Hobart to the Economic Society of Australasia caught the markets unaware when he suggested the RBA is ready to act if the AUD remains elevated; that it is watching the non-mining space; and the fact it continues to lag expectations while also expressing concern around wage growth.

This jawboning that isn't 'jawboning' (according to Governor Stevens) is what the market will be watching for; further signs the RBA Governor is moving back to its easing stance will lead to similar AUD weakness seen on July 3.  

We are currently calling the ASX 200 up a solitary point to 5541; however yesterday reiterated the strength of the resistance level on the ASX. Although the local market had a six-year closing high, the extremely light volumes meant price action was indirect. We see the bearish signal developing at 5540 to 5545 as a zone the bears will defend with vigour, and considering the tone of trade overnight the market is likely to see red screen trading.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,540.80

2

0.03%

Japan 225 (Nikkei)

15,264.60

50

0.33%

Hong Kong HS 50 cash (Hang Seng)

23,390.90

4

0.02%

China H-shares cash

10,361.90

7

0.07%

Singapore Blue Chip cash (MSCI Singapore)

377.72

0

0.09%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

17,043.50

-36

-0.21%

US 500 (cash) (S&P)

1,971.58

-5

-0.24%

UK FTSE (cash)

6,736.70

-17

-0.26%

German DAX (cash)

9,625.70

-97

-1.00%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (September)

16,977.50

-37.00

-0.22%

S&P Futures (September)

1,965.38

-5.00

-0.25%

ASX SPI Futures (September)

5,496.00

-0.50

-0.01%

NKY 225 Futures  (September)

15,285.00

-52.50

-0.34%

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

$0.9373

-0.0015

-0.17%

USD/JPY

¥101.410

0.165

0.16%

Rio Tinto Plc (London)

£32.95

0.00

0.00%

BHP Billiton Plc (London)

£20.13

0.02

0.07%

BHP Billiton Ltd. ADR (US) (AUD)

$38.45

0.23

0.60%

Gold (spot)

$1,312.30

1.89

0.14%

Aluminium (London)

2020.5

39.50

1.99%

Copper (London)

7029

35.50

0.51%

Nickel (London)

18872

209.00

1.12%

Zinc (London)

2344

50.00

2.18%

Iron Ore (62%Fe)

96

-0.60

-0.62%

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Traders work on the floor of the New York Stock Exchange July 17, 2014. U.S. stocks fell sharply lower on Thursday, with the S
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