Global Markets Overview – September 1, 2014

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By Stan Shamu, IG Markets Strategist | September 1, 2014 9:33 AM EST

Global markets are in for a big week on the central bank front, with the RBA, BoE, BoJ, BoC and ECB all set to meet. In the background will be the threat of Russia/Ukraine tension derailing the recovery. EU leaders are likely to impose further sanctions on Russia this week if no resolution is reached. As a result, while investors will be optimistic about potential central bank action, particularly from the ECB, there is likely to be a degree of caution exercised.

All signs continue to point to a weaker European economy and I get the sense this week's meeting will at least have to give a strong indication of imminent stimulus to keep momentum going in European equities.

Some analysts, including JP Morgan, Nomura, RBS and BNP Paribas, are actually calling for action at this week's meeting. Deutsche Bank went as far as saying it believes Mario Draghi will announce a private QE programme composed of ABS purchases.

Meanwhile, the euro remains the funding currency of choice, with EUR/USD dropping to September 2013 lows and looking set to test 1.3100 in the near term. It's all about Europe this week and any activity on that front is likely to drive global sentiment.

AUD facing some tests

AUD/USD opened a touch weaker this morning but remains resilient, with an uptrend support line in place as it holds on to the 0.9300 handle. The regional calendar kicks off on a busy note with quarterly company operating profits for Australia due out at 11.30 AEST.

The market is expecting a 1.8% contraction - a big drop from the previous +3.1% reading. We also have China's official manufacturing PMI due out at 11.00 AEST with estimate at 51.2. The HSBC final manufacturing PMI reading is due out at 11.45 AEST, which is expected to remain flat at 50.3.

All these readings have the potential to cause some AUD volatility today. Tomorrow we have the RBA meeting, where no change is expected. But Glenn Stevens speaks in Adelaide on Wednesday and you can never write off the potential for market-moving comments. Keep in mind we also have Q2 GDP on Wednesday that some analysts feel will disappoint after recent construction and trade data.

Earnings season behind us

Ahead of the open, we're calling the ASX 200 up four points to 5633. As earnings season has finished, focus will shift to reactions to the season and any analyst changes to ratings. Iron ore names might see a bounce today after a minor recovery in iron ore prices.

However, there will still be a lot of nervous trading around these materials plays, with investors likely to be looking to sell into strength. Until we see a sustainable recovery in iron ore then the fragile price action is likely to continue.

China's PMI numbers today could also be a catalyst to the price action through Asian trade. There isn't much on the company news front but a couple of reports from Medusa Mining and Yellow Brick Road might deserve some attention.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,632.70

7

0.12%

Japan 225 (Nikkei)

15,452.50

3

0.02%

Hong Kong HS 50 cash (Hang Seng)

24,692.30

-49

-0.20%

China H-shares cash

10,938.10

-25

-0.23%

Singapore Blue Chip cash (MSCI Singapore)

377.30

-0

-0.09%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

17,089.50

-15

-0.09%

US 500 (cash) (S&P)

2,001.65

2

0.08%

UK FTSE (cash)

6,816.90

7

0.10%

German DAX (cash)

9,466.50

-16

-0.16%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (September)

17,081.50

-11.00

-0.06%

S&P Futures (September)

1,999.88

1.75

0.09%

ASX SPI Futures (September)

5,615.00

6.50

0.12%

NKY 225 Futures  (September)

15,457.50

30.00

0.19%

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

$0.9332

-0.0022

-0.24%

USD/JPY

¥104.140

0.330

0.32%

Rio Tinto Plc (London)

£32.68

0.59

1.83%

BHP Billiton Plc (London)

£19.41

0.50

2.62%

BHP Billiton Ltd. ADR (US) (AUD)

$36.77

0.10

0.28%

Gold (spot)

$1,286.35

-2.55

-0.20%

Brent Crude (October)

$103.02

0.26

0.25%

Iron Ore (62%Fe)

87.9

0.60

0.69%

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(Photo: REUTERS / Alexei Druzhinin)
Russia's President Vladimir Putin chairs a meeting at the Novo-Ogaryovo state residence outside Moscow July 17, 2014.
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