Morning Thoughts And Opening Prices: October 30, 2012

Equities drifted lower in the European session with US markets closed due to hurricane Sandy. Apart from US markets being closed and likely to be closed for a second day, there were no major new developments. Greece remained in focus as the Troika review nears an end. Latest reports suggest leaders are disagreeing with Troika on some labour reforms.

Risk currencies gave up some ground but still remain in fairly tight ranges with EUR/USD hanging around 1.29, while AUD/USD is at around 1.033. The lack of developments on the Spain and Greece end is likely to suppress the euro in the near term.

Ahead of the open, we are calling the Aussie market up 0.1% at 4480. On the local economic front we have new home sales data due out, but this is a low impact event. We also have RBA Governor Lowe speaking later and this might give some hints on the RBA’s stance or planned action on the strength of the Aussie dollar. Elsewhere in the region, Japan will be the main point of focus with plenty of economic releases set to hit the wires.

The headline will be the BoJ’s decision on the asset purchase programme. The market has already priced in an increase of ¥10 trillion to the size of the asset purchase programme. We have seen USD/JPY trade flat at 79.80 heading into today’s session. Should the BoJ decide to go over the expected ¥10 trillion then we will likely see the pair bid higher.

On a stock level, we expect to see subdued trading in the cyclical space. Commodities were mostly weaker and this is likely to weigh on some of the resource names. There are some September quarter output reports to look out for from Beach Energy and Aquarius Platinum. The main news of the day is Singapore Airlines’ decision to buy a 10% stake in Virgin Australia. With Qantas tying up with Emirates, Singapore Airlines is probably trying to get exposure to the domestic market. Meanwhile, Virgin Australia has also agreed to acquire a 60% stake in Tiger Australia for $35 million.