As world markets ended up disappointingly with a tepid performance on Friday, analysts expect some negativity spreading, but the good market support for the Australian share markets will hopefully hold it up at today's trading day.

Key Sectors to Watch

The materials sector will likely lead the market lower this morning despite a pretty good session for base metals on the LME. Aluminium was the only decliner, falling a modest 0.3 percent. In London equities trade, Rio Tinto and BHP fell 0.8 percent and 0.9 percent respectively while locally, BHP Billiton's ADR is calling the stock to open 0.8 percent lower at $42.90. Many brokers believe the diversified miner represents very good value below $43, so watch closely for signs of bargain hunting.

Summary of Key Market Data from IG Markets

MarketPrice at 6:30am AESTChange Since Australian Market ClosePercentage Change
AUD/USD1.07050.00400.38 percent
ASX (cash)4544-40-0.86 percent
US DOW (cash)12133-101-0.82 percent
US S&P (cash)1296.7-14-1.09 percent
UK FTSE (cash)5834-35-0.59 percent
German DAX (cash)7102-1-0.02 percent
Japan 225 (cash)9466-36-0.38 percent
Rio Tinto Plc (London)41.08-0.35-0.84 percent
BHP Billiton Plc (London)23.06-0.22-0.92 percent
BHP Billiton Ltd. ADR (US) (AUD)42.90-0.33-0.76 percent
US Light Crude Oil (Jul)100.570.230.23 percent
Gold (spot)1542.09.770.64 percent
Aluminium (London)2639.00-9-0.34 percent
Copper (London)9100.001701.90 percent
Nickel (London)22850.002250.99 percent
Zinc (London)2271.00100.44 percent
RBA Cash Rate to be raised by 25bp (Jun) ( percent)9.000.000.00 percent

Energy stocks are seen hitting a high note as it was the best performing sector in last Friday's trade.

Mr Potter also noted that crude oil futures added 0.2 percent to US$100.43/bbl from Friday's 4.30pm close. However, given the turmoil in Yemen and the threat of contagion across the region, we may see further upside in crude prices as traders see further geopolitical tensions.

"Having said that, our local market is going to open in the middle of a strong support zone, so we would not be surprised to see good buying support emerge shortly after the open," he added.

Currency Trends

Turning to currencies and the USD was sold off across the board on Friday, most notably against the Swedish krona, which gained 1.2 percent. Interestingly, when the weaker-than-expected payrolls report was released, the EUR/USD rallied to 1.4530 before traders changed their mind and sold out of risk positions, with the EUR/USD dropping to 1.4450 and the AUD/USD falling to 1.0594. Traders then did another about turn and looked to buy risk after confirmation that the EU/IMF/ECB will release its next tranche of aid to Greece. This saw the EUR/USD rally through the 1.4569 level (61.8 percent retracement of the May fall) and close above the 1.46 mark.

Traders have started looking beyond the next tranche of aid with Eurogroup chairman Mr Juncker sounding optimistic that the Eurogroup would agree to provide 'additional financing' to Greece over the longer term. It seems there is speculation that a new aid package is already being discussed that would involve private bond holders wearing some of the burden. Traders will also be looking at the upcoming ECB rate statement, where we believe Mr Trichet will signal a July rate hike; therefore being long EUR/GBP and EUR/USD could be a good place to be this week.

In the short term we are looking for more USD weakness this week, with the QE3 argument now being thoroughly debated across trading floors globally. We believe the Federal Reserve are far from providing a fresh package given the Fed currently views the slowdown as temporary, interest rates are near or at yearly lows, the USD is already weak and financial conditions are accommodative.

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