US markets closed flat after early weakness, with investors buoyed as concerns eased over euro-zone sovereign debt contagion issues and by initial US corporate earnings showing improvement. European markets recovered overnight, as investors were encouraged by the European Central Bank (ECB) stepping in to buy euro-area government bonds for the second consecutive day, and by Japan joining with China in committing to buy euro-debt. Asian equity markets were mixed yesterday, with Chinese economic data causing investor concern about inflation and impending interest rate hikes.
The SPI Futures is above its key weekly pivot level of 4700, and closed up marginally 0.2% (or 10 pts) at 4,713. The key levels for our index today are 4740 and 4680. M&A activity continues to drive specific stocks. The ASX is set trade higher, as we had generally mixed leads from overseas markets. Look for recovery in the energy and mining stocks. In economic news today there is November Housing Finance Approvals Report and the DEEWR Monthly Leading Indicator of Employment for January.
US Markets
US markets closed flat after early weakness. US corporate earnings showed improvement, and easing concerns over euro-zone sovereign debt contagion helped investor sentiment. The earnings season began this week with Alcoa reporting its 4Q earnings beating forecasts and its highest profit in 9 quarters. The aluminium maker said it expects demand for its products to jump 12 percent in 2011, citing improving auto sales. Elsewhere two major retailers raised their earnings forecasts, with Sears Holdings Corp saying they expect earnings to be twice as much as analysts forecast and Tiffany’s said better-than-expected holiday sales would push its earnings higher this year. Bellwethers such as JP Morgan and Intel are also due to report this week. Gains were spread across the market, with the Telecom sector (down -1.6%) the only member of the 10 industry groups that make up the S&P 500 index to fall. Other sector performances included rises in Energy up 1.7%, Materials up 0.8%, Healthcare up 0.5% and Financials up 0.4%.
The Dow closed up 0.3% (or 34 points) at 11,672, while in the broader market the S&P 500 index was up 0.4% (or 5 points) at 1,274 and the tech-heavy Nasdaq ended up 0.3% (or 9 points) at 2,717.
European Markets
European markets rose strongly overnight. Investors were encouraged as the European Central Bank (ECB) stepped in to buy euro-area government bonds for the second consecutive day. Traders were also comforted after Japan said it would buy bonds from a euro-zone rescue fund to help finance an Irish bailout, following similar commitments from China amid fears of a spreading crisis, however concerns lingered over debt-laden Portugal. China had already expressed its readiness to assist the European PIIGS economies seen as most exposed to a European debt contagion crisis, pledging to buy bonds directly from Spain, Greece and Portugal. Stocks across Europe rose, however investors remain cautious over the possibility of the need for a bailout of Portugal, for which borrowing rates remain close to record levels, though Portugal is adamant that it does not expect to seek external help. In London the market rose for the first session in four as the banks recovered from their recent sell-off. In Germany the market rose for the first session in three.
The FTSE 100 index closed up 1.0% (or 58 points) at 6,014, the German DAX closed up 1.2% (or 85 points) at 6,942, while in France the CAC was up 1.6% (or 60 points) at 3,882.
Asian Markets
Asian markets were mixed yesterday. Traders were cautious amid growing fears of the euro-zone debt contagon crisis resurfacing, but markets managed to recover from their early sell-offs. The Chinese market rose as the central bank reported M2, the broadest measure of money supply, rose to 19.7 percent in December, the fastest pace since May. Chinese foreign exchange reserves also climbed to a record last quarter, and lending exceeded the government’s annual target, which will increase pressure on the central bank to tighten policies to rein in liquidity and inflation.
In China the SSE Composite closed up 0.4% (or 12 points) at 2,804, while in Hong Kong the Hang Seng Index was up 1.0% (or 233 points) at 23,760 and in Japan the Nikkei 225 Index was down marginally -0.1% at 10,511.
Commodities
Gold remained below $US1,400 an ounce, while crude oil rose and copper fell. The Dollar Index was down marginally -0.1% at 80.83 on the higher Euro, while the Australian Dollar last traded lower at 98.67. Commodities were generally higher.
Benchmark crude NYMEX for December delivery was up 2.2% (or $US1.97) to settle at $US91.22. Copper prices backed off around 2-year highs, and copper for December delivery was up 2.1% (or 9.1 cents) at $US4.3450. Gold prices were off all-time highs again, with December gold up 0.8% at $US1,380.70.
ASX – to open higher
US & UK/Europe – Mixed
ANZ down 0.4% & NAB down 0.2%
NEM up 0.8%, JHX up 0.4%, NWS down 1.2%
Head of Research
