Strong earnings reports out in the US helped to propel equity markets to fresh highs overnight. Technology stocks led the way with the Nasdaq finishing the day up 1.32%, the other major US indices also had strong days with the S&P closing 0.88% up and the Dow 0.55% in the black. The dollar gained well across the majors with the Dxy punching up to make a new yearly high at 97.77 before dropping back slightly into the Asian open. Oil continued to drive higher again as Saudi Arabia remained cautious on increasing production in light of the US’s decision to end Iranian oil sanction waivers, WTI now above $66/b and Brent trading at $74.5/b and Gold dropped lower again in the ‘risk on’ atmosphere.
It’s been a good start to what could be a pivotal week for financial markets with positive earnings reports from a number of US firms including Twitter, Texas Instruments, Coca Cola and Hasbro. Investor optimism is rising now after subdued volatility over the last few weeks and that has been reflected in another push higher for equity markets. If the trend continues through the week with some even bigger names due to report, especially in the US, then we could see indices break through into new territory.
Australian CPI data is due for release this morning and this release could have even more impact than normal given comments from the RBA in their recent monetary policy meeting minutes where they indicated that a cut could be pending if inflation remains low and employment buoyant. Expectation is for 0.2% QoQ and 1.5% YoY prints and anything south of this could bring forward expectations of that cut as well as sending the Aussie dollar tumbling.
Looking at the rest of the days trading and the Aussie CPI release will be the main focus in the Asian session as well as the follow through from the strong US session. German IFO and UK Public Sector Net Borrowing data are due for release in the London time zone but the main focus through the later sessions will be the earning reports and the BOC meeting. Expectations are for the Bank of Canada to remain on hold at 1.75% however given recent fluctuations in data and global markets, especially Oil, investors will be looking very closely at all comments for any change of stance.