Overnight market action suggests investor confidence is growing. The European Central Bank’s chief economist said withdrawal of accommodation was a live issue at next week’s meeting. The Euro surged and European bonds sold off. However stocks on the continent and in the US rose, and copper continued its recent rally, indicating belief that the economic drivers of higher interest rates were sufficiently strong to sustain asset prices.
The stronger sentiment lifted Asia Pacific futures markets in overnight trading, pointing to opening gains across the region of around 0.5%. The US dollar gained against the Japanese yen despite the stronger Euro, potentially providing currency support to regional markets.
Activity indicators released over the last week show expansion in almost every global region. Industrial metals again traded higher overnight. Copper is knocking on a five year ceiling. West Texas intermediate crude oil dropped on a surprise increase in weekly inventories, but the more positive industrial outlook meant Brent crude held its ground.
Japanese investment data this morning could speak to the temporary investor rush to safe havens last week, although the afternoon release of the Leading Index is more likely to affect market thinking in the current context. In Australia the mid-session trade balance read takes on additional significance given the positive surprise on exports that drove yesterday’s surprisingly strong GDP growth.