Asia Pacific investors are looking at extending yesterday’s gains after solid rallies in international share markets overnight. Assurances from the European Central Bank that it will “do its part” sent both stocks and bonds higher. The exuberance carried into USD trading, although industrial commodity markets and US bond traders declined to join the party.
The continuing support of central banks is a key factor in elevated asset prices. Bond markets indicate a high degree of doubt that monetary support will be maintained in a higher growth / inflationary environment. The ECB’s assurances had a positive effect on trading, despite no commentary on the outlook, or what factors could change their stance.
Australian traders are looking at a localised version of this dynamic today. The Reserve Bank of Australia is very unlikely to move interest rate settings today, but there is heightened speculation that it will extend its bond purchase program. Currently at $200 billion in bonds, the doubling of daily purchases yesterday has led some analyst to believe the RBA could increase the program to $400 million. The result of the meeting is released at 2.30 pm east coast time.
The focus on central bank actions is intensified by a laundry list of data release over the week. In the next 24 hours. Japan releases jobs and national accounts data, the UK unveils house price indices and Germany reports on retail sales. Stronger ISM data in the US overnight appeared to fuel investor enthusiasm
The divergent performance of two haven markets overnight illustrates the conflicting currents running through markets. Cryptocurrencies were strongly supported despite a stronger US dollar, and CMC’s All Crypto Index rose more than 4%. However gold prices tumbled through key support, and remain under pressure this morning.