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The ghost of European crises past

Market sentiment stabilised overnight. While the rise of the US dollar against the Euro indicates lingering concerns, a sell-off in bond markets and a rally in US shares could see positive momentum in Asia Pacific trading today.

Despite the best efforts of alarmists, investors appear to have regained their risk appetites. After a soft European session US stocks lifted. The problem for those resurrecting the ghost of European crises past is the numbers simply don’t add up. European bank exposures of 150 billion Euros are insignificant in the continental context. The increasingly wild theories around contagion to South America or India, or that Turkey’s NATO status means it assumes political importance above and beyond the numbers, are understandably having less impact on market action.

The rising US dollar continues to weigh on commodity prices, and copper, oil and gold remain under pressure. However for producers outside the US there are currency offsets. The Australian and New Zealand dollars are at two year lows against the US dollar.

The release of Australian wages data this morning could drive market action. Wages growth is the missing ingredient in the inflation pie. Any deviation from the forecast 2.1% annual growth rate will raise speculation around interest rates. Company reports this morning are mixed. Fairfax swung to a loss on further write downs, CSL and Woodside Petroleum came in just above estimates.

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