Overnight trading action indicates easing market fear. The US dollar strengthened, the VIX “fear and greed” index fell further, copper surged and shares made modest gains. The improving sentiment is underpinned by the defeat of a no confidence motion in the UK government and better than expected US company reports.
The survival of the May government pulls Britain back from a potentially messy leadership vacuum. The next steps involve cross party consultations and the delivery of a Plan B early next week. While the UK is no nearer a plan, a clear process with defined steps saw the Pound edge higher. Share investors were less impressed, and reversed the previous day’s gain in the UK 100 index, making it the only European market to record a loss.
Nine of thirteen top SPX 500 companies reported better than expected earnings. Bank of America featured, smashing consensus by 12%. Its shares rocketed 7% higher and the financial sector led the market higher with a 2.2% lift. Banks may feature in Asia Pacific trading today.
There is now a significant data backlog in the US caused by the government shutdown. Increasing uncertainty about the state of the US economy makes the overnight gains more impressive. The sentiment flowed into futures markets, and all Asia Pacific markets are looking at opening gains. Lower local currencies could help. The hot topic in Australian remains house prices and today’s home lending data may shape the session.