Global markets collectively flicked the sentiment switch in overnight trading. Central bankers have shifted market thinking with apparently co-ordinated commentary suggesting higher interest rates sooner on the back of strengthening economies. The result is a surge in shares and industrial commodities, and pressure on safe havens such as bonds and the USD.
The Australia 200 index outperformed the Asia Pacific region yesterday, and the twin support of rising stocks and key commodities could bring more of the same today. Oil rose on evidence of increasing US demand and lower production. This helped buoy copper and iron ore, generating a clear market signal of an improving industrial outlook.
Futures are pointing to opening gains in Hong Kong and Tokyo of around a third of a percent. In contrast, Australian futures are up more than two-thirds of a percent. However currency markets are throwing sand in the gears. A weakening USD is pushing the Chinese Yuan and Japanese Yen higher after recent lulls. The AUD is at three month highs and threatening long term resistance levels above 77 US cents. This currency strength may curtail international investor enthusiasm for Asia Pacific shares.