A run of weaker US profit reports over the past 24 hours saw US stock markets provide a soft lead for the Australian market today.  Upward momentum in US markets faced headwinds in the form of misses against expectations from leading stocks like Intel and American Express. However, overall the US profit reporting has so far surprised to the upside.

The European Central Bank’s failure to increase expectations of further stimulus is another minor headwind to upward momentum in stocks today. It’s by no means clear what impact, if any the Brexit decision will have on the level of economic activity in Europe in the short term.  It seems sensible that the ECB should wait for clarity on this before deploying its limited stimulus capability. However, markets seem to have expected more concrete statements of intent from the ECB.

Despite these overnight headwinds, it’s possible that selling on the Australian market will be relatively limited today.  Mounting expectations of further rate cuts in Australia have been one of the key drivers buying on the Australian market this week. This is unlikely to change prior to the next week’s inflation data and sellers will be cautious about acting too hastily. The possibility of more stimulus from the Bank of Japan provides another reason for stock markets to remain relatively well supported at this stage.

Gold stocks like Newcrest may have a better day today. Reduced expectations of imminent stimulus by the ECB may see some short term caution about further extending the recent uptrend in $US and related selling in gold.