Investor sentiment took a U-turn in overnight trading. European shares rose and oil and base metals lifted simultaneously in a sign of improving global industrial sentiment. However later session selling in the US saw gains erased, creating a nervous environment for Asia Pacific markets today.

Stronger Italian industrial orders helped push continental indices into positive territory. The optimism saw gold prices tumble, aided by a stronger US dollar. However in early signs of fracturing sentiment bonds rallied, sending German ten year Bunds to their lowest yield in two months. This spilled into US bond markets and may have acted as the fear transmission agent for equity markets.

While tech shares were hit again the worst performing sectors in the S&P 500 were Energy and Materials. This could spell bad news for Australian shares and may countermand the modest gain predicted by overnight SPI futures trading. Lower local currencies should add to positive sentiment and the Nikkei may lead given the importance of USD/JPY to daily performance.