A further surge in European and US stock markets is pointing to a strong start in Asia Pacific trading today. The strengthening US dollar could underpin local optimism and resurgent energy markets indicate a continuation of pro-growth market activity. Investors have a positive picture of corporate health as the US and Australian reporting seasons draw to a close. However the release of key data around the globe this week may constrain activity.
Bond market activity highlights a “goldilocks” moment for investors. US ten year bonds pulled back from a yield break out level on Friday night. The modest contrapuntal rally echoed through other bond markets. Broad economic growth and corporate earnings growth are driving expectations higher as fears of higher interest rates stabilise. This sweet spot for investment could see Asia Pacific markets outperform futures markets indications of one third to a half percent gain for major indices.
The week ahead contains important reads. PMIs in China and the US are forecast to give leads to higher future growth. Inflation numbers for prominent European economies could also shape market thinking. On Wednesday night the Fed’s preferred inflation indicator; the PCE has potential to disrupt the positive outlook if the annual core rate exceeds the forecast 1.5%.