Asia Pacific investors face a challenging trading day. Will they follow European investors and respond to rising infection rates and heightened Sino-US tension, or will they focus on hopes for a vaccine and a US stimulus package, as did American markets?

Forex traders seemed to focus on the latter. The US dollar fell further, and growth-exposed, higher-beta currencies fared best. The Australian dollar hit a 2020 high overnight, and is threatening to break through key resistance at 72 US cents. A break of this level could see a stronger uptrend emerge. Most regional currency charts are also pointing higher. Potential for forex gains could bring international support to regional stock markets.

Overnight the US State Department confirmed it told China to close its Houston consulate, and ramped up rhetoric around cybersecurity concerns. These factors helped push gold to a fresh 11-year high above US $1,872, threatening to test the all-time high at $1,921. In a sign that markets are less data sensitive than usual, crude oil markets rose, defying a surprise 4.9 million barrel build in inventories over the week.

As of this morning, 17% of S&P500 company reports are in. Earnings for the quarter are down 17% compared to the previous quarter, and sales 6% lower. However this is 15% and 3.5% ahead of forecasts respectively. Adjusted, the S&P500 Price to Earnings ratio is now 25.8 times, the highest since 2000. The all-time P/E high was 26.9 times, set in the last quarter of 1998. Aftermarket reports saw both Microsoft and Tesla deliver better than forecast quarterly earnings.

In Australian corporate news, both Cooper Energy and Santos delivered better than expected production reports. However Syrah Resources warned on the outlook for the graphite market, and Coca Cola will take a write down of around $175 million in its half year result. Tabcorp appointed Steven Gregg as chairman, and charged him with responsibility for the search for a new CEO.

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