US stocks rebounded as risks of a wider banking crisis receded in Europe, while earnings continue to beat estimates in the US amid a light calendar. Portugal’s troubled lender Banco Espirito received a lifeline after the central bank offered a €4.9bn bailout package, putting woes of a wider contagion to rest. Whether this is the end of the episode or just an intermission remains to be seen. One thing is for sure, the central bank now has a less of a buffer to work with if other Portuguese banks require support.

Berkshire Hathaway, Disney and AIG

In corporate earnings, shares at Warren Buffet’s Berkshire Hathaway jumped more than 3% after earnings rose 10%, as the suite of companies under its control saw better operating profits with the rebound in the economy. Walt Disney reports after the bell today, after gaining some 2.2% today as its latest movie franchise ‘Guardians of the Galaxy’ hit a home run at the theatres. Michael Kors fell close to 6% despite posting stellar earnings, which outdid expectations. Margins are set to fall with a budding expansion in Europe. In after-hours trading AIG reported earnings which rose more than 10% from a year ago and announced a $2bn share buyback programme. Overall, the S&P500 pared back from its steepest weekly losses in two years, gaining some 0.7% overnight while the Dow added 0.5% to trade nearly in the black year to date.

Currencies

In the currency markets, the dollar hardly changed against the yen and the euro due to the absence of data in these markets, but lost against sterling and the Aussie dollar. The pound rallied for the first time in 14 sessions against the dollar following the release of a better-than-expected construction PMI report, which coincided with a key support level on cable. Services PMI data is due for release today and, judging from the recent slate of disappointing data releases out of the UK, there is potential for a disappointing read. However, considering how deeply sold cable has been over the past two weeks, the 1.682 levels should play a key support in the interim. The Aussie dollar will come into focus this morning as the RBA makes known a key monetary policy meeting decision. The RBA’s hands are tied when it comes to adjusting interest rates, as it juggles between controlling an increase in inflation and bolstering exports on declining mining investments. While we do not expect any changes to interest rates, how the unit trades will largely depend on the language in the RBA statement. A more neutral tone will likely cause a relief rally in the unit as the currency holds above a key support at the 0.93 levels. Other releases to look out for include the trade balance data out of Australia and the HSBC services PMI report out of China.

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