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IG Markets - Afternoon thoughts

Fuseworks Media
Fuseworks Media

Across Asia, regional markets are all higher after sentiment was boosted overnight by a series of strong earnings and economic reports. Japanese technology names were performing well, boosted by the strong results from Intel and Yahoo!. The Nikkei 225 is the best performer, up 1.9% while the Kospi and Hang Seng are 1.9% and 0.9% firmer respectively. In China, the Shanghai Composite is 0.3% higher.

In Australia, the ASX 200 is currently 1.3% firmer at 4857 and trading right near its highs of the session. Yesterday we may well have seen an overreaction to S&P putting the US's AAA credit rating on negative watch with investors today happy to step in and buy those names that may have been unnecessarily oversold. Gains for the day are broad based but are being led by the materials and financial sectors with the former being assisted by an overnight rise in commodity prices. Elsewhere, the energy, industrial and consumer sectors are all enjoying modest advances.

What a difference 24 hours can make! A couple of better-than-expected earnings reports from the likes of Goldman Sachs and Intel, coupled with bullish housing reports saw yesterday's macro concerns replaced by optimism as traders bought yesterday's weakness. Sentiment is very fickle at the moment and is likely to chop around on daily news flow until a trend can be established.

Whilst notoriously volatile, the housing numbers boosted confidence that the economic recovery is continuing. The housing market has lagged the rest of the economy in terms of recovery, so any positive news is usually accompanied by a pickup in sentiment.

Precious metals names have seen a lot of buying interest as gold pushed to another all-time high. It broke through the US$1500/oz level in afternoon trade, boosted by a weakening US dollar. Silver didn't miss a beat either, hitting fresh 31-year highs of US$44.34/oz.

Currency Markets

The AUD surged to fresh post-float highs as demand for 'risk' was boosted by the strong corporate and economic results overnight. The AUDUSD broke through previous highs at 1.0582 and pushed as high as 1.0596 as buying in the AUDJPY peaked; however, it wasn't enough to push it through the well protected 1.06 figure.

Elsewhere, the EURUSD has seen solid buying interest throughout the session, with demand supported by buying in the EURJPY and EURGBP. Momentum was boosted by a few stops being triggered as bears threw in the towel, seemingly frustrated the EUR could continue to rise despite the enormous debt sovereign concerns.

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