Cautious Optimism to Continue

Further gains for Asia Pacific shares are likely today as overnight markets continued their rise on European optimism, despite concerns raised by US stocks reporting weaker than expected revenues and earnings. Additionally, a stronger USD is casting a shadow, and resulting weakness in commodity prices may curtail any lift in share markets.

Of particular concern to Australian investors is the hammering of the gold price to five year lows. A stronger USD takes some of the blame, but market talk of a significant sell order at yesterday’s Asian open is also weighing on sentiment. Lower oil and copper prices are pointing to more bearish industrial sentiment, and the generally weaker commodity outlook may cause local underperformance today despite futures market indications of a modest jump at the open.

RBA minutes released today are unlikely to change perceptions of a data and US Fed dependent stance. Tomorrow’s release of CPI data could be the spark. Today, traders turn to Tokyo, where the CI leading index and Tokyo retail sales could fuel further volatility in the Nikkei index.