Central banks, deals, spur markets

Central bank support, adjustment to the US tightening timetable and mergers and acquisitions drove strong gains for shares overnight. A weaker USD provided relief after four weeks of strong gains, and Asia Pacific futures markets are pointing to gains of around one percent at openings across the region.

Weaker US industrial and manufacturing data sparked strong rallies in shares as investors and traders speculated interest rate rises may be pushed back. Takeover deals in pharmaceuticals and health stocks helped drive the rallies that followed strong gains for European shares. Despite the release of FOMC minutes later this week, US investors abandoned recent caution and re-entered the market with enthusiasm.

Locally, the release of RBA minutes is a likely determining factor for both the share market and AUD today. Investors will look for an explanation of the decision to keep rates on hold in February, and any clues to the timing of future moves. The consensus is for another cut in April or May, and any steering away from this scenario may pressure stocks and lift the currency.