Offshore rallies to give shares a boost of confidence

The article says offshore gains lifted sentiment – US stocks climbed after strong Google earnings, rising US retail sales and hopes Europe may resolve its debt crisis. ASX 24 futures were 46 points higher and AMP Capital’s Shane Oliver expected the market to open about 1.1% higher, pointing to improved confidence that the global economy won’t plunge into a recession.

US markets closed higher: the Dow Jones rose 167.11 points to 11,645.24, the S&P 500 gained 20.91 points to 1,224.57, and the Nasdaq added 47.61 points to 2,667.85. Strong US closes often boost Australian market sentiment because investors take positive offshore moves as a sign of global risk appetite improving.

Google’s ‘gangbuster’ earnings helped buoy US stocks, which in turn gave investors more confidence globally. The article links Google’s strong results with improved risk appetite that contributed to the expected lift in the Australian sharemarket.

Dr Shane Oliver said he expects the market to more than recover Friday’s losses and for a reasonably good start to the week. He noted concerns about the European crisis and a US recession had eased, but cautioned that volatility will remain reasonably high while investors hope for a reasonable plan from Europe.

The article highlights several items to watch: Chinese GDP figures for last month (expected to show a slight slowing), the minutes from the Reserve Bank of Australia’s October 4 board meeting (to look for signs of an easing bias), the RBA assistant governor Guy Debelle’s address on Wednesday, and the Westpac–Melbourne Institute leading indexes for October.

The article reports that while concerns about the European debt crisis and a US recession have eased, AMP Capital’s Shane Oliver expects volatility to remain reasonably high. He suggested investors are hoping for a European plan to further calm markets and avoid a global financial crisis–style meltdown.

The ASX 24 is the December share price index futures contract. It was 46 points higher on Sunday, which the article interprets as an indication the Australian sharemarket was likely to open higher.

The article explains that the RBA minutes from the Oct 4 board meeting may show further indications of the central bank’s recent easing bias, which can affect interest-rate expectations and market sentiment. Additionally, Guy Debelle’s speech and the release of leading economic indexes are events investors watch for clues about economic momentum and policy direction.