Scoreboard: Europe's rising fortunes

European markets surged overnight as investor confidence in the region grows, while Wall Street made gains on solid corporate earnings.

It was another solid session for global equities overnight, especially in Europe where the Dax was up 2 per cent to a new record, the CaC 1.4 per cent and the FTSE100 0.8 per cent.

There is no shortage of reasons for the optimism, mind you. In Europe, banks are still bathing in the afterglow of recent regulatory decisions, one of the more recent being that they don’t have to mark sovereign bonds to market, on the proviso that they hold those bonds till maturity. Marking to market would of course pose a significant threat to their capital position. More broadly, European equities are getting a lift from more positive news out of Spain and Italy: Spain recently posted its strongest growth in six years. Investors are growing in confidence that the crisis is over.

Gains on Wall St are more modest at the time of writing, but gains are still solid. With about an hour left to trade, the S&P500 is 0.5 per cent higher at 1848, the Dow is 120 points higher (16494), while the NASDAQ is up 0.8 per cent. These are good gains, with a strengthening US economy providing a supporting backdrop. Indeed, most Fed districts report that the US economy is expanding at a “moderate pace’, to use the language of the latest Beige Book (a collection of anecdotal reports produced by the Fed), which came out this morning.

We also had some positive corporate news: Apple said that iPhone sales into the Chinese market were strong. Similarly, Bank of America reported results that beat expectations - that bank’s stock up 2.5 per cent thus far. Financials aren’t the key outperformer; tech stocks, telecommunications and basic materials seem to be at this point.  Commodities were mixed. Copper was up 0.5 per cent, although gold was weaker (off another $6.8 to $1238) and crude was mixed. It surged on WTI, up 1.8 per cent to $94.34, although moves on Brent were flat ($106.3).

Otherwise there wasn’t too much in the foreign exchange and rates space. Debt sold off a bit with the US 10-year yield up 1 basis point to 2.88 per cent. For the Australian market, our 3s and 10s were a tick lower each to 96.96 and 95.810. The euro is off about 30pips to 1.3602, the Japanese yen is higher, a little, at 104.62, while the Australian dollar is little changed at 0.8916.

In other news and data, the euro zone's trade surplus rose to €16 billion ($24.3 billion) in November from €14.3 billion the month prior. Then in the US, the Empire State manufacturing index rose to 12.5 in January from 2.2. Mortgage applications rose by almost 12 per cent in the week to January 10. Otherwise, producer prices rose by 0.3 per cent in December and are 1.4 per cent higher annually.

For our market today, the SPI points to a modest 0.4 per cent gain for the All Ordinaries today. As for the data, the key release for the Australian market will be the employment figures at 1130. The consensus is that employment rose by 10,000, while the unemployment rate is forecast to remain steady at 5.8 per cent. Other than that though it’s pretty quiet for our session. For tonight, the key dataflow includes eurozone and US inflation figures alongside initial jobless claims, the Philly Fed and NAHB housing market indexes.

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