Big gains for Japan after the yen drops

Asia is enjoying a day in the sun after US equities remained at all-time highs heading into the Thanksgiving holiday.

Japan is leading a buoyant session in Asia after a fresh round of yen weakness. Big gains in the major yen crosses (USD/JPY and EUR/JPY) have broken to fresh cycle highs over the past 24-hours. The Nikkei has climbed over 1% with traders happy to be long heading into tomorrow’s CPI data.

Markets in China have also extended their gains after a solid performance yesterday with commentary around reforms continuing to trickle in. Additionally industrial profits data released today showed a 13.7% jump (up from 13.5%). Economic reports out of some emerging economies also showed positive signs, with South Korea’s current account balance and the goods balance readings both coming in well ahead of expectations and helping push the Kospi higher.

Capex numbers surprise

Australia also got a positive surprise on the data front with the much-anticipated private capital expenditure reading showing a 3.6% rise, much better than the expected 1.2% fall. Not only was the headline strong, underlying numbers were also strong, with mining rising 4% in the September quarter and helping alleviate concerns about deteriorating mining investment. Expectations for 2013 to 2014 were upgraded to $162 billion (from $159 billion).

Some analysts feel the capex numbers will ease the RBA’s concerns about mining investment for now. This data saw a reversal in the underperforming AUD, with AUD/USD rising back above 0.91. However, traders are still sceptical about pushing the AUD much higher with the short-term downtrend remaining in place. This is likely to see traders continuing to favour selling AUD/USD into strength.    

Europe to open relatively flat

Looking ahead to the European open, we are calling the major bourses relatively flat to mildly firmer. With US markets closed, all the leads will be coming from the eurozone today. The DAX rallied to another record high of 9363 and continues to be an outperformer in Europe. This time the gains were triggered by solid consumer climate figures and Angela Merkel finally getting closer to forming a coalition. Later today we have German inflation and jobs numbers due out and this data could see the DAX extend its gains should it impress. Meanwhile the European Commission will release its economic sentiment survey for November and we also get retail PMI for the region.  

Mining services a drag on the ASX 200

The ASX is underperforming the region today despite gains for the big banks and miners. Gold miners have been serial underperformers all week and this trend is likely to continue with gold prices facing plenty of uncertainty. Industrials continue to languish with profit warnings in the mining services companies being the dominant theme. A shocking day for Forge (-83%) set the tone for the sector with the likes of Monadelphous, Bradken, UGL and Boart Lonmgyear. Meanwhile, online businesses such as Seek and REA Group continue to power ahead and are trading near record highs in a clear indication of investors favouring lower cost model businesses.

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