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Most of the major European bourses gained ground after French GDP (+0.5% versus +0.2% expected) showed that the country is no longer in a recession. German GDP (+0.7% versus +0.6% expected) also came in ahead of estimates and helped GDP for the eurozone rise 0.3% for the quarter. Gains in Europe were neutralised by tapering concerns which weighed on US equities.
The Fed’s James Bullard was also on the wires, reinforcing that any QE tapering moves will be data dependant, which really shows some consistency to what we’ve been hearing from Fed members lately. This just puts a bit more weight on CPI, unemployment claims and industrial production data due out later today.
The FX space was very calm, with most major currency pairs remaining in a holding pattern and maintaining relatively tight ranges. Despite the positive GDP prints out of Europe, EUR/USD is still sidelined at 1.325. Meanwhile USD/JPY is just holding on to 98, and AUD/USD is at 0.912. There is no major economic data due out of Asia today but once again Japan’s weekly fund flows will deserve some attention.
Ahead of the open, we are calling the ASX 200 relatively flat at 5,157 with investors likely to continue reacting to the big earnings we received yesterday. The resource names are in for an interesting session, particularly with iron ore continuing to push higher and gold enjoying a strong bounce. Iron ore was up another 0.7% to 142.8 while gold climbed 1.2% and is within striking distance of the 1,340 resistance level.
BHP’s ADR is pointing to a 0.7% rise to 37.17 at the open. The next key level for BHP is at $37.50; where it last traded in February. We expect to see strength in the other iron ore miners as well today. While today’s earnings are not quite as big as yesterday’s, there are still some names that deserve attention. AMP has reported its first-half results, with a 6% rise in earnings to $393 million and an interim dividend of 11.5 cents. It’ll be interesting to see how the market responds to the result as AMP had come out with a hefty downgrade in June which saw its share price hammered. It now seems the guidance was very conservative as the headline earnings have beat estimates quite comprehensively. Coming off a low base and having underperformed financials significantly this year, we might see AMP enjoy some reprieve today. Wesfarmers will be reporting its full-year results and this result generally also has an impact on Woolworths. Once again there will be a strong focus on how Coles is performing and whether the Target turnaround is gaining momentum.
There will be plenty of attention on Commonwealth Bank after its quality results yesterday were not enough for it to keep rallying. We feel traders taking profits hurt the stock yesterday and we might see a recovery today. CSL will also be another one to look out for as it struggled yesterday despite a fairly positive outlook.