Equities bounce as emerging markets stabilise

With emerging market currencies beginning to calm, we are finally seeing the moves we would have expected to see on the back of the tapering decision.

Equities bounced despite some mixed US economic data, which suggests that focus was perhaps on a recovery in emerging market bourses, particularly for Turkey and Mexico. The earnings season in the US continued to progress favourably and this also encouraged investors to bid equities higher. Facebook put on double digit gains on the back of its results, which also drove other stocks like Twitter higher. Around half of the companies in the S&P have reported now, with nearly 70% of those beating on the EPS front and 65% on the revenue front.

Japan in focus ahead of a raft of data

USD/JPY finally managed a recovery after having hung around the 102 level for most of yesterday’s Asian session. The pair came in within striking distance of the 103 level heading into a key day of data for Japan. USD/JPY has had many attempts at a recovery this week, but this has failed as different headlines just continue to push traders into the safety of the yen. We have a raft of releases from manufacturing PMI, household spending, CPI, unemployment and industrial production. Most of these releases are due out at 10.30 AEDT and will help set the tone for the Nikkei open. As it stands we are calling the Nikkei up 0.7% at 15,105 which is only a minor recovery after a 2.5% drop yesterday. Traders will be looking for signs that the recovery is stalling which would be positive for the pair as it suggests the BoJ might be prompted into action and weaken the yen. Most of the region will be out of action celebrating the Chinese New Year today so I don’t expect an overly active session for the region.

Minor gain tipped for ASX 200

Looking at the local market we are calling it up 0.2% at 5197. Today is also the last trading day of the month for the ASX 200 and as a result we might see some unusual stock-specific moves. Reflecting on the month heading into the last day of trade, the market is off around 3% and it looks like we are headed for the worst January performance since 2010 when the local market dropped 6.2%.

With the US dollar regaining ground, gold was smashed to a six-week low and this could see local gold names struggle today. Peabody’s results missed estimates and this could put a dampener on local coal stocks today. Iron ore miner Fortescue Metals has been upgraded to buy (from neutral) by Citi despite its disappointing report yesterday. We have a few reports to look out for today including Lynas Corp, Medusa Mining and origin Energy. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.