US dollar strength was primarily driven by some better than expected unemployment claims and Philly Fed manufacturing data. Unemployment claims dropped to 334,000 versus 344,000 expected while the Philly Fed manufacturing index came in at 19.8 versus an estimate of 8.
A headline also crossed the wires that Moody’s upgraded US credit rating from negative to stable AAA. Meanwhile earnings also impressed, with Morgan Stanley leading the way. According to Bloomberg, out of the companies that have reported earnings so far, 73% have topped analyst estimates. Most of the major investment banks have trumped estimates (including Goldman Sachs, Citi and Morgan Stanley) and this is usually a good forecast of market conditions.
This helped the S&P to a record an intraday high of 1,693 as optimism continues to ramp up heading into the thick of reporting. USD strength resulted in a big move higher in USD/JPY which managed to print a high of ¥100.66 heading into a key weekend. With the pair riding high, Japan’s Nikkei is facing a gain of around 0.8% at the open which will bring it within striking distance of 15,000.
It is the last day for traders to position portfolio ahead of the weekend’s upper house elections in Japan. The polls are suggesting a strong victory for Shinzo Abe’s LDP party which would be positive for the Nikkei, and negative for the JPY. Prior to that though, we get the weekly MoF fund flows at 09:50; another week showing good buying would be good for the Nikkei.
Ahead of the open we are calling the Aussie market up 0.4% at 5012. This is right at last Friday’s high and is also a key resistance level. As we have mentioned recently, 5012 is the 61.8% retracement of the recent sell-off from 5246 to 4632. A closing break here would be very positive.
The big miners are facing another strong start after a solid session in the UK. BHP's ADR is pointing to a 0.7% rise to 34.44 after iron ore climbed 1.2% to 131.9. We have already received fairly impressive production reports from BHP, RIO and Woodside this week and these should keep their share prices supported in the short term. Santos has had a stellar run recently with its share price popping above $14. The stock is up 18.6% since its low on 25 June and will be in focus today with its 2Q output report due out. Any slight disappointment could see this undone very quickly.
CSL Limited will be in focus today after peer Baxter posted solid earnings which came in ahead of estimates. We are likely to see the stock back above $65 today with its $67.19 high in focus.