Global Markets Overview - 1/31/14

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. The US dollar index bounced back above 81 while equities advanced despite some mixed US economic data. This 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 1.3% at 15,116 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.

AUD/USD managed to gain ground despite the US dollar recovery. The pair is within touching distance of the 0.88 level now and seems to have near term upside momentum heading into PPI and private sector credit data today. 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 5,197. 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. The Chinese New Year break is also likely to hamper demand for some commodities and result in subdued moves. This is already evident in iron ore prices which were flat at 122.60. 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.

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