Australia: Both the US and European equity markets posted solid gains overnight as some positive data out of the US and encouraging news out of Europe regarding Greece’s banks, helped continue the optimistic feeling in the market following Ben Bernanke’s speech at Jackson Hole last Friday.

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The DOW finished 2.3% higher at 11539, and the S&P up 2.8%; its highest close since the beginning of August. US consumer spending for the month of July surprised on the upside posting a gain of 0.8% compared to market expectations of a 0.5% gain. While this shows that the feeling among consumers is more optimistic, this reading does precede the recent turbulent times that we’ve experienced in the markets during August, and also may have a lagging affect from the Japanese earthquake. While equity markets were up overnight, commodities were weaker as concerns regarding another global financial crisis eased and investors were happy to look at riskier investments.

Gold was the worst hit falling 2.2% to USD1,787 per ounce. While there continues to be a lack of top tier data released locally, we do have building approvals for July released later this morning. Previous results have disappointed and shown negative growth in the construction sector; it is expected this morning to post impressive rebound, up 3.3%. This data is unlikely to influence the AUD too much, with expectations that the AUD will push higher as our equity markets follow the positive tone from offshore markets.

Majors: As mentioned above, there was some encouraging news out of Europe with two of Greece’s largest banks (Alpha Bank and Eurobank) proposing to merge. Following this announcement, Greek equity markets posted their largest one day gain, up 14%; with financial stocks alone up 29%. While this is a positive step for the region, and leaves investors hopeful that other banks may follow suit, it certainly won’t solve all their problems.
With the rebound in investor confidence, safe haven assets such as the CHF were weaker overnight. The CHF lost as much as 2% against the EUR, as the news regarding the mergers saw demand for the EUR increase. The intervention efforts by the Swiss National Bank can also be attributed to the fall in the CHF as they continue to try and make it less attractive as a safe haven asset.

Economic Calendar
Aust Building Approvals July
US Consumer Confidence
US FOMC Minutes
EU Euro-zone Consumer Confidence