Global Markets Overview - 2/21/14

Risk sentiment picked up in US trade after having slumped in Asia yesterday following a disappointing China manufacturing PMI print. Sentiment was also subdued in European trade with a raft of PMIs mostly disappointing and weighing on the single currency.

In the US, CPI and unemployment claims came in-line with estimates, while manufacturing PMI was well ahead of expectations. Given the string of disappointing PMIs we had already received from different parts of the globe, this beat was good for confidence in US trade. However, the Philly Fed manufacturing index was well short of expectations and this was mainly due to weather-related issues. As a result investors were happy to look past the print and concentrated on the positive elements.

Facebook's WhatsApp takeover has also given some encouragement and resulted in a significant rally in the social giant's stock from its lows. While there are many positives to the acquisition, the key issue for many investors is whether Facebook is paying too much for WhatsApp. Given the recovery in Facebook shares, perhaps investors are starting to believe in the potential of the acquisition.

AUD finding buyers off lows

In the FX space, the AUD stormed back to life after having slumped significantly in yesterday's Asian trade. AUD/USD bounced off the 0.894 level and is now back to the 0.90 mark. While the improvement in risk in US trade is the likely driver of this recovery, perhaps there is a general consensus that fair value for the pair is at the 0.90 mark given current fundamentals. With the RBA adopting a more neutral bias, then traders are struggling to commit to a direction. As a result the range between 0.89 and 0.908 just continues to hold. There is no local data due out today but traders will continue to monitor events in China after yesterday's disappointment.

Equities firmer as reporting winds down

Ahead of the open we are calling the ASX 200 up 0.8% to 5457. This level is also the October 2013 high and could present some resistance for the local market. Should this opening call materialise then the Australian market will be trading at the highest level since June 2008. This is quite an achievement considering the average to mildly positive earnings season we've had. However, one could argue that Australian equities are coming off a low base and therefore there is plenty of room for improvement.

For the week so far, the local market is up 1% and will be looking to extend these gains at the open today. On the reporting front, 181 out of 197 companies have reported and therefore earnings season is starting to wind down.

Reporting today we have Santos, IAG, Iluka and MMS being the main ones. There is a fairly big dividend coming out of the market on Monday (over 16 points) and therefore today we might see some positioning on stocks going ex-div on Monday.

Asian markets opening call	Opening Calls (8:00am AEDT)	Change from the Offical market close	Percentage Change
Australia 200 cash (ASX 200)	5,457.30	45.30	0.84%
Japan 225 (Nikkei)	14,567.50	118.50	0.82%
Hong Kong HS 50 cash (Hang Seng)	22,528.50	134.50	0.60%
China H-shares cash	10,013.20	35.20	0.35%
China A-50 cash	6,896.80	24.80	0.36%
Singapore Blue Chip cash (MSCI Singapore)	354.00	2.00	0.57%
Key inputs for the upcoming Australian trading session (Change are from 16:00 AEDT)	Price at 08:00am AEDT	Change Since Australian Market Close	Percentage Change
AUD/USD	$0.9018	0.01	0.75%
USD/JPY	¥102.345	0.38	0.37%
WALL STREET (cash) (Dow)	16,043.35	2.79	0.02%
US 500 (cash) (S&P)	1,828.90	0.14	0.01%
UK FTSE (cash)	6,828.30	31.59	0.46%
German DAX (cash)	9,621.80	-38.25	-0.40%
Rio Tinto Plc (London)	£35.54	0.19	0.54%
BHP Billiton Plc (London)	£19.51	0.26	1.35%
BHP Billiton Ltd. ADR (US) (AUD)	$39.15	0.45	1.16%
Gold (spot)	$1,324.45	12.44	0.95%
Aluminium (London)	1765.00	7.00	0.40%
Copper (London)	7174.00	52.00	0.73%
Nickel (London)	14505.0	115.00	0.80%
Zinc (London)	2056.00	17.00	0.83%
Iron Ore (62%Fe)	122.90	-1.00	-0.81%