Global Markets Overview – July 24, 2014

It was another positive night for equities, with gains through European and US trade mainly driven by optimism around US corporate earnings. Geopolitical risk was largely ignored yet again with traders favouring equities.

The report that grabbed most of the attention was social media giant Facebook, which managed to top estimates and extended its rally. Data was limited in overnight trade, but today is already off to a busy start with the RBNZ delivering a mild surprise.

The RBNZ hiked rates by a further 25 basis points for the fourth consecutive time to 3.5%. However, the bank said rates will now be held for a period, but further tightening is likely over time. The RBNZ feels the economy is showing signs of adjusting to the tightening and as a result this warrants some assessment before further tightening. Analysts feel it is unlikely we'll see further tightening before December. This has resulted in a significant unwind of the NZD as the market seems to have been overly long the currency. We still have trade balance data out of New Zealand this morning and should this come in worse than expected, then the NZD could come under further selling pressure.

PMIs in focus

At 11.45am AEST we have China's HSBC flash manufacturing PMI reading, which is expected to come in at 51.2. This is a solid bounce from the previous read and would confirm the China recovery story. This reading could be key for the Asian reading today, along with Japan's flash manufacturing PMI and trade balance. The PMI theme will continue in European trade with a raft of PMI releases (services and manufacturing) for all the major nations and the region. This has potential to move EUR/USD, which is already looking quite vulnerable.

ASX 200 eyeing six year highs

The ASX 200 is pointing to a 0.2% rise at the open to 5589. Yesterday the local market traded as high as 5598.2, just shy of the pivotal 5600 mark. Momentum is certainly to the upside at the moment, but at such elevated levels there is always a risk we'll see some profit taking. Additionally the stronger AUD/USD exchange rate won't do the local market any favours and that'll be something to look out for. Yesterday's CPI reading seems to have breathed new life into the AUD and the pair looks like it'll test early July highs again in the near term.

Most commodities retreated and this might put some pressure on the materials plays today. We have a few reports out today including Atlas Iron and Newcrest Mining. These quarterly reports will help set the tone for the materials space. AGO recently released a trading update which was quite positive, but still not enough to ignite the stock. It'll be interesting to see how the stock reacts today after a long period of underperformance.

In the financials space, Macquarie Group has an AGM today which might include some commentary on trading conditions. Given the recent pick up in corporate activity, perhaps we might hear some positive commentary. Telstra is reported to be looking to outsource some jobs and this tends to be positive for price action.

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