Across Asia, regional markets are all higher on the back of improving sentiment on Wall St and news of the weekend that China's exports grew 44% on year in June. The Shanghai Composite is the best performer, up 0.7% with resource and financial shares outperforming. Elsewhere the Hang Seng and Kospi are both higher by 0.6% while the Nikkei is down 0.4%.

In Australia, the ASX 200 finished 0.3% higher at 4409, off its intra-day high of 4416. After a cautious opening, the market built on last week's advance with the materials, energy, and consumer discretionary sectors contributing the bulk of the day's gains. The financial sector was flat.

We've been in a bit of a holding pattern today. Following last week's gains, it's very encouraging to see that investors aren't scurrying for the sidelines ahead of tonight's Alcoa earnings announcement, which kicks of the US Q2 reporting season.

The next few weeks will see the focus shift from economic data to company earnings. Last week's gains were predicated on expectations of a relatively robust showing from US corporates, so we will need to see justification of this from positive results and outlook statements if the rally is to continue.

A total of 21 S&P 500 companies will report this week, with the market expecting earnings to rise by 27% across the board. Along with Alcoa, the likes of Intel, Google, JPMorgan, Citigroup and General Electric are all due this week. It won't just be the headline number the market looks at, but the outlook for the remainder of the year.

In economic news, Australian housing finance grew a seasonally-adjusted 1.9% in May from April, the first rise since September 2009. Economists had expected an increase of 1.0%. It's unlikely to ease widening concerns about a downturn in the housing sector so far in 2010, with rising interest rates, risk aversion in financial markets, softening consumer confidence and the winding down of government stimulus support expected to continue weighing on the sector.

The materials sector ended the day as the session's standout performer closing 1.1% firmer as growing risk appetite saw investors happy to buy into beaten down cyclical names. Heavyweight miners BHP Billiton and Rio Tinto added 0.5% and 1% respectively while gold miner merger partners Newcrest Mining and Lihir were higher by 2% and 2.4% as the gold price clawed its way back above US$1210 oz.

In a comment from Deutsche Bank, it believes value is beginning to emerge in the base metals complex. Moreover, the downside in copper may be more limited than many expect. Deutsche added that over the course of the next calendar quarter there may be an inflection point in performance for this group, with upside into 2011.

The energy sector was the other standout gainer on the session closing up 0.7% with strong Chinese crude import data released over the weekend renewing optimism about the enormous growth prospects for the sector. Among the major names, Santos and Oil Search led the gainers advancing 1.8% and 1% respectively, with Woodside Petroleum seeing more muted gains, firming just 0.1%.

In a broker note from UBS, it upgraded Santos to buy from neutral after media speculation that Shell is bidding for a stake in its Gladstone LNG project against Sinopec and KOGAS. Santos has confirmed that it's in talks over an equity stake with unnamed parties. UBS believes the probability has increased that Santos will sell down its 60% stake in Gladstone LNG to support a two-train project, and a positive for the company. The broker estimates a 15% stake could be sold for $1 billion-$1.5 billion. UBS retains a $15.16 price target on the stock.

Elsewhere, the financial sector finished the day flat. National Australia Bank was the top gainer, closing 0.9% firmer while Westpac and ANZ added 0.5% and 0.2% respectively. CBA bucked the trend, declining 0.5% while Suncorp Metway fell 0.7%.

On the downside, industrial names were among the worst performers, with the sector falling 0.4%. Brambles was the worst, declining 2.9% while the likes of James Hardies, Transurban, Downer EDI and United Group were down between 0.5% and 1.2%.

In company specific news, Sigma Pharmaceuticals was flat on the day. It has taken a tough stance regarding Aspen Pharmacare's takeover offer, casting further doubts on the bid's chances of success. Sigma said its board won't give Aspen an extension of exclusive due diligence and revealed it's mulling at least one expression of interest in its generics business. It also said it wants to work with Aspen on a better deal for shareholders than the current "highly conditional" offer. While this may be posturing by Sigma as part of bid negotiations, it can also been seen as the board signalling its willingness to continue as a standalone. Aspen attached a long list of conditions to its 55 cents a share bid and Sigma's statement shows the board is willing to stand up to the South African company.

Ben Potter Research Analyst

IG Markets - CFD trading