IG Markets - Morning thoughts and opening calls

Good morning

US markets started August with a bang, closing the session at 10-week highs after better-than-expected manufacturing data and some strong bank earnings out of Europe.

The Dow Jones Industrial Average closed 2% higher, the NASDAQ saw gains of 1.8%, while the S&P 500 surged 2.2%. The S&P's closing level of 1125 saw it back above the key 1121 level, which represents the 50% Fibonacci retracement level from the 2009 low to the 2007 high.

The positive start to August came after markets' posted their best month of the year in July. The major indices jumped out of the gates after two of Europe's biggest banks (HSBC and BNP Paribas) beat earnings expectations and reported greatly reduced provisions for bad debts, and were further boosted after the ISM manufacturing report . While the manufacturing gauge came in at 55.5 in July, down from 56.2 in June, it was well ahead of consensus estimates of 54. Construction spending also unexpectedly rose 0.1% in June. This US data followed reports from the euro-zone showing manufacturing growth accelerated in July.

Locally, we'll be looking for the Aussie market to test 4600 with our ASX 200 opening call currently seeing the index unwinding 53 points or 1.2% higher at 4595.

Overnight, risk appetite was certainly back in abundance with further breakouts to the upside for the Euro and the AUD and strong performances from all of the base metals. Growing confidence in a sustainable move higher in economic activity levels also saw the price of crude oil surge 2.8% higher to US$81.40 - breaking through the US$80 level for the first time since May.

With the energy, financial and materials sectors all firmer in the US session between 2.4% and 3.5%, we can expect to see dominant performances from those sectors across our market today - but let's not forget the slew of economic data due out today.

At 11.30am we have retail sales and building approvals data which are expected to reveal monthly growth of 0.4% and 2.1% respectively, while at 2.30pm we hear from the RBA, who are expected to have left rates unchanged at 4.5% as a result of benign inflation readings in recent weeks.