Strong US close may push Asian stocks higher

Asian markets should perform better today after a stream of losses over the past few days. US reporting season is starting to trickle through with numbers that at least for now seem to be pleasing expectations.

The S&P500 booked gains of around 0.7% at the close with traders embracing Alcoa’s result. European markets were also supported by a better than expected result in Spanish and Italian bond markets, with 10 year yields down. The Stoxx Europe 600 index was 0.7% higher.

The Australian dollar remains steady above 1.0320 against the US dollar with employment numbers due out this morning Asian time. Market expectations are for 6,000 new jobs to have been added and the unemployment rate rising slightly from 5.2% to 5.3%, mainly on a change in the participation rate. Any deficit number of new jobs will not only increase the fall for a rate cut but perhaps even the size of a cut, not likely to come next month from the Reserve Bank of Australia.

In commodities, copper remains in the US$3.60-65/lb range for the time being, holding that support level. The next few days will be crucial, a Chinese response to reserve ratio cuts isn’t expected by the market until next month.

Gold remains steady also, last at US$1659/oz but we note again the gold/silver ratio – market neutral in nature and a common trade among commodity veterans – which despite the gold price falls, has stretched out slightly to 52.4x from around 50x last month.

In energy, US. stockpiles of gasoline and distillate fuels declined, while natural gas tumbled below $2 per million British thermal units for first time since January 2002.