IG Markets, Afternoon Thoughts

Regional markets across Asia are ending the week with solid gains following the very positive session on Wall Street. Talk of a Middle East peace plan helped eased geopolitical concerns while strong US economic data boosted confidence in the recovery. Japan’s Nikkei 225 is the best performer, up 1.5% while the Hang Seng and Kospi are 1.3% and 1% firmer respectively. The Shanghai Composite is lagging a little, only higher by 0.4%.

In Australia, the ASX 200 is currently 1.1% firmer at 4857, right on its highs of the day. After last night’s strong US session it is not surprising to see broad-based gains across our market today with the materials and industrial sectors leading the advances with gains of more than 1%. More modest gains are evident across the consumer, financial and energy sectors.

Apart from the jump on the open, it’s been a pretty quiet session, with the benchmark index trading in a very tight range of about 10 points. Nonetheless, there’s been enough buying to support it throughout the day, which is encouraging, especially heading into tonight’s non-farm payrolls number.

The global recovery is really gathering momentum, especially in the US. The US equity markets look to be entering a sweet spot for further gains with continually improving economic data coming on the back of the strong corporate earnings season. Healthy company profits amidst a strong economic environment is a sound recipe for a big rally.

The missing ingredient to date has been an improving labour market; jobs now look to be coming to the party as evidenced by a strong ADP private sector employment report and a two and a half year low in weekly jobless claims.

Hence, tonight’s US non-farms payrolls report will be a key determinant in whether today’s bullish vibe can be maintained into next week.

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