A heavy schedule of profit reports will likely decide whether the local market builds on a cautiously positive platform after US stocks inched to five-year highs overnight.
The March SPI 200 futures contract ended the night session five points or 0.1% stronger at 4931 as the benchmark share indexes in the US battled to hold early gains and traders prepared for earnings today from market heavyweights CBA, CSL and LEI.
Solid corporate earnings helped the Dow and S&P 500 push further into territory last seen in 2007. The Dow rallied 70 points before closing 48 points or 0.34% ahead. The S&P 500 put on 0.13%, while weakness among tech stocks dragged the Nasdaq to a loss of 0.19%.
"This market is front-running better economic and earnings news," the chief market strategist at Fifth Third Bancorp in the US told Bloomberg. "We all think of a correction coming in February. Guess what, we probably won't get a correction in February. This market has got upward momentum."
Financials, industrials and telecoms were the pick of the sectors during another session that was short on market-moving catalysts. Traders took their cues from positive earnings reports from lesser names such as Avon, Fossil, Michael Kors Holdings and Masco. Bloomberg data shows that two-thirds of the way through the fourth-quarter earnings season, roughly 74% of S&P 500 companies have beaten analysts' profit projections.
Traders were reluctant to push the indexes too far ahead of potential market-moving events in the next 24 hours, including President Barack Obama's State of the Union address and the first retail sales data since the January 1 introduction of higher taxes.
European markets were more upbeat following an improved outlook on Spain from European Central Bank President Mario Draghi. Draghi said Spain had stabilised its struggling banking system and was well positioned for economic recovery. The remarks helped Spain's IBEX 35 share index rally 1.94%, Germany's DAX 0.34%, France's CAC 1% and Britain's FTSE 0.97%.
A retreating US dollar helped oil and metals after the Group of Seven nations issued a joint statement aimed at heading off a currency war. West Texas crude for March delivery rallied 42 cents or 0.4% to US$97.45 a barrel after the Organisation of the Petroleum Exporting Countries lifted its demand forecast. OPEC raised its 2013 demand expectation by 80,000 barrels a day to 840,000 barrels a day.
Base metals found support in ECB President Draghi's claim that "enormous progress" had been made in Spain. US copper for March delivery was recently up two cents or 0.5% at US$3.74 a pound. In London, copper rallied 0.5%, aluminium 0.8%, lead 1.1%, nickel 1.1%, tin 0.1% and zinc 0.9%.
Gold hovered above Monday's five-month low. Gold for April delivery was lately up $3.10 or 0.2% at US$1,652.20 an ounce.
TRADING THEMES TODAY
DIGESTING THE RALLY: Looks like another day of minimal index movement unless CBA or another of the heavyweights springs a big earnings surprise today. Markets here and in the US are up against long-term resistance and taking a breather before mounting a serious attempt to break out. The XAO had a peek above 5000 yesterday and quickly fell back. Keep an eye on US futures after 1pm EST - that's when Obama starts his State of the Union address in the US. The speech seems to have been heavily leaked, so surprises are unlikely but you never know.
EARNINGS SEASON: A substantial menu of corporate profit reports today includes big names such as CBA, CSL and LEI. Also reporting: AMO, ANN, BLD, CPU, CRZ, DMP, DWS, DXS, GBG, GBT, GFF, GMG, HIL, MCX, NBL, NRU, OZL, PMQ, SGN, SGP, SKE, TRS, USA and WOR. (Sources: Fairfax, BRR)
ECONOMIC NEWS: Consumer sentiment figures are due at 10.30am EST. President Obama's "State of the Union" address starts at 1pm here. China remains closed for the Lunar New Year holiday. Europe has industrial production data due tonight. A slow week in the US flares into life tonight with retail sales/core retail sales, import prices, inventories, mortgage delinquencies, crude oil inventories and testimony from Treasury Secretary nominee Jack Lew before the Senate Finance Committee.
