Morning Note -

** 08/02/11  -  8.27am  -  by James Gerrish** 

It was the financial shares that led the US market higher last night while continued improvement in Egypt also added to confidence. As we suggested in the 2011 Outlook we put out at the start of the year, there has been a noticeable uptick in the M&A activity globally.
This shows 2 things. 1 - Confidence is improving 2. Companies have cash they want to put towards growth. 

On the market, the DOW JONES added +69 points or +0.6% to close at 12162. In London, the FTSE 100 added +53 points or +0.89% to close at 6051. Locally, FUTURES are pricing in a rise of +19 points when tradsing kicks off this morning. 

Locally, the market has broken above the critical technical level of 4840 a couple of days ago and does look set to for a rise towards 5000. This will be dependent on results from the reporting season which is starting to hot up.

This morning we had a trading update from Macquarie Group (MQG) one of our preferred exposures for the strengthening  recovery in the US. On the face of it, it seemed slightly negative with a 5% cut to half yearly profit expectations however they maintained full year guidance.  The bank had guided towards $1.05 billion full year net profit however the market had been a little sceptical of this - this compares to a market concensus of $969.. I would assume the market will support MQG today however its always a difficult one to call before the open - there may be a short term shock in early trade to the downside. 

NAB has also given the market an update this morning which looked pretty positive. The bank generated cash of $1.3 billion for the three months to December which was above concensus. There was some pressure on margins however given NAB is focussed heavily on business banking, this is hardly a surpise (SMEs still doing a quite tough and are not as prepared to borrow) - A GOOD result from NAB. 

Bradken (BKN) also reported and missed the mark - the stock is trading on a PE of 17 times so I'd expect some pain here this morning. (Stocks that have risen hard + have a high PE + Miss the mark during reporting will be sold down aggressively)       
           
 I'll be on SKY BUSINESS today at 12.