Morning Note - Risk appetite building

 

27/7/10   - 8.13am   -  by James Gerrish 

Another positive night in overseas markets with momentum towards risk assets building. This most obvious place to look at this theme is within the Aussie Dollar which broke through resistance to trade above 90c. For mine, this now sets up a move back to 93c on the back of continuing appetite for risk (my trip to the states in September is likely to get a whole lot better - especially when we think Aussie reporting season is going to be strong and we'll get some political stability by the end of August). 

Overnight, the DOW JONES added +100 points or +0.97% to 10525. The FTSE 100 rose +38 or +0.72% to 5351.Locally, SPI FUTURES are suggesting that we'll open 26 points higher. 

In the US Fed Ex reported a strong result which supports the positive number that were released from UPS last week. Both companies ship goods around the states and internationally and these results show that US citizens are still shipping a lot of goods. 

We also saw better than expected New Home sales overnight which recovered from a pretty disappointing result last month. New Home sales are important because they have a flow on effect to other consumer related goods - furniture, appliances etc. 

We continue to have a bullish bias in the market but are certainly cautious of becoming overly optimistic. Looking at the charts, the technical structures are supporting the concept of higher prices, particularly the disparity between the Aussie Dollar the Australian Market. Generally we see the S&P/ASX 200 with a higher degree of correlation however the moment, the Aussie dollar is out pacing the index. SEE CHART. Interestingly, both the FTSE 100 and DOW Jones are also outperforming our index SEE CHART so there could be scope for a stronger rally in local stocks to catch up to overseas counterparts.