Overnight, US markets staged a modest recovery as no further escalation of the nuclear disaster in Japan saw investors cautiously wade back into equities.
Also helping sentiment was a continued improvement in US economic data, with weekly jobless claims and the Philly Fed manufacturing survey enhancing the growing view that the US economy is now in a sustainable uptrend.
The Dow Jones Industrial Average surged 1.4% to end at 11,774, the S&P added 1.3% to 1273, while the NASDAQ gained 0.7% to 2636. All key S&P sectors ended in positive territory, led by the energy, telecoms and materials sectors.
Market trading this week has been dominated by fear and ‘headline’ news, with the VIX index spiking more than 40% over the course of the week. The absence of any heightened fears overnight saw the VIX drop 9% to below 27, which was enough of a sentiment change to attract bargain hunters back off the sidelines.
Asia and Australia
Across Asia, regional markets are mostly higher following the positive leads from the overnight US session and a day of relative calm from Japan’s Fukushima nuclear plant. The Nikkei 225 is the region’s best performer - higher by 2.8% - while the Kospi is 1.2% firmer. Elsewhere, the Hang Seng and the Shanghai Composite are up 0.8% and 0.6% respectively.
In Australia, the ASX 200 closed 1.3% firmer at 4615 right near its highs of the day. An apparent stabilising of Japan’s nuclear issues and some timely intervention by the G7 in currency markets saw investors cautiously wade back into oversold “risk” plays, with the energy and materials sectors the biggest beneficiaries, with advances of more than 2.2%. Elsewhere across the market, gains were broad based with all but the telecommunications sector seeing modest advances.
Major indices ticking higher
Suggestions that the Japanese nuclear crisis is showing some signs of stabilising - along with notes of support for the country's economy from the G7 - has provided a degree of stability for equity markets running into the weekend break. The major indices are all ticking higher as a result of this shift in sentiment, offering global equity markets some much needed relief. Although the situation remains volatile, anything that instils confidence in the near term is likely to be well received.
Earnings news is again fading with few high profile organisations left to report, whilst economic items of interest are likely to centre on the UK public sector borrowing and German producer prices readings. Ahead of the open we're calling the FTSE up 30 at 5726, the CAC up 36 at 3822 and the DAX up 76 at 6733.
