In the US session yesterday, stocks ebbed and flowed as the Dow Jones Industrial Average closed at a fresh 18-month high.

Investors digested stronger-than-expected consumer confidence data as well as an inline reading on home prices across 20 major metropolitan regions.

The tech-based NASDAQ was the best performing index, rising 0.3% while the Dow Jones Industrial Average was up 0.1%. The broad S&P 500 finished the session flat.

Inline or better-than-expected economic data continues to support the global recovery. Confidence is improving and people are beginning to spend more freely, which is catching a few by surprise. However, ahead of Friday’s employment report there still remains some caution, especially considering it is a shortened trading week.

There has been a focus recently on the ‘quality’ of the rally seen in the US. Traders have been buying riskier, lower quality stocks over defensive, dividend-paying blue chips. The Russell 2000, a benchmark for US small cap stocks is up 15% since early February, outpacing the Dow Jones Industrial Average’s rise of 7%. This is pretty impressive considering the Russell 2000 is trading at over 50-times current earnings. When small caps outperform blue chips it shows traders are more confident in the equity markets.

Across Asia as at 06.50, regional markets are largely negative following the flat overnight leads and concerns that stocks may be becoming overvalued. On the upside, the Nikkei 225 is firmer by 0.2%, but the Hang Seng, Kospi and Singapore Straits Times Index are weaker by 0.2%, 0.4% and 0.6% respectively.

European markets have certainly been winding down for the Easter break over the last few days, trading in a reasonably narrow range. With little in the way of fundamentals around, the late rebound in New York stands to lend support to the likes of London and Frankfurt at the open, but again there’s little in the way of fresh directional data due.

Clearly we’re at the month and quarter end so this could initiate some volatility, especially with talk that stocks are starting to look overvalued. US factory orders and the ADP payroll survey are likely to dominate on the economic calendar, with the ADP payroll numbers taking on added significance with the non-farm payrolls being released when the vast majority of equity markets are closed. In London, the food sector is leading the earnings news with Tate & Lyle, Northern Foods, Compass and Dairy Crest releasing numbers but again these readings aren’t going to have any notable impact on the market as a whole.

Ahead of the open we’re calling the FTSE up 16 at 5686, the DAX up 15 at 6157 and the CAC up 11 at 3998.