- S&P500 at highest level since December 2007.
- Asian markets are generally lower - Japan still underperforms in the wake of the Bank of Japan meeting.
- UK PM Cameron expected to promise vote on EU membership.
- Focus today will be on the expected US House debt ceiling vote.
US equity markets managed to close higher despite somewhat mixed earnings as the Q4 reporting season is in full swing. The S&P500 index gained 0.4% to close at its highest level since December 2007.
While investor flows into stocks appear to be quite strong, as also reflected in the somewhat stretched price momentum, there is little indication that overall investor positioning has become significantly overweight in risk assets.
Hence, while the risk of a temporary correction is building, the underlying economic and monetary environment should remain supportive and there should be room for a further rebalancing into risk. A Bloomberg survey shows that close to two-thirds of investors are planning to raise their holdings of equities during the next six months.
Asian markets are generally lower this morning with Japan underperforming in the wake of the slightly disappointing Bank of Japan meeting yesterday. USD/JPY has continued lower and is close to testing 88.00, which in turn has weighed on Japanese stocks with the Nikkei index down more than 1%.
In Europe, trading was fairly volatile yesterday after, according to Reuters, a German newspaper reported that several banks had been asked to simulate a break with their investment banking divisions. There was also market chatter of a profit warning on Deutsche Bank and the euro sold off sharply only to recover fast after a strong German ZEW indicator. EUR/USD has traded down to 1.33 overnight..
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