Investors regain more courage on Friday night

Share Markets:

Investor sentiment improved for the second consecutive session on Friday night.

Investor optimism gained support from upbeat US economic data, better than expected US corporate earnings results and a report in the Wall Street Journal that the People's Bank of China will inject liquidity into 20 mid-sized banks.

The Dow rose 1.6%, the S&P 500 gained 1.3% and the Nasdaq was up 1.0%. European stockmarkets had a very strong session, with the Euro Stoxx and the German Dax both gaining 3.1%.

The offshore moves suggest Australia's stockmarket will open strongly this morning.

Interest Rates:

US government bond yields rose as investors moved back into equities. Better than expected US consumer confidence data raised hopes the US economic recovery was on track.

Fed Chair Yellen spoke but avoided monetary policy and the economy, while dove Rosengren remained of the view rate hikes will start in 2015.

Australian interest rates rose, with three-year government bond future yields rising from 2.54% to 2.65% and 10-year yields up from 3.24% to 3.36%.

Foreign Exchange:

The US dollar index climbed on Friday night as upbeat US economic data boosted the currency.

The Aussie dollar finished little changed against the US dollar, but gained ground against the Yen on improved risk appetites.

The Aussie dollar benefited from the People's Bank of China report. The Aussie dollar was stronger versus the Euro.

The ECB's Couere said ABS and covered bond purchases will start within days.

Commodities:

The copper price made solid gains on the Wall Street Journal report that the People's Bank of China may inject liquidity into 20 banks.

Australia:

There was no major economic data released on Friday in Australia.

Europe:

Eurozone construction output rose 1.5% in August but was down 0.3% for the year to August.

United States:

US consumer sentiment rose from 84.6 points to 86.4 in October, according to the University of Michigan series. This was the highest reading since 2007.

The present index was unchanged, while the outlook component gained, which was quite an impressive result given the 5% fall in the Dow during the survey period.

US housing starts rose 6.3% in September, reflecting a 17% bounce in multiples (which have been very volatile in recent months) and a more modest 1.0% rise in single family starts, after they fell 2.0% in August.

Housing permits rose 1.5%; multiples were again the driver with a 5% September gain. Single family permits slipped 0.5% which followed modest falls in both July and August too.



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