Massive rally in the US and Europe may spark similar moves in Asia

<p>Asian stocks are expected to open significantly higher today after a mammoth session on U.S. and European markets overnight. The Dow Jones Industrial average added […]</p>

Asian stocks are expected to open significantly higher today after a mammoth session on U.S. and European markets overnight.

The Dow Jones Industrial average added 4.2% at the close after the central banks of the U.S., the euro region, Canada, the U.K., Japan and Switzerland pledged to cut the cost of providing dollar funding via swap agreements. That was enough to signal to traders that another round of coordinated monetary measures are about to hit the market to make sure contagion around Euro debt issues don’t spiral out of control.

Meanwhile China also relaxed the reserve ratio requirements imposed on lenders, reducing it by 50 basis points. Brazil announced a similar 50 basis point cut to its official lending rate, down to 11% with a lot more room to move. India and Russia are expected to round out similar cuts for as the remaining BRIC members into 2012.

All this has had a significant impact on commodity prices with copper up 5.5% overnight to US$3.51/lb, now well above the US$3/lb which looked like it could have been tested only days ago.

The Australian dollar rallied strongly overnight, last trading at 1.0271 against the U.S. dollar. The Euro remains vulnerable and having rallied overnight also, it still remains below 1.35 against the dollar, last trading at around 1.3440.

There aren’t too many traders willing to trust the currency just yet with more news needed to address the growing debt issues in that region. The Japanese Yen continues to consolidate its gains with the USD/JPY at 77.58, eyeing a move below 77.0 during the session. Key data will be China’s PMI print today during the afternoon Asian trading session.

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