Strong lead from the US may push Asian stocks higher Aussie dollar soars

Asian stocks are expected to open higher today after positive offshore leads. US stocks advanced to a five month high with all 10 industry groups up on the S&P500 overnight.

Ironically, the index is at its highest level since the US lost its AAA credit rating. The US dollar index has also continued to consolidate its recent, although only modest, gains.

In other currencies overnight, the Australian dollar is back above 1.03 against the US dollar after briefly falling yesterday afternoon during the Asian session.

The Euro’s gains have been limited however, a sign that its problems aren’t about to go away anytime soon. The USD/JPY remains in a very tight trading range, last seen at 76.85.

Copper was the standout performer in metals markets overnight, up 2.9% to US$3.51/lb. It again showed its role as the lead indicator for risk appetite, particularly across the Asia Pacific region. Its rise came as China’s growth numbers slightly exceeded expectations and send stocks around 3% higher on the Shanghai exchange.

There are signs though that demand for high end goods – like Bordeaux wines for example – is tapering off as even the higher end luxury buyers are starting to monitor their spending patterns.

We don’t see cause for alarm but will closely keep an eye on auctions by key wine exchange merchants leading up to Chinese New Year celebrations to get a feel for how clearances end up. Market estimates are for a 33% decline on prices achieved last year.

The outcome is not only important for Chinese consumption trends but also for one of the largest pure play listed wine businesses – Treasury Wines – which joined the Australian market last year after the breakup of Foster’s Group.