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Mixed Bag Brings Cautious Start

By Michael McCarthy (chief market strategist, CMC Markets and Stockbroking).

Mixed economic readings in Europe and the US on Friday night left investors pondering. While stocks traded mixed to positive, the global bond sell off resumed in earnest. There is little macro data to drive action today, and traders will likely turn to company reporting ahead of the Lunar New Year holidays later this week.

The German DAX bucked the trend on Friday night, finishing in the red after December factory orders fell more than expected. However, Italian retail sales and French trade numbers both showed more strength than forecast. Similarly, US non-farm payrolls and labour force participation undershot consensus, but unemployment and hourly earnings growth were better than feared. Overall, the numbers skewed positive, weighing on the US dollar and lifting energy and industrial metals.

US company reporting continued to illustrate a bounce back in earnings. As the season approached the 60% mark, Ford, T-Mobile, News Corp and Peloton Interactive stood out, with quarterly earnings well above analysts’ estimates. Tonight, retailer Loews, toymaker Hasbros and reinsurer Everest will face shareholders.

In Australia, analysts predict small appliance manufacturer GUD Holdings will cut its dividend to 15 cents (previous 25 cents) when it unveils its first half result today. Key reports this week include CBA, Transurban, Telstra, Newcrest Mining and the ASX.

The combination of stronger futures markets at the New York close and a weaker US dollar this morning should see a cautiously positive start to Asia Pacific trading. Volumes may lift as investors reposition themselves ahead of holidays across the region that begin later this week.

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