Rally Prompted by Relief

International Markets:
The past week has seen rallies across global markets as investors embraced the tax compromise between the Obama administration and the Republican Congress during US budget negotiations. The sense of relief prompted a rise in equities in all the major markets, though the enthusiasm was tempered by the fact that no agreement was reached on spending cuts and debt ceiling discussions would need to continue in 2013.

Early sessions this week have seen profit taking amid the beginning of the corporate earnings season.

The Dow (-0.41%), S&P500 (-0.32%), and NASDAQ (-0.23%) were all down overnight.

In Europe, the debt crisis is still a priority concern for investors. Recently released labour figures showed that unemployment in the Eurozone is at a new high (11.8%), placing increasing pressure on social welfare.

The region did get a boost from improved retail sales figures.

The FTSE tracked 0.18% lower, while the DAX and tumbled 0.48%.

The CAC disrupted the trend, edging up 0.03%.

Australian Market:
The ASX made a good start to 2013 with the All Ordinaries up more than 1.2% during the first official week of trading. However, the post New Year enthusiasm has worn off a little since, with the opening two sessions of this week producing losses.

On Tuesday, it was again the mining sector leading the drift down.  BHP (-0.8%) and Rio Tinto (-1.2%) both gave up ground as fears surrounding a fall in iron ore prices gained momentum.

The finance sector also performed poorly, with only Westpac able to break even. The other three major banks shed between one and two percent of their market value.

Media stocks and some big players in the retail sector were able to make some profits.

At the close of trade, the All Ordinaries were down half a percent to 4712 points, while the ASX200 wound up with a similar loss to settle at 4690 points.

Currencies:
It was a dismal start to 2013 for the Japanese yen, declining for the eighth straight week against the USD. The USD reached its highest level against the yen since mid-2010 and the losing streak for the yen was the longest in nearly a quarter of a century. Currently one USD buys 88.86 yen.

The AUD hovered around the 105 US cents mark for the second day in succession as currency traders displayed a little caution ahead of the commencement of the US earnings season. The local currency is holding up well as investors buy into riskier assets amid New Year positivity.

Commodities:
Food commodities have been in the headlines over the past week with concern over crop projections influencing prices. The USA’s biggest crop is Corn and thanks to severe drought in the country’s mid-west during 2012, harvest estimates are well down.

Official crop statistics will not be released until January 11, but investors have already seen Corn prices jump 7% in a year and it’s anticipated that if crop numbers are lower the rise will continue. Currently Corn is $US6.89 per bushel, but did hit a record $US8.49 back in August 2012.

Wheat (-0.1% to $US7.50 a bushel) and Soybeans (-0.1% to $US13.86 a bushel) were both down yesterday, but have shown enormous growth in the past year, rising 20% and 16% respectively.

US Crude remained stranded around the $US93 per barrel mark as traders await this week’s inventory reports. Analysts are anticipating a rise of 1.5 million crude oil barrels in the US stockpiles.

Industrial metals have been steady over the past week with a stronger euro prompting market players to buy, though weak German factory data has impacted price moves.

Economic Announcements:
The EIA Petroleum Status Report will be of interest to oil investors who will be eager to see if US inventories have been replenished this week.

In Australia, New Home Sales and Retail Sales data will be available for public consumption.

Question:
Do you think global markets will be preoccupied with US budget spending cuts or could some good earnings results