The coast isn't all clear yet for a risk-on rally
- S&P 500 futures +0.5%
- US 10-year yields up 3.5 bps to 2.54%
- Germany DAX +0.5%
- AUD/JPY +0.9% to 80.20
Risk-on flows are the main talking point over the last two hours as markets got a bit of a jolt and that helped to see equities gain while bonds declined. In currencies, the aussie and euro are the big winners while the dollar and yen are the notable losers on the day so far.
While all is looking good for risk sentiment now, there's still potential for things to sour in trading later. US earnings season kicks off today with financials being the first to report and on the agenda there's JP Morgan and Wells Fargo both set to report before market open.
Although they're not traditionally bellwethers for how the rest of the earnings season will play out, they could still play a part in affecting overall market sentiment. Hence, over the next few sessions it's also best to be prepared for potential landmines still to come from earnings season in the US. Greg pointed out what names we should expect until next week here.
That said, I'd be watching the AUD/JPY chart rather closely today. It's often a barometer on how market sentiment is behaving and for the pair to break above its three-month range today will be a significant victory for risk assets.
