Stocks climb as risk appetite improves

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Stocks are climbing today as risk appetite continues to improve globally.

S&P 500 futures are higher by almost 0.2 percent. Europe is rallying strongly after the German ZEW survey of investor confidence blew past expectations. Indexes are higher by more than 1 percent in Frankfurt and Paris, along with formerly distressed markets such as Spain and Italy. Most Asian stocks were lower as investors took profits in China and Japan overnight.

U.S. trading resumes today after a three-day weekend. Stocks remain in rally mode as economic conditions continue to improve, especially in Europe. The S&P 500 is sitting at its highest level in more than five years, while indexes such as the Dow Jones Transports and the Russell 2000 small caps are already in record territory.

The question now facing investors is whether they should worry about potential political risks in the United States and Italy or chase what may be the start of a new multi-year bull market. This week's economic calendar will continue to focus attention on areas that have been positive: Germany, China, and the residential real estate.

Currencies and commodities are mixed, with no clear direction. The euro is down slightly, but the Australian dollar is inching higher after the country's central bank suggested that further rate cuts are unlikely. The Japanese yen is higher across the board. Oil is little changed and copper is down by 1.5 percent, while precious metals are inching higher.

It's noteworthy that many of the typical correlations are breaking down. Normally a strong yen and weak copper would correspond to lower equity prices, especially in Europe, but that is decreasingly the case. It suggests that new patterns are emerging, marking a break with the conditions that prevailed before the 2008 crash.

In company-specific news, Office Depot and Office Max are climbing amid reports they may combine their businesses. Best Buy is up after getting recommended by Barclays, which raised its rating to "overweight" and said that sales are stabilizing. Express Scripts is also advancing after quarterly results beat estimates. 

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