The Australian market is set to open mildly higher ahead of what is likely to be a relatively quiet day's trading.

The local market got a mildly positive lead from the U.S. The fourth-quarter reporting season got under way this morning as Alcoa, announced its fourth-quarter results after the market closed. These came in broadly in line with expectations at a loss of 3c per share.

Equity markets are likely to be dominated by the reporting season over the next few weeks with Australian companies beginning to report results for the December half year in February.

Earnings growth for leading US companies is expected to be around 6% compared to Q4 2010. However, one feature of recent months has been that statistics on economic growth in the US have consistently surprised to the upside. In yet another sign that US consumer demand is alive and well, consumer credit grew $20.4bn in November. If these signs of improved demand translate into better than expected revenue growth for companies, it will become difficult for investors to ignore equities at current earnings multiples. Markets will continue to build significant risk premium into valuations because of the European situation. Even so better than expected earnings growth will significantly increase the opportunity cost of holding low yielding assets such as cash, bonds and gold compared to equities.

Domestically, markets will focus on building approval statistics due for release at 11.30 a.m.
This has been a very weak sector of the Australian economy in recent months. Although monthly figures are volatile, investors will be looking for signs of improvement following recent interest rate cuts. This will assist not only companies directly exposed to the building sector but provide some insight into the general state of investor and household confidence.