SCOREBOARD: April pause

Right. Finally, finally the Greek problem looks like it has been settled. The French and Germans have agreed on a set of principles to rescue Greece, should that be required. But, while the ECB and many Europeans are vehemently opposed, the IMF would be included in any assistance program, although most funds would be provided through bilateral loans. Also helping the situation will be the ECB's decision to drop a proposed increase in collateral requirements that could have seen Greek debt excluded on further credit downgrades.

European stocks surged on the news, backed by a stronger profit result from Hochtief and a spike in UK retail sales. UK retail sales jumped 2.1 per cent (median 0.9 per cent) in February after a downwardly revised 3 per cent weather-induced fall in January. Annually, sales are 3.5 per cent higher although excluding gasoline, sales are up 5.4 per cent which is the strongest growth rate since May 2008.

The US effort proved less remarkable despite a fall in jobless claims to 442k from 456k (in the week to March 21) and Bernanke stressing the US needs low rates for a while yet. US stocks had actually spent most of the session in the black, hitting a high of 0.9 per cent (1180). They went offered pretty much in the last half hour, dropping 0.6 per cent over that period as energy (-1.4 per cent) and basic materials (-2.2 per cent) slumped. I'm not too sure what the issue was here as commodities themselves weren't that bad. Sure oil was off smalls (-0.3 per cent to $80.34) and metals were generally higher – gold up $5 to $1091, copper up 0.9 per cent, nickel 2.1 per cent and zinc 1.1 per cent. The key outperformers on the S&P500 were consumer services, financials and tech stocks – NASDAQ down 0.06 per cent (2397). Otherwise the Dow was up 5pts (10841) and the SPI dipped 0.04 per cent to 4901.

Rates sold off again and another mediocre treasury auction seems to be key here. $32bn of 7yrs were up for grabs and while cover was average at 2.61, the spread from the median bid to stop was wider than average at 8.5bps with the new notes stopping 4.2bps above the when-issued. Indirect interest was 41.8 per cent versus the prior 12-auction average of 50.4 per cent. At the close the 2yr yield was up 1bp to 1.09 per cent, the 5yr was at 2.64 per cent ( 4bps) and the 10yr was 3.88 per cent ( 6bps). Aussie futures were down 2 ticks a piece on a 7 tick range. The 3s were at 94.57 and 10s at 94.18. Not much to report on currencies otherwise – dollar index up 0.2 per cent, sterling the biggest move down 50pips.

For Australia today the headline will be the RBA governor's speech on recent financial developments. Yesterday we again heard from the RBA that rates will move to neutral gradually. Australia was regarded as being in a "reasonably solid upswing” with the terms of trade expected to rise significantly this year. Overall I reckon this supports my view that the cash rate will be at more normal levels by mid-year (4.5 per cent with hikes in two of the next three meetings).

However, they also share my concern over the drop in lending approvals and in my mind this rules out an April hike. As they state "it is too early to tell whether the property market is cooling" so we need time to see what is going on. It's important to note, however, that the RBA hasn't dismissed the data. Assuming lending isn't going into a hole, everything in Oz is great otherwise and rates will rise to a more normal setting quickly – that is, 4.5 per cent by mid-year. So let's watch those lending numbers.

Prior to this we get the Kiwi February trade balance and then tonight the final estimate of US GDP is out (forecasts unchanged at 5.9 per cent). Apart from that the final reading of the Michigan Uni's consumer confidence measure (March) is due alongside three Fed speakers.

Adam Carr is senior economist at ICAP Australia. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.