SCOREBOARD: Commodity flutter

News flow was fairly sparse last night and, naturally enough, Greek-centric. But we saw some interesting price action in the commodity space regardless – some reasonably big moves.

Gold for instance is up $27 to $1747, silver is 1.6 per cent higher and crude is up almost 2 per cent on WTI ($98.79) and 0.5 per cent on Brent ($116.5). A weaker US dollar seems to be a part of the story here and the dollar index is off 0.7 per cent after Bernanke talked down the economy to the US Senate – QE3 here we come.

But it's not the entire story, and in fact US dollar weakness doesn't seem entirely attributable to Bernanke. Bernanke's testimony was largely the same as that to the House, in stating that the recovery was frustratingly slow. He also noted that the 8.3 per cent unemployment rate was likely understating the weakness in the labour market, as presumably are the 3.6 million jobs that have been created in the recovery so far. No mention was made, that I could see, of the 257,000 increase in private employment on Friday. So I reckon that jump in commodity prices also reflects the fact that the market doesn't necessarily see the labour market the way Bernanke does – especially given data out last night showing US job openings at a 3-year high.

Euro also had its own reasons to shoot higher as well. You may think that is an odd move given the Greeks delayed making a decision on the bailout agreement again (for another 24 hours I think). Nevertheless, subsequent news flow that a final document had actually been put together for consideration allayed fears that talks would collapse. Euro was up over a big figure to 1.3238, Sterling was up about 80 pips (1.25886), while Australian dollar was little changed at 1.0785, having spiked about 80 pips higher after the RBA decision yesterday.

In another sign that the market isn't as beared-up as the Fed chairman, the US treasury curve steepened overnight (well so far) as the 10-year yield pushed up another 5bps to 1.96 per cent (4bps higher than at 1630 AEDT so far). The 5-year yield was also about 4bps higher (0.804 per cent), while the 2-year yield was up over a basis point to 0.246 per cent. Having sunk after the RBA meeting, Aussie futures were off another tick or two from 1630 – the 3s at 96.51 and the 10s at 96.005.

As for equities, they were generally weaker in Europe – Dax off 0.2 per cent, FSTE off 0.03 per cent, although the CaC rose 0.2 per cent. US stocks looked to be weaker as well, at least just after the open when the S&P hit a low of 0.6 per cent. The job openings data and news that Greece had drafted a final agreement saw a bid developed and the index retraced, although as I write, it's barely above zero (rising 0.2 per cent) at 1346. Utilities, tech and consumer goods are the key outperformers at the moment, while basic materials, industrials and financials are lagging. The Dow is then 29 points higher (12874), the Nasdaq is 0.01 per cent lower (2901), while our own SPI is 0.1 per cent higher (4253).

A few other data points were noteworthy last night. US consumer credit spiked for the second straight month, rising by $19.3 billion in December after a $20.4 billion rise the month prior (which was the biggest jump in over a decade). Not so positive was a 2.9 per cent fall in German industrial production in December, although November's 0.6 per cent fall was revised up to 0 per cent.

To the day ahead, Westpac puts out their Australian consumer confidence measure for February at 1030 AEDT and then we get Japanese trade numbers at 1050. German trade numbers follow at 1800, otherwise there isn't much out tonight.

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

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