SCOREBOARD: Crude boost

In a night devoid of any meaningful news or data flow, price action was relatively subdued, which compares favourably to the Asian session yesterday – punters there were concerned about the prospects of increased instability in North Korea following the death of Kim Jong-Il. Crude got a boost though, with both Brent and WTI pushing modestly higher on the prospect of heightened geopolitical tensions. Already there are issues with Iran still festering and this just adds to that. Moves weren't huge, but they were just sufficient to buck the softer sentiment that prevailed elsewhere. So WTI and Brent were both up 0.3 per cent at the time of writing (to $93.83 and $103.6 respectively). Otherwise, gold ($1593) and copper were both up smalls from 1630 AEDT yesterday.

The only other event to note was the European finance minsters' conference call (I said in yesterday's report that was for tonight, apologies). In that call they agreed to provide €150 billion in bilateral loans to the IMF, although they failed to agree on new increased limits for the EFSF and ESM. Then ECB head Mario Draghi was out again, in testimony to the European parliament, dousing hopes that the ECB might print – reiterating that it is illegal and that the current bond-buying program was finite.

Throwing that all together, it's little wonder European stocks were sluggish, with the CaC ending up 0.1 per cent, the Dax down 0.5 per cent and the FTSE down 0.4 per cent. On Wall Street, equities had a worse session of it, closing 1.18 per cent weaker on the S&P (1205.32). Financials, basic materials and consumer services were the hardest hit although nearly every sector (except health) was weaker. The Dow was then off 0.84 per cent, or 99.52 points (11766.87), the Nasdaq ended 1.26 per cent lower (2523.14), and the SPI is up 0.4 per cent (4064) following the large fall on the All Ords yesterday.

On the debt side, there was good action again on Spanish and Italian bonds, being hoovered up to use as collateral in the upcoming 3-year ECB tender and on expectations that all that cash will find its way into higher yielding bonds whatever the case. So for last night, the Spanish 2-year yield fell 8bps to 3.37 per cent (it was 5.4 per cent a month ago) and the 10-year was off 13bps to 5.17 per cent (compared with 6.38 per cent a month ago). In Italy it's only short-end bonds getting the bid – the 2-year yields fell 16bps to 5.13 per cent while the 10-year was up 24bps to 6.83 per cent. US Treasuries haven't done much and ranges were comparatively narrow. As I write, the 2-year is at 0.24 per cent ( 1bp), the 5-year is little changed at 0.8 per cent, while the 10-year yield is down 3bps to 1.81 per cent. Aussie futures didn't do a lot either, with the 3s at 97.06 and and the 10s at 96.245 (low of 96.205).

Otherwise, the offer is currently being put on the Australian dollar, which has dropped 25 pips (0.9898) in the 10-15 minutes or so from 0700 AEDT. It was pretty much unchanged prior to that, having hit a high of 0.9970. Euro is otherwise at 1.3004 (high of 1.3044) and little changed from 1630 AEDT. Sterling sits at 1.5504 and yen at 77.99.

Bits and pierces otherwise. In the US, the NAHB housing market index rose to 21 in December from 20 (up near 3-year highs) but well below average. The eurozone current account was at -€7.5 billion in October, while construction output fell 1.4 per cent in October after a 1.5 per cent decline the month prior. But that's it.

Today at 1130 AEDT, the RBA releases the minutes to the December meeting where the bank cut 25bps to 4.25 per cent. As mentioned yesterday, I'm not sure that we're going to learn a great deal from the minutes. It'll be interesting to see how close the call was but that's about it, given Europe is completely dominating the landscape at the moment and events, announcements and the news flow more generally is completely random. Tonight it's worth watching out for the German IFO survey (for December), German producer prices (for November) and also US housing starts (also November data).

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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