SCOREBOARD: European enthusiasm

Well the Europeans don't seem to be double dipping. If anything the economy accelerated in July after what's looking like a strong second quarter. The PMIs (for both the services and the manufacturing sectors) beat expectations for a fall and actually rose. So after last night's move, the indexes sit about 8-12 per cent above average – obviously pointing to continued robust growth. Backing that, industrial orders were up another 3.8 per cent in May after a 0.6 per cent rise in the month prior. Get on board.

I reckon the best news came out of the UK though. Consumer spending came in at almost twice the expected rate in June, surging 1 per cent for the month. Even better, the previous month's data was also revised up (0.7 per cent from 0.5 per cent). From where I'm sitting it looks like households are going to make a solid contribution to UK GDP in the second quarter (due tonight). This is a great result which should dispel unfounded fears of a double dip. Unfortunately it also highlights the absurdity in discussing further quantitative easing. Truly. The fact that it was even talked about by the MPC with inflation well above target and the economy on a solid footing beggars belief.

The good data nevertheless gave a solid bid to stocks overnight with indices in Europe up between 1.9 per cent (FTSE) and 2.5 per cent (Dax). The flow through to the US was immediate with the S&P up 1.1 per cent shortly after the open. Another round of very strong earnings results is obviously helping here and the good news, is that not only are many of these companies eclipsing earnings estimates, they are revising up their outlooks as well. At the close then, the S&P500 rose 2.3 per cent (1093), with financials, basic materials and industrials leading the index higher – all up over 3 per cent. The Dow was up 201pts to 10322, the Nasdaq rose 2.7 per cent (2245) and the SPI underperformed rising 1.4 per cent (4408).

You can probably predict what happened in the commodity and Forex space. Okay, fair enough, probably not the Forex space. This time, and I emphasise this time, growth optimism saw US dollar sell off. Most majors were up over a big figure with the euro at 1.2894, the Australian dollar at 0.8936 (highest since mid-May) although Sterling rose only 63pips to 1.5258. Confusion is obviously weighing here what with inflation and retail spending at pretty solid rates, but then the BoE seemingly stuck in a time warp and talking about printing more money. So USD weakness, great earnings and very solid data saw commodities bid. Copper was up 2.3 per cent and crude surged about 3.3 per cent to $US79 which is the highest in almost three months.

Otherwise rates sold off, the curve bear steepening as the 2-year yield rose 1bps (0.56 per cent) while the 10-year rose 6bps to 2.93 per cent. Ranges were again comparatively narrow and volumes light however (down 24 per cent). Aussie futures were down 7 ticks to 95.25 and 94.79 on the 3s and the 10s respectively.

In other news, data out was mixed but generally okay. US home prices rose 0.5 per cent in May (-0.32 per cent expected), existing US home sales fell less than expected (5 per cent versus 10 per cent) which leaves sales slightly below average. Then jobless claims rose to 464,000 from 427,000 which brings the four-week moving average to 456,000. Continuing claims nevertheless continue to decline, down to 4.5 million from 4.7 million. Bernanke repeated to the House of Reps Financial Services Committee that although the Fed doesn't expect the recovery to falter, if it should, they would provide more stimulus. Another Fed speaker Dudley said that growth is 'far less robust' than the Fed would like, but the risk of a double dip is slight. Amen brother. Finally in China, a number of government economic agencies predict that growth will range from 9.5-10 per cent this year and that further stimulus measures were not needed. In Canada retail sales fell 0.2 per cent in May.

In Australia, we get export and import prices at 1130 AEST. But we know the story. The terms of trade is surging. Other than that we get the German IFO survey at 1800, Taiwan's industrial production and the preliminary estimate of UK GDP which is expected to rise 0.6 per cent. There is no US data to speak of but the Canadians pump out their June CPI number.