SCOREBOARD: European exhale

European markets bounced back last night, following what was a reasonable degree of, if not panic, then heightened concern the previous session. Now, magnitudes weren't sufficient to offset the falls that we saw, but the moves are a good sign that we won't see a repeat of the Greek election. You can't rule that out obviously, but when the Dax is up 1 per cent, the CaC is 1.9 per cent higher and Italy's index is up 1.8 per cent, it's a good sign that it won't. In any case creditors don't seem too fussed by the result, probably because it's been the norm for, oooh I don't know – 67 years? I'd be spooked if the result wasn't ‘uncertain'.

Anyway, creditors snapped up another auction of Italian bonds, and while yields were higher – the 4-year bond at a yield of 3.59 per cent and the 10-year bond at 4.83 per cent, in both cases the highest since October – demand was solid. So things seem to be settling somewhat at this stage and the euro was about 70 pips higher as a result (1.3127).

I guess the other thing worth noting, and helping that bid for euro stocks, is that the European Commission's economic confidence indicator rose in February for the fourth consecutive month to 91.1 from 89.2. The climate indicator itself is the highest since May 2012.

Right. So over in the United States the bid got underway from the open and looks pretty decent as I write. Not that US markets ever seemed spooked by the quite usual Italian election result. The S&P500 is currently up 1.4 per cent (1517), the Dow is 165 points higher (14,065) and the Nasdaq is 1.3 per cent higher (3170). Bernanke is working wonders (second speech to Congress last night) promising no end to quantitative easing, which perhaps served as a reminder to traders last night of what the likely policy response would be if there was, errmm, any angst over Italy's election. Now, Bernanke did say in response to a question that the Fed would review its exit strategy soon, but we shouldn't take out of that that it would be implemented soon. It would only be reviewed.

Outside of that there was the additional advantage of quite decent data. So while headline durable goods orders fell 5 per cent in January, core orders – non-defense capital – surged 6 per cent and pending home sales surged almost 5 per cent.

The great surprise amid all of that was in the commodities space. Despite solid economic numbers and the promise of free money all round for a long time yet, commodities were generally weaker overnight. Gold fell $21 to $1594 and silver fell 1.3 per cent, although crude managed a very modest gain of 0.2 per cent to $92.38.

Elsewhere there wasn't much – we saw bond yields rise with the US 10-year up to 1.90 per cent from about 1.87 per cent, and the 5-year in turn is a couple of basis points higher to 0.85 per cent.

Then for forex, and having hit a low of 1.0184, the Australian dollar then bounced back to be at 1.0232, up smalls from yesterday afternoon. The British pound is 60 pips higher to 1.5156 and the yen is up 92.20 from 91.81.

In other news, a Bank of England official suggested that banks may be penalised for leaving money parked at the central bank. The stick would be negative interest rates and while this was not imminent it was being discussed.

Looking at the market today, the SPI suggests the All Ord's will rise 0.8 per cent. Then looking to the news and dataflow, capex is the big release locally. Everyone will be looking for signs that the mining boom is over and while we didn't see any of that in the last release, this release may actually provide some relief of those who made that call. Remember though that business investment is extremely volatile and it swings wildly from quarter to quarter. So while any decline this quarter will be seized upon by proponents of the 'mining boom is over' view, it's more likely just the usual swings that we've seen these past few years. Forecasts are that capex will rise by 1 per cent this quarter.

Tonight, the key data includes revisions to US GDP, initial jobless claims and then German employment and eurozone CPI.

Have a good one…

Adam Carr is a leading market economist.

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