SCOREBOARD: Falling flat

Not much love last night, not that the news and data flow were devoid of reasons, mind you. The non-manufacturing ISM for instance, was stronger than expected in February at 57.3 (forecast for 56) and up from 56.8 recorded in January. Happy days as the service sector is about 80 per cent of the economy. Within that survey, production, prices and new orders were all higher, although the employment index dipped a bit (still well above 50 at 55.7).

Not enough! I guess the data wasn't unanimously good and US factory orders for instance fell 1 per cent, admittedly better that the -1.5 per cent expectation, but a fall nevertheless. Throw in some concerns about whether all private sector participants will voluntarily accept the proposed write-down of their Greek bond holdings – and a bit of profit taking – and it was generally risk off. Now in terms of private sector involvement, all we have is speculation.

The Greek government set a threshold of 75 per cent participation to proceed with it and have said they would force participation if they don't get it voluntarily. Most major holders have said they would participate and the Greeks seem confident of 90 per cent participation. Either way, Greek fatigue has well and truly sunk in and the notional value of CDS is only about $3-5 billion. The deadline is March 8, so we'll find out soon enough.

For last night though, equities were offered and in Europe, stocks were down 0.8 per cent on the Dax, 0.4 per cent on the CaC and 0.6 per cent on the FTSE. It's a similar session in the US, at close the S&P500 shed 5.37 points (0.39 per cent) to 1,364.26, driven lower by basic materials, technology (Nasdaq lost 0.87 per cent to 2950) and industrials. The Dow is otherwise off 0.12 per cent (12962) while the Aussie SPI was earlier down 0.5 per cent (4249).

On the debt side, US treasuries generally sold off but moves have been small. The 10-year yield was up only 2 basis points or so (from 1630 AEDT) to sit at 2 per cent. The 5-year is up almost 3 basis points to 0.87 per cent, while the 2-year is about 2 basis points higher to 0.29 per cent. Aussie futures did little and were up a tick or two with the 3s at 96.30 and the 10s at 95.92.

Not much more excitement in the forex and commodity space I'm afraid. Price action wasn't great for metals with gold down about $10 to $1703, silver fell 2.4 per cent, while copper was off 1.1 per cent. Crude managed to push a little higher, and I mean a little. WTI and Brent are both currently up 0.1 per cent to $106.7 and $123.8 respectively. For forex then, the Australian dollar is off 40 pips to 1.0670, the euro was up smalls to 1.3222, sterling was 40 pips or so higher to 1.5863, while the yen didn't do much, up smalls to 81.52.

In other news and data, the UK services PMI fell to 53.8 in February from 56.0 which was also weaker than the expectation of 55.0. Eurozone retail the posted a surprise increase of 0.3 per cent, in January, which was above the market forecast for a fall of -0.1 per cent. In the US, Dallas Fed President Fisher (hawkish no-voter), said that there was little room for more accommodation unless things deteriorate. Finally, the Chinese government lowered its 2012 growth target to 7.5 per cent from 8 per cent in order to reform price controls without causing an inflationary spike.

Looking to the day ahead we get the RBA at 1430 AEDT although no change is expected. The market is only about 12 per cent priced for a cut at this meeting and no economists look for a cut. I suspect the press release following the decision will be short with little in the way of new information.

Before that at 1130 AEDT we get the Aussie current account balance, where the market looks for a widening to about $8 billion from $5.6 billion. Net exports will also be important in forming a final view on tomorrow's GDP numbers as will the government spending numbers also out at 1130 AEDT.

After yesterday's rebound in inventories and the strong retail sales print, I'm less concerned about a weak GDP figure tomorrow. It was very positive to see such solid growth in both the retail and wholesale sectors and the thing is, this is where inventories grew the most as well. It appears to me than that the inventory rebuild was a deliberate restocking, reflecting greater confidence in the outlook. If sales had fallen for instance and inventories increased, then you could be concerned that the inventory bounce was unanticipated and therefore a negative sign for growth. Not the case though it seems. Not much tonight otherwise – eurozone fourth quarter GDP breakdown is about it.

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

Follow @AdamCarrEcon on Twitter