SCOREBOARD: GDP support

Equities had a reasonable bid around the globe last night, largely due to some decent data out of the US. Moreover, concerns over Italy's election seem to have died down, although having said that their 10-year bond yield remains a little elevated at 4.72 per cent, compared to what we've become used to over the last three months (well down on peaks though). A month ago yields were closer to 4 per cent. But for equities the bull run continues and Italian stocks rose 0.6 per cent; in France they were 0.9 per cent higher and same with the Dax; while the FTSE100 rose 0.6 per cent as well.

Over in the US, gains look to be more modest, with the major indexes up around 0.2-0.3 per cent around one hour before the close, (S&P500 1520, Dow 14118 and Nasdaq 3176) although the Dow is pushing new records and the S&P500 isn't to far from its 2007 record.

Some key levels here. If America's useless politicians can stop the theatrics and deal with the sequester – they have talks tonight – we might even see more solid gains over the next week. New records all round – good bull market stuff.

Anyway, the general tone to US economic data was positive. We had GDP and if you recall the first estimate of fourth quarter US GDP showed a fall of 0.1 per cent. Fortunately this has been revised up to positive (if barely so) growth of 0.1 per cent. The important thing to note here, as I did last time, is that defence spending largely accounted for the weakness in GDP, taking 1.3 percentage points of growth just by itself. Inventories took off another 1.6 per cent.

So is underlying growth really this weak? No, only a fool would suggest this, and the fact is it isn't actually too bad. I mean, I don't think anyone believes that the US will cut defence spending 22 per cent each quarter. More to the point, private demand is still up around 3 per cent.

Outside of that, jobless claims fell back to 344,000 in the week to February 24 from 366,000 the week prior. We even saw some decent manufacturing surveys, regional ones and third tier, but still they adds to the positive tone. For interest it was the Chicago and Milwaukee manufacturing NAPMS's or PMIs, both of which have a reading over 56 – up 1-5 points. Offsetting that was an 8 point fall to -10 in the Kansas City Fed index.

Notwithstanding all the positive data and price flow last night, there were again some big falls across the commodities space. Gold was down almost $20 to $1576, silver was off 1.8 per cent, copper down 0.6 per cent and crude fell 0.7 per cent to $92.

Otherwise there wasn't too much else – the euro fell 70 pips to 1.307; the Australian dollar is off about 50 pips to 1.0226; the British pound is little changed at 1.5175; while the yen weakened a bit, up to 92.64.

On the rates side there was virtually no action. The US 10-year Treasury yields traded within a 3 bps range and are little changed at 1630 AEDT as I write, at 1.89 per cent. The 5-year sits at 0.77 per cent and the 2-year at 0.24 per cent. Aussie futures were equally boring, down about 3 ticks a piece to 97.23 on the 3s and 96.65 on the 10s.

For today, the SPI suggests a modest 5 point fall on the ASX – not a lot. So in terms of macro dataflow we get RP Data's house price index at 1000 AEDT, which is about the only Aussie data worth watching today. (Alright, not true, we also see the Reserve Bank's commodity price index at 1630 AEDT).

Japanese inflation figures are also due about 1030 AEDT and then at 1200 AEDT we see China's manufacturing PMI.

Tonight, the key dataflow includes German retail sales, Italian employment and eurozone unemployment. In the US the key release is the ISM, where the market looks for a modest fall to 52.5 from 53.1. Accompanying that data, we see Michigan University's consumer confidence estimate, personal spending and income and construction work done.

Have a great day…

Adam Carr is a leading market economist.

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