SCOREBOARD: Greek breather

European markets were relieved overnight as Greece raised €4 billion, sparking an improvement in Spanish and Italian bond yields.

Another crisis was averted overnight as the Greek Treasury managed to raise €4 billion in a bill sale. Greek banks will provide the remaining €1 billion the government needs over the next two days. That should tide them over then until eurozone ministers meet (I think on November 26) to make the final decision on the disbursement of funds. All the boxes have been ticked so I’m not sure why there is a delay. Drama I guess.

Anyway, the Greek auction helped a bid for Spanish and Italian bonds and we saw the 10-year yield fall 10 basis points (5.84 per cent) and 8bps (4.9 per cent) respectively. European stocks then rose, but gains were modest with the Dax flat, the CaC up 0.6 per cent and the FTSE 0.3 per cent higher. In Athens stocks rose 0.4 per cent.

In terms of other news flow there is nothing substantive – rumours and press reports. Apparently the Germans want to bundle future payments to Greece into one €44 billion payment and rumours of an impending Spanish bailout request are doing the rounds – although they are fully funded this year and Spain’s PM said they want being requesting one for a while, if at all.

With that as the backdrop, US stocks still slipped in what was a sluggish session. I guess markets were also buoyed by a positive earnings report from Home Depot. They raised their 2012 earnings outlook which helped the stock close at a 12-year high. Otherwise I haven’t heard anything new on the cliff, but so far it seems that people are cautiously optimistic, especially after the Republicans said they were okay with raising revenue, rather than just cutting spending. At time of writing, the S&P had slipped 0.29 per cent to 1377, Dow 0.27 per cent (12,781), while the Nasdaq is down 0.83 per cent (2862). US Treasuries too did little (2-3bp) range with the 10-year at 1.59 per cent, the 5-year at 0.6 per cent and the 2-year at 0.27 per cent.

In the forex and commodity space, there wasn’t much action – the Australian dollar had a modest bid (30 pips) to sit at 1.0438 while the euro was about 20 pips higher (1.2709), as was the British pound (1.5878). The yen sits at 79.40. Commodities were generally weaker but again, moves were small – crude down 0.3 per cent ($85.35), gold fell $5 to $1726 and copper was up 0.3 per cent.

In other news and data, a run of price indictors show that inflation remains well above target in major European economies. In France and Italy, annual rates of 2.6 per cent and 2.8 per cent (respectively and unchanged from September) are well above the ECB’s target of 2 per cent. Similarly, UK inflation was much stronger than expected, blitzing expectations for a 0.2 per cent rise to be 0.5 per cent higher. Annually, prices are 2.7 per cent higher with core inflation 2.6 per cent higher – again above the BoE’s target as it has been for some time – and this is during a recession. As the recovery takes hold, inflation will likely accelerate even further. For mine, that they have still gone on to print money and hold rates near zero proves they have abandoned their inflation target.

Otherwise we saw the German Zew survey weaken with economic sentiment down to -15.7 in November from -11.5 and the current situation index falling to 5.4 from 10 – this is still well above the average of -23 I would add, so investors are not as gloomy as headlines would suggest.

For the market today, the SPI suggests stocks will rise 0.6 per cent while debt futures did little, with the 3s at 97.48 and the 10s at 97.035. Australian data today includes Westpac’s consumer confidence index at 1030 AEDT. Recall yesterday we saw both business conditions and confidence deteriorate in October, which firms up my non-consensus view that the RBAs easing cycle is actually harming, not helping confidence.

As I have highlighted before, the reason this is the case is because the economy is actually doing very well. The broad spread of tier one data shows this and that been the case for a while. Cue the RBA and those who ignore the data and keep talking the economy down. When the Reserve Bank cuts rates, citing all manner of false weaknesses (mining boom end, soft consumer spending, and modest domestic demand) it stands as a contradiction to the strong growth metrics we have – so confidence falls. I mean whichever way you cut it, the cash rate is at crisis rates, and the economy is clearly not in a crisis.

After the confidence numbers we see the wage cost index comes at 1130 AEDT. But that’s it for the Australian data. Tonight we then get the BoE’s inflation report, and then UK employment data. For the US we see quite a lot of data – retail sales, producer prices, business inventories and the FOMC minutes.

That’s about the lot, hope you have a great day…

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