SCOREBOARD: Greek optimism

Risk was back on last night, apparently on optimism over Greece, although there was no new news flow as such. The confidence vote was passed, notwithstanding the fact that there are about 20,000 people reportedly surrounding parliament. The European Commission even offered a sweetener by announcing they would accelerate €1 billion in development grants if the Greeks can just get their act together and pass the reform package. But, as the EC President said, "no one can be helped against their will”. European banks have become understandably nervous, requiring the ECB to offer the largest amount to the money market since February.

But yes, risk was back on more generally and equities had a strong bid on both sides of the Atlantic. In Europe, the major indices rose by between 1.4 per cent on the FTSE and 1.9 per cent on the Dax. Stocks in Athens were up 3.7 per cent (1.9 per cent in Spain). On Wall Street, stocks closed just off their session highs ( 1.5 per cent) to be 1.3 per cent higher on the S&P (1,295). Basic materials, technology and energy stocks were the key outperformers, although all sectors were up. The Dow was up 109 points (12,190), the Nasdaq gained 2.2 per cent (2,687), while for Australia, the SPI rose 0.8 per cent (4,545). Not a bad outcome considering the limited dataflow on tap was disappointing. US existing home sales fell 3.8 per cent (admittedly better than the market expectation for -5 per cent), which brings the numbers of sales in May to 4.8 million or about 1 million (17 per cent) below average.

Commodities were generally bid, gold up a few bucks ($1,546), copper up 0.4 per cent, softs pretty much all higher on the CRB, although crude was mixed – WTI up 0.2 per cent ($93.4) and Brent down 1.2 per cent ($110.4). In forex land, the US dollar was generally sold, with the Australian dollar up 37 pips (1.0604), euro up 55 pips (1.440.3), sterling up 19 pips (1.6243) – which is a good effort considering that a monetary policy committee member (Fisher) said that further QE was still possible – and yen unchanged at 80.19.

In the treasury space, nothing much happened and on a 2-5bps range the yield on the 2-year was at 0.37 per cent, the 5-year was 1.54 per cent and the 10-year was up 2bps to 2.98 per cent. Australian futures eased off after yesterday's post-minutes spike to be 3 ticks lower on the 3s (95.32) and the 10s (94.87).

Bits and pieces otherwise – German investor confidence took a dip, obviously due to Greece, with the ZEW economic sentiment survey at -9 in June from 3. The current situation index fell to 87.6 from 91.5, which is still well and truly above average (-18) and just off its highs (91). Other than that, Fitch said that it would treat any voluntary roll-over by Greece as a default and said that if the US didn't raise the debt ceiling by August 2 they would put the US on negative watch.

Not much for Australia today but New Zealand releases its current account deficit at 0845 AEST. Tonight, watch out for European industrial orders, US house prices and the FOMC decision. Don't forget that Bernanke now gives a press conference after most meetings. As to what the Fed might say (they probably won't do anything), I can only guess that they will make much of this 'soft patch' that has become the consensus and probably down play the rapid acceleration in inflation that we've seen. And it has been very rapid. I've got no doubt that Bernanke, Dudley and Yellen would love nothing more than to print more money and will use any excuse they can to do this, but I'm not sure the conditions are right for them to get the rest of the FOMC on board. Obviously rate hikes are some way off.

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