SCOREBOARD: Greek order

European markets soar as more and more bond holders sign up to the Greek debt swap plan.

The night’s events were largely Euro-centric and of course the question on everyone’s mind is what was the final uptake? Well, there is good news for those who like order, peace and harmony – word is that more than 75 per cent of private sector bond holders have agreed to the Greek debt swap plan so far – and participants remain confident of at least 80 per cent. Risk on! In Europe, stocks rose 3.2 per cent in Greece, 2.5 per cent on the Dax and CaC, while the FTSE was up 1.2 per cent. Euro then shot up about 80 pips – to 1.3254 with additional support provided by a stronger-than-expected lift in German industrial production in January. Production rose 1.6 per cent versus expectations for 1.1 per cent.

So far so good and indeed, such has been the change in sentiment, growth, everything – pretty much from late last year – that the ECB felt confident enough to issue a warning on inflation. The bank held its policy meeting overnight and no change in rates was forthcoming, but there was a huge change in rhetoric. Mario Draghi suggested that things had improved enormously and that there were many signs of returning confidence in the euro. From my read of things, the ECB is not considering a rate cut at all this year and has basically signalled that if anything, it'll hike rates given that it expects inflation to now remain above the target for 2012. I don’t expect that to come soon though, and that’s because the ECB is also forecasting weak growth this year – something between -0.5 per cent and 0.3 per cent. A difficult situation no doubt.

Across the Atlantic, US equities pushed higher on news of high participation in the Greek debt swap plan and probably also on the jobless claims data. Claims were up marginally in the week to March 3, but the real pint of interest is that claims remain much lower than last year. So far this year they’ve averaged 365,000, which is down sharply from the 410,000 average of 2011. The result signals a good recovery is underway in the labour market, and as we know Bernanke has already suggested that the unemployment rate has come down faster than he expected.

At close, the S&P500 was up 13.28 points, or 1 per cent, to 1366, sitting just near its highs, with industrials, basic materials and healthcare the key outperformers, although all sectors were up. The Dow was up 70 points, or 0.6 per cent, to 12908, while the Nasdaq rose 35 points, or 1.2 per cent, to 2970. Earlier, the Aussie SPI was up 0.8 per cent (4200).

Commodities too had a solid session with gold up $15 to $1703, silver rose 0.6 per cent and copper was 0.7 per cent higher. Crude for its part rose 0.6 per cent on WTI ($106.8), while Brent was 1.2 per cent higher ($125.6). Forex moves elsewhere saw the Australian dollar up about 50 pips to 1.0665, sterling was about 70 pips higher to 1.5830 while the yen was little changed at 81.56.

On the debt side, US treasuries were off smalls with the 10-year yield up 3 basis points or so to 2.01 per cent, the 5-year rose a bit over 2 basis points to 0.8782 per cent, while the 2-year was yield rose smalls to sit at 0.30 per cent. Aussie futures followed suit with the 3s down 6 ticks to 96.385 and the 10s down 4 ticks to 95.960.

Not much else really. The BoE left rates unchanged as did the BoC. That’s about it. So looking at the day ahead, we get the January trade numbers for Australia at 1130 AEDT, with Kiwi credit card spending before that at 0845 AEDT. For the rest of our session Chinese data is probably the key stuff with producer and consumer prices out at 1230 AEDT, and then we get industrial production at 1630 AEDT. Tonight of course we’ll all be watching payrolls at 0030 AEDT. The market looks for a rise of 210,000, with the unemployment rate expected to remain steady at 8.3 per cent.

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.

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