Scoreboard: Greek relief

More International Monetary Fund aid for Greece gave European stocks a small lift but disappointing US data pushed Wall Street lower.

A lacklustre session on both sides of the Atlantic, with little in the way of major economic news out last night to drive things. I suspect European stocks only just managed to close in the black because of positive news on Greece. You’ll never guess, but they got the next tranche of aid from the International Monetary Fund.

Remember when news like that would have seen stocks up 3 per cent or so? Well, we had none of that last night people. The Dax was only up 0.2 per cent, the CaC was flat and the FTSE100 was only 0.1 per cent higher.

This latest tranche takes Greece past the German election when some suggest a harder line may be taken. Something to look forward to, I guess – the resurrection of the Greek crisis and ye olde ‘kicking the can’ chestnut.

Over in the US, stocks were all in the red, but only modestly so. At the bell the S&P500 was off 0.4 per cent (1685), the Dow was 36 points lower (15,521), while the Nasdaq fell 0.4 per cent (3599).

A weak pending home sales report may have weighed for the session – they fell 0.4 per cent in June – but then again that’s after a sizeable 5.8 per cent lift in May. Can’t forget the Dallas Fed manufacturing index either – it fell to 4.4 in July from 6.5 in June.

Whoa! I hear you say. That’s enough to get Nouriel Roubini and Paul Krugman and other such bauble wearing economic loons talking about another double dip recession. Yet I suspect it’s more the case that punters are just sitting pretty until the barrage of data – payrolls, ISM and the Fed – comes out toward the end of the week.

Now, other than that we got some interesting commentary from a China expert – ex-Chief Economist at the World Bank, Justin Yifu Lin. I can’t say for certain, but I’d like to think that his commentary may have had a calming influence – especially in the commodities space, where gold was up $5 ($1326) and copper held its ground – flat, basically – although crude was down 0.2 per cent.

Okay, maybe his comments didn’t rock the market – but he provided, in my humble opinion, some very rare pearls of wisdom. Oh, and something else that is lacking in this market – common sense! His view is that China will have no trouble growing at around 8 per cent or so for the next 20 years, for the simple reason that it is still developing. Or, in his words, it has “the advantage of backwardness”. He correctly noted, as I have, that while many people “are pessimistic about the Chinese economy…so far none of the doomsday predictions have been realised.” And this is important, because these predictions are made year in and year out.

Not much else to report for the session otherwise. The Australian dollar hovers just above 0.92 US cents, having been closer to 0.93 cents yesterday (0.9245 at around 1630 AEST). Punters obviously weren’t hearing Justin Lin. The euro is then down smalls to 1.3264 and the yen is at 97.95.

Otherwise, just watch that 10-year bond yield. It rose 5 bps last night to 2.6 per cent, which by itself isn’t all that interesting, but ahead of the Fed and some key data is very much so. It’s a decent move in this day and age and I’m surprised there is so much conviction. Unless something has been leaked, that is (and it often is). So tonight’s price action will be key.

Our market will probably be flat today given last night’s moves and the SPI, which was effectively flat overnight. Then for the rest of the day we get hit with Japanese industrial production figures at 0950 AEST, while domestic data is limited to building approvals at 1130 AEST and a speech from the Reserve Bank governor Glenn Stevens at 1305 AEST. The consensus of forecasts has building approvals rising 2 per cent after a 1.1 per cent fall the month prior.

For tonight there are bits and pieces out of Europe, Spanish GDP figures, eurozone economic confidence and German inflation figures. US data includes US house prices and consumer confidence.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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