SCOREBOARD: Greek reprieve

Well as expected, the Fed meeting passed without incident. They decided to keep rates unchanged, kept their commitment to keep rates low for an extended period (with Hoenig dissenting again) and anticipated an end to MBS and agency debt purchases by month's end. It was noted that economic activity was continuing to strengthen with the labour market stabilising and household spending expanding at a moderate pace. Nevertheless, the Fed thought that substantial resource slack would allow them to keep rates low. My view hasn't changed and I expect them to begin tightening by Q4 this year with 25bps hike.

While the decision was expected, there were notable moves in markets. Fed futures and eurodollars rallied and US treasuries were also bid up. Yields on the major notes dropped about 3bps after the announcement with the 2yr at 0.9 per cent (down 2bps from 1630), the 5yr at 2.35 per cent and the 10yr at 3.65 per cent (both down about 4bps from 1630). Aussie futures followed the US lead, 3s and 10s up 6/5 ticks to 94.79 and 94.39 respectively.

Perhaps the most marked reaction was in the commodity space – oil surged 2.5 per cent to $81.77, base metals were all stronger (copper 1.4 per cent, nickel 3 per cent, zinc 0.5 per cent) while gold was up $18 to $1127. There were some solid moves in FX also – particularly sterling which spiked 2 big ones to 1.5258 (in part on data showing house prices up 6 per cent y/y). EUR was up almost a big figure to 1.3782 while AUD was up 45pips to 0.9192. Yen was otherwise little changed at 90.27.

Earlier on, sentiment had been given a boost by S&P affirming Greece's BBB rating and removal from credit watch negative.

The combination of free money and a lower threat level from Greece proved a powerful boon to equity punters. Bid from the open, the S&P500 pushed higher throughout the session, getting another 0.3 per cent after the FOMC, to close near its highs (1159 or 0.8 per cent). All sectors posted positive growth with basic materials, industrials and financials the key outperformers. After today's moves, 87 members of the S&P500 are at 52 week highs (or almost 20 per cent of the index). Elsewhere, the Dow rose 44pts (10685), the Nasdaq was up 0.7 per cent (2378) while the SPI pushed 0.7 per cent higher to 4840.

There were few surprises on the remaining data or news flow. US housing starts fell in February (down 5.9 per cent to 4575k) although that was expected given the poor weather (also note that January's numbers were revised up 20k to 611k). Otherwise the German ZEW survey dipped a bit – still at a high level – while eurozone CPI was unchanged in February at 0.9 per cent y/y.

Looking at the day ahead we start off with some Kiwi consumer confidence data (8am) – confidence has spiked sharply higher lately which is no doubt part of the reason NZ consumers are splurging on cars.

In Australia, Westpac releases its leading index at 10.30am, then we have the AOFM tender for $500m April 15s and dwelling starts at 11.30am. After a strong bounce in Q3, approvals data suggest another decent bounce in starts for Q4. An RBA Assistant Governor is a panel discussant at 12 and that's pretty much it (BoJ meet possible they'll expand credit facilities). Tonight just watch out or US producer prices, the BoE's minutes and UK jobless claims.

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