SCOREBOARD: Hard drive

What a difference a day makes – in the US at least. Stocks on Wall Street rebounded sharply last night, largely offsetting the losses of the previous session. There really wasn't much news to drive it though, maybe a correction from the panic that prevailed before. Being cited for the gain was Dell's decision to go private and delist from the Nasdaq, plus a non-manufacturing ISM report that, while weaker, wasn't as weak as expected. Specifically, the non-manufacturing ISM slipped to 55.2 in January from 55.7 (with an expectation of 55).

With an hour to go, the S&P500 is up 1.3 per cent (1514), the Dow is 0.9 per cent higher (14,000) and the Nasdaq is up 1.4 per cent (3174). A good effort, especially as we approach that dastardly fiscal cliff again. That's right, the cliff – the gift that keeps on giving. Kind of like the Grexit. Gotta keep the fear alive, people.

Anyway, the budget battle goes on and will probably go on all year, if not for the next decade. To avoid it this time, the Obama regime suggested a series of smaller cuts and tax increases to get Congress through the next few months. The GOP rejected the plan – and so on it goes ad nauseum.

In Europe, too, the tone was positive but gains were modest and nowhere near sufficient to offset the previous session's losses. The Dax was up 0.4 per cent, Cac up 0.95 per cent and FTSE 0.6 per cent.

In the rates space, the US 10-year Treasury yield shot back up over 2 per cent – 2.02 per cent to be precise, which is about 6 bps higher than yesterday afternoon. The 5-year yield was about 4 bps higher at 0.87 per cent, while the 2-year is up a bit to 0.27 per cent. Spain's 10-year yield then fell 12 bps to 5.35 per cent, while the Italian equivalent is about 5 bps lower at 4.4 per cent.

Price action elsewhere was non-descript. We saw modest gains across the commodities space, except for gold where we saw a small fall of $4 to $1670. Copper was 0.1 per cent higher, silver 0.3 per cent and crude was 0.5 per cent higher ($96.69).

The euro and British pound were the big movers in the forex space, up to 1.3582 – a big figure given that the panic has subsided a bit – and down 90 pips to 1.5660. The Australian dollar is little changed at 1.0413 and the yen is at 93.39.

Bits and pieces otherwise: in Germany the final estimate of the January PMI was revised up to 55.7 from 55.3; Italian and French PMIs are around 43; while for the eurozone as a whole, the PMI was finalised at 48.6 from 48.3. Still in the eurozone, retail sales fell by 0.8 per cent in December.

As for the Reserve Bank's decision yesterday to keep interest rates on hold, there isn't a lot to say. The decision was expected but, as the board's statement makes clear, it won't take much for them to cut again. They won't hesitate to invent another reason. (For a more in-depth discussion you can read my piece in Business Spectator yesterday, The Reserve Bank is Stumbling in the Dark.)

For the day ahead, the SPI suggests our stocks will rise 0.5 per cent. Data-wise get domestic retail sales at 1130 AEDT, with the market looking for another soft result of 0.3 per cent. Note that this survey measure has consistently failed to capture the true strength of consumer spending for some years now. Company accounts, the national accounts, car sales and overseas travel numbers show a much stronger spending picture.

Tonight its very light, we get German factory orders and that's about it.

Have a great day…

Adam Carr is a leading market economist.

See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

Follow @AdamCarrEcon on Twitter.