SCOREBOARD: Housing monopoly?

US stocks managed to push higher last night although there doesn't appear too much driving it. US home prices rose (0.7 per cent in May after a 0.7 per cent rise the month prior) and that may have helped I guess, but most of the data was less supportive.

Consumer confidence for instance dipped a bit in June to 62 from 64.4 (average 91) and then the Richmond Fed manufacturing survey fell to -3 in June from 4 (average 2). So make of it what you will. More buyers than sellers perhaps. Initially, US stocks looked like they might follow some of the European bourses, what with the CaC down 0.3 per cent and the FTSE off 0.07 per cent. At the low, shortly after the open, the S&P was down 0.3 per cent and by that stage we had seen all the economic data the US had to offer. That's why I don't think it was home prices that pushed the market. Whatever the case, the bid was on shortly after though, and it took the index up 0.5 per cent at the close (1319). Energy stocks were a key outperformer, although crude itself only had a modest bid – up 0.2 per cent ($79.38) in NY trading. The Dow was then 0.3 per cent higher at 12534, the Nasdaq rose 0.6 per cent to 2854, while our own SPI was 0.3 per cent higher (3996).

As for Europe? Well the discussion goes on. The whole issue, apparently, revolves around Germany's insistence that there can be no blank cheques. Germany doesn't think that it should continue to bankroll things while it has no say in or role in supervision. Just giving cash away would be reckless, and the German position is the correct one. As is their position that continually printing money and fighting a debt crisis by taking on more debt is beyond stupid.

As an aside, and as you've probably already heard, the Bank for International Settlements threw its considerable intellectual weight behind the idea that ultra-loose monetary policy is dangerous – potentially doing more harm than good. Regular readers know this to be my view also and it has already proven to be correct. Inflation is rising and is more volatile, markets are much more volatile and subject to severe bouts of hysteria. The real economy is more volatile, and governments have taken little action. This is all very dangerous. Counter arguments lack any merit, logically, empirically, and simply can't be taken seriously – no matter how many baubles proponents wear.

Moving along, the European Union outlined a plan last night that would establish a kind of European supervisor of the financial system – a prerequisite for pooling debt. Also last night, the Italian prime minster said he would continue to push for the bailout funds to stabilise markets in the near-term, helping to bring Italian and Spanish debt yields down. On that front, Spain sold off about €3 billion in bills – 3 month bills at a yield of 2.36 per cent from 0.84 per cent in May, while the 6 month yield rose to 3.24 per cent from 1.74 per cent. Still, these rates are much lower than what Australia has to pay. Roughly 3.3 per cent for 3 million T-notes. Yet the market panicked again and bonds sold off further, taking the Spanish 10-year yield up to 6.81 per cent from about 6.65 per cent. The Italian 10-year followed suit rising to 6.17 per cent from 5.97 per cent and it will be well worth watching Italy's auction of 5-year and 10-year bonds this Thursday.

As for US Treasuries? There's not a lot really. They bounced around and sold off slightly at the close. From 1630 (AEST) yields on the 10-year are 2bps higher at 1.63 per cent. The 5-year is a bit over a basis point higher at 0.73 per cent, while the 2-year sits at 0.31 per cent. Aussie futures are 4 ticks lower on the 3s to 97.66, while the 10s are at 97.035.

Finally for the price action, the Australian dollar is about 30 pips higher to 1.006, the euro is about 30 pips lower (1.2491), while gold traded almost $16 lower to $1572 and copper was flat.

In other news, the Italian government lent €2.5 billion to one of its banks – Monte dei Paschi (since 1472) – bringing total holdings in those bank's bonds to €3.9 billion (initially bought under the Tremonti bank bond program). Then German consumer confidence rose, yes rose, in July while French confidence held steady in June. Otherwise there isn't really much out today. Tonight it's worth checking German consumer prices and US durable goods.

Adam Carr is a leading market economist. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

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