SCOREBOARD: Lingering doubts

It's looking like a fairly lacklustre session overall and we haven't seen much in the way of big price moves or even big news or dataflow. That's not that surprising given the time of year. Some of the gloss seems to have come off after yesterday's session, but nothing serious.

In Europe, markets took a bit of a battering after a string a negative news stories; European banks parked a record €453 billion at the ECB overnight, Greece will default and leave the euro if it doesn't get the next bailout package apparently (we all know the drill) and sentiment also took a turn for the worst following an announcement that Unicredit (Italy's largest bank) plans a rights offer – at 43 per cent below yesterday's closing price – to raise capital.

The euro dropped over a big figure in response, hitting a low of 1.2898 before rebounding somewhat to 1.2940 (over a big figure lower than 1630 AEDT yesterday). Similarly, European stocks all ended weaker, with the Dax off 0.9 per cent, the CAC off 1.6 per cent and the FTSE off 0.6 per cent.

In the US, equities ended flat, having been off 0.7 per cent at the low (on the S&P). A few more positives here to contend with given the run of US economic data continues to paint a reasonably decent economic picture. So, for instance, factory orders out last night (for November) rose 1.8 per cent, which was just below expectations ( 2.0 per cent), but a solid number nevertheless. Similarly, both the ICSC-GS and Redbook chains store sales estimates suggest solid sales growth in the week to December 31 (both around 5 per cent year-on-year). As the close of trade, the S&P500 was up 0.02 per cent (1,277) with basic materials, technology and industrials the key outperformers. The Dow ended about 21 points higher (12,418), the Nasdaq lost 0.01 per cent (2,648), while Australia's SPI is 0.4 per cent weaker at 4,145.

In the fixed income space, bond yields around the global seem to have edged up overnight – 10-year bunds and gilts up a couple of basis points, while in the US, the curve has steepened again as the 10-year yield rose over 3bps to 1.99 per cent. US 5 and 2-year yields were little changed (at 0.89 per cent and 0.26 per cent, respectively). Most of the news in the debt space was reasonably positive otherwise. The German auction of 01/2022 bunds went out at a yield of 1.93 per cent (compared to 1.98 per cent in November) with bid/cover at 1.3, which is up from 1.1 previously – an okay issue. The Portuguese, meanwhile, sold €1 billion of 3 month bills at 4.346 per cent which is a decent improvement from the last auction in early December, which went out at 4.87 per cent – cover was solid at 2.4. Not much more to say really. Australian futures were off 4 ticks on the 3s and sit at 96.75 at the moment, while the 10s are at 96.11, or about 5 ticks lower.

In the forex and commodity space, copper and silver have taken a beating, down 2.8 per cent and 1.6 per cent respectively, although gold is up about $16 to $1614. Crude had a bid of sorts, more so on Brent which is up 1.4 per cent ($113.7), while WTI is 0.3 per cent higher ($103.2). The Australian dollar traded within a 65 pips range and sits at 1.0366 or little changed from yesterday afternoon. The sterling is down about 30 pips (1.5611) and the yen is at 76.74 (little changed).

In terms of other data and news flow, it's interesting to note that European CPI moderated to 2.8 per cent year-on-year in December as expected, from 3 per cent. Then in the US, mortgage applications fell 4.1 per cent in the week to December 30 after a 0.3 per cent rise the week before. Otherwise the final estimate of the European composite PMI was revised up slightly to 48.8 from 48.3.

Looking at the day ahead, there isn't too much of note for Australia or New Zealand. We get Aussie trade data at 1130 AEDT (November data), but that's about the lot I think. For tonight's session in Europe, we get German retail sales (November), the UK services PMI (December), European industrial orders (October) and producer prices (November). For the US, it's about jobs and we see the December ADP employment report and jobless claims.

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

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