Wall Street continued a tentative upward trend, but European markets were subdued despite positive German data and a promising outlook.

It was a very simple session last night with little major news or data flow, but still stocks on Wall Street are pushing higher as I write – just. The S&P500 is up 0.2 per cent (1554, now less than 1 per cent way from a record), the Dow is 0.2 per cent higher (14,428) and a new record, while the Nasdaq is also 0.2 per cent higher (3249).  

For Europe itself, gains were even more subdued and that was after some rock solid German data showing the recovery is accelerating. German exports surged 3.3 per cent in January after a 1.5 per cent fall the month prior, while imports rose 1.2 per cent after a 0.2 per cent increase. Having said that, the Dax was flat, as was the CaC. The FTSE in turn rose 0.3 per cent. Remarkable constraint really, when you note that the OECD said the outlook in the major economies is improving. Hey, thanks for the heads up guys.

Price action elsewhere was non-descript. For forex, the Australian dollar was modestly higher – up 40 pips to 1.0265. The euro was about the same, up to 1.3036, while the British pound was unchanged at 1.4919, having hit a low of 1.4866.

We saw no significant moves on the commodity space – gold was up smalls to $1579, copper rose 0.3 per cent and crude was 0.1 per cent lower ($91.9).

On the rates side we saw nada. The US 10-year traded on a narrow range and sits at 2.057 per cent. The 5-year is at 0.895 per cent and the 2-year is a whopping 0.261 per cent. Aussie futures were down about 2-3 ticks a piece, with the 3s at 97 and the 10s at 96.42.

To the day ahead, the SPI suggests the All Ords will rise. As for the dataflow, we see National Australia Bank’s business survey at 1130 AEDT and, all things considered, I’d be surprised if there isn’t a sizeable lift in confidence. Global and domestic equities were rallying hard at the time, house prices were on the up, all the usual rot about debt and daleks and deteriorations had subsided and, importantly, the Reserve Bank held rates steady.

That fact has proven to be confidence lifting, as interest rates were never high. So when lazy business leaders and useless policy makers make up reasons to cut rates, well, that hurts confidence. I hope those trying to target lower rates, to lower the Australian dollar or for other reasons, now realise the damage they had been causing to the rest of economy.

You see, all the other stuff – the solid economic recovery and equity rally – has been around for a while, it’s not like any of it is new, it hasn’t just happened this year. The US recovery is in its fourth year and has been pretty solid and above trend the whole way. Ditto the equity rally for the globe, and from mid last year for Australia.

The domestic economy itself has been around trend, more often above, for what, three years now? That hasn’t just all of a sudden changed either, it’s just that the resistance to reality has slowly been chipped away. People have slowly realised the errors of their pessimism, and so the only thing that’s really changed is perception or expectation. Thus the damage caused by rate cuts only served to justify all the pessimism. It didn’t lift the government’s election chances – hahaha, yeah right, nothing could have done that! – nor did it weaken the Australian dollar.

Outside of NAB's survey we see German consumer prices tonight alongside UK industrial production and trade. For the US there isn’t much – small business optimism and the monthly budget statement.


Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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