SCOREBOARD: Rally cry

European bonds were steady despite Cypriot troubles, while mixed US data didn't faze a rallying Wall Street.

Markets threw off concerns on Cyprus overnight and the remarkable thing is, they did so while being hit with mixed US data. Goes to show just how much momentum this rally has. People are seriously buying these dips and if they’re not, they’re planning to and biding their time.

European equities saw a modest bid on the major indices with the Dax up 0.1 per cent, the CaC up 0.6 per cent and the FTSE100 0.3 per cent higher. Can’t say there was any love for the ‘periphery’, with Italian and Spanish equities down 0.95 per cent and 1.8 per cent respectively.

At least their bond yields held steady – the Italian 10-year was at 4.54 per cent and the Spanish equivalent at 4.92 per cent, this ultimately is what matters. If these yields are contained there is no crisis and they are comparatively contained. So for instance while these yields are up a bit from a trough in late January/early February, they aren’t changed too much from the average of the last six months.

I haven’t heard any other news really Cyprus-wise – the deal done, all that matters now is the execution. Winding down Laiki is going to take time, large deposit holders are in limbo, and the Cypriot economy will be stuffed for some time. So no doubt we’ll hear more about Cyprus as the weeks and months drag on, but these are issues to specific Cyprus. For the market all that matters is Spain and Italy and the more alarming issue of a bank run. So far so good.

So over on Wall Street, the key indices look to be having a decent session as I write. The S&P500 is 0.7 per cent higher (1562) which is back near its 2007 record (1565) and pretty much unchanged since the latest European crisis started. The Dow is 112 points higher (14,559) and the Nasdaq is 0.5 per cent higher (3252). As mentioned this is a great effort all considered and it’s not even like there was any major offsetting (to the crisis in Cyprus) news flow.

So for instance, most of the economic data was mixed – a 5.7 per cent surge in durable goods orders in February, although most of this was defence and aircraft. Excluding that, core orders for business fell 2.7 per cent (although that follows an almost 7 per cent spike the month prior). House prices surged, sure – up 1 per cent in January to be about 8 per cent higher annually. But then consumer confidence fell sharply, to 59.6 from 68, as did new home sales, down 5 per cent in February (although that follows a 13 per cent surge the previous month). Add to that a fall in a regional manufacturing index – Richmond to 3 in March from 6 – and there wasn’t a great deal to celebrate.

By sector energy looks to have outperformed on the back of a 1.6 per cent jump in crude prices to $96.29, and commodities elsewhere were mixed with copper up 0.3 per cent and gold down $5 to $1599. Having said that consumer stocks did well, as did healthcare.

Elsewhere, price action was really quite subdued – the Australian dollar is about 20 pips higher at 1.0484, the British pound is down about the same to 1.5160 while the yen was at 94.5. Moreover, rates generally did little – the US 10-year yields were down by 1 bps or so to 1.91 per cent, the 5-year is at 0.78 per cent and the 2-year at – yep, you guessed it –  0.25 per cent.

So for today, the almighty SPI is up a whopping 0.2 per cent which suggests a fairly decent underperformance – maybe Australian strategists and economists are out doing their global marketing rounds: “Yeah, we’re definitely in a recession, interest rates are way too high, our dollar is crunching everything and our stocks are overvalued – oh, and earnings are going to collapse."

In terms of the data, there is nothing of note for Australia, while tonight the key economic release is pending US home sales for February. In addition to that we see eurozone inflation and confidence numbers and the final estimate of fourth quarter UK GDP.

Enjoy… 

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