Greece was again delayed on a bailout agreement overnight, as all eyes locally turn to rates.

Not a lot really on the news and data front. Greek politicians delayed for one day making a decision on whether to accept bailout terms laid out by the IMF and Europe, much to the frustration of German Chancellor Angela Merkel who said that she "can’t understand why we need a few more days... time is running out”.

Against that backdrop and with nothing else to really shake the market, moves were comparatively small overnight.

In Europe for instance, most of the major indices were down smalls – the Dax off 0.03 per cent, the FTSE down 0.15 per cent, although the CaC fell 0.7 per cent. US equities too have spent the session bouncing around zero, and are currently down 0.1 per cent (1343), having been down 0.5 per cent at the low. Financials, healthcare and basic materials are the key deadweights so far, although most sectors are down. Only energy stocks are higher (up 0.4 per cent at the moment) although crude itself is mixed with WTI off 0.9 per cent ($97) and Brent up 1.1 per cent ($115.9) due to Europe’s cold weather. The Dow is 29 points lower (12832), the Nasdaq is down 0.2 per cent (2899), while the SPI is 0.3 per cent higher (4268).

Price moves elsewhere were similarly muted and the US Treasury curve flattened a bit as the 2-year yield did nothing (at 0.23 per cent), while the 10-year yield came down just under 3bps to sit at 1.89 per cent. The 5-year yield in turn was down about 1.5 to 0.75 per cent. Aussie futures then did little with 3s at 96.69 and 10s at 96.11.

On the forex front, Australian dollar traded on a 50-pip range though isn’t much changed from 1630 AEDT at 1.0725. The biggest move was on euro, which rose 50 pips or so to 1.3127. Sterling followed euro higher (40 pips to 1.5823) while yen is at 76.527. Gold then fell $12 to $1721, silver was down 0.1 per cent and copper fell 0.95 per cent.

As far as the news and data is concerned, we saw German factory orders rise 1.7 per cent (1 per cent expected) in December after a 4.9 per cent fall (3 month average rise of 0.6 per cent). Then in the UK, Halifax reported house prices rose 0.6 per cent in January to be 1.8 per cent higher year-on-year in the three months to that month. That’s pretty much it though. We saw a bit of Fed speak with non-voter Bullard (St Louis Fed President) suggesting the Fed should hike rates next year. He said the belief that a wide output gap can be addressed simply by making rates low enough and keeping them there for long enough was wrong, and argued that such a strategy could lead to disaster. He also noted, as many have, that it creates a massive disincentive to save. That’s pretty much the lot though.

Looking at the day ahead, we have the RBA decision at 1430 AEDT. This is going to be very interesting given the November and December meetings were apparently very close calls and noting that the economic and market environment has improved markedly since then. We also know that banks aren’t going to pass any cut on in full. So for mine, 2 2 equals 4. But, as I mentioned yesterday, there is enormous pressure from industry groups to cut and the Treasurer and PM are talking as if we’ve already had one. 2 2 equals 5.

The perception that the economy is weak and that the Australian dollar is crunching growth is entrenched, to the extent that business and consumer confidence is lower here than in Germany. Twenty-three of 27 economists expect a cut and IB’s are 66 per cent priced for a cut.

Otherwise, watch out for NZ earnings this morning at 0845 and the German industrial production tonight.

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

Follow @AdamCarrEcon on Twitter

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