SCOREBOARD: Yields down

With many still on holidays and given the absence of hard hitting data, most markets struggled to find direction and moves were generally small.

Stocks in the US oscillated around zero hitting a high of 1136 ( 0.3 per cent) on the S&P500 before easing off to a low of -0.3 per cent. Currently, the S&P500 is up 0.2 per cent (1135) with financials, energy and consumer goods the key outperformers. Weighing on the index are utilities, healthcare and consumer services. The Dow is having a more sluggish session down 0.2 per cent to 10563, while the Nasdaq is flat at 2308 and the SPI is 0.1 per cent higher to 4935.

Little action on commodities either. Oil is up another 0.32 per cent to $81.75, gold is down $4 to $1117 while base metals all dipped (between 0.2 per cent for copper and 2 per cent for zinc). A bounce in the US dollar is probably accounting for some of the weakness in commodities with the euro down 60pips to 1.4372, sterling off a big figure to 1.5999 and the Australian dollar broadly unchanged at 0.9121.

Not so in debt land. The rally continued last night, yields on the major treasury coupons down 5/6bp to 1 per cent on the 2-yr, 2.55 per cent on the 5-yr and 3.76 per cent on the 10-yr. Aussie futures traded on a 11/9 tick range to 94.95 and 94.33 or about 8 ticks higher from yesterday afternoon. Much of the action commenced prior to the US open but a sharp drop in pending home sales for November exacerbated things (down 16 per cent after a 3.96 per cent October gain).

Other data out was generally good. Factory orders in the US were up 1.1 per cent in November which was much better than the market expectation for 0.5 per cent. Then in Germany the jobless number fell for the sixth consecutive month (3k) although the unemployment rate was steady at 8.1 per cent. In the UK, the December construction PMI rose to 47.1 from 47, but it is interesting to note the positive news flow about Christmas sales coming from the top three UK retailers with like-for-like sales reported as strong. Finally for Europe, inflation rose to an annual rate of 0.9 per cent in December from 0.5 per cent.

Coming up today, November building approvals are released for Australia and I'd expect to see a fairly decent number around 1 or 2 per cent. Mortgage rates are comparatively low, 100,000 new jobs have been created recently and there is a housing shortage – all very good reason to see support. In the US tonight the ADP employment report and non-manufacturing ISM take centre stage.