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Eurogroup finance ministers have just concluded their meeting in Brussels. At this point no official announcement relating to Greek debt negotiations has been forthcoming. There have been rumours that ministers are currently working on a 6-month bridging facility that will fund the nation until a firm agreement can be reached although, showing that it’s all speculation at this point, others are stating that ministers have told Greece that they will have until Monday to accept existing bailout terms with no other option on the table. We’ll have to wait and see which one, if any, is on the money. An official statement is being drafted as of the time of writing.

US crude inventories continued to rise last week with the EIA reporting an increase of 4.868m barrels. The figure, higher than expectations for an increase of 3.733m but below the 6.333m gain reported previously, left total US stockpiles at 417.93m barrels. The figure, coupled with renewed US Dollar strength, saw crude oil futures extend their declines for a second-consecutive session.

The US federal budget reported a deficit of $18b in January. The figure, higher than the $10b figure expected and $10.2b deficit of January 2014, was a result of expenditure ($324b) increasing at a faster pace than revenues ($307b) compared to levels of a year ago.

US mortgage applications fell heavily last week with the MBA mortgage market index sliding 9.0%. Refinancing and loans for new purchases both fell, -10.3% and -6.5% respectively, as the average 30-year mortgage rate jumped 5bps to 3.84%.

 

The Day Ahead (AEDT)

Telstra and Rio Tinto headline today’s domestic corporate earnings calendar.

The ASX 200 looks set to push higher this morning with SPI futures pointing to a gain of 14pts on the open. Presuming there is no nasty surprise to come from the Eurogroup finance ministers meeting the local unemployment data released at 11.30am, something that will have implications for monetary policy in the short-term, will likely determine how the index will trade today. Should we get a continuation of the improvement seen in recent months it may actually see stocks slip into the red on the back of reduced RBA rate cut expectations. On the contrary, should it reverse course and deteriorate in January, look for gains to accelerate on the back of higher-yielding sectors.

The AUDUSD has fallen heavily overnight with the pair touching a low of .7695 before bouncing modestly into the close. In what is a similar scenario to stocks the local unemployment data at 11.30am will likely dictate movements in the pair today. Strong data will prompt modest short covering on the back of reduced RBA rate cut expectations, weak data will prompt further selling as expectations for a further rate cut, possibly as early as March, build. Before the unemployment data RBA Assistant Governor Guy Debelle will also speak although, with Glenn Stevens addressing politicians tomorrow, I don’t expect we’ll see much on the monetary policy front. Support is found at the overnight low, .7680, .7650 and .7625 with resistance kicking in at .7720, .7750 and again at .7790.

Australian unemployment data for January will be released this morning at 11.30am. Markets are expecting net job growth of 5k, down from 37.4k in December, with unemployment expected to tick up to 6.2% from 6.1% seen previously. While short-term traders will be focused on the highly-volatile seasonally-adjusted figures mentioned above, given ongoing doubts surrounding their reliability, the trend series remains the best measure in my opinion for gauging current labour market conditions. On the policy front RBA Assistant Governor Guy Debelle will also address the FX Week Australia Conference from 9.05am in Sydney.

Data releases this evening include retail sales, initial jobless claims and business inventories from the States, Canadian new home prices, Eurozone industrial production, German CPI, Greek unemployment along with CPI and industrial output figures from India. On the policy front the Bank of England release their quarterly inflation report while Sweden’s Riksbank announce their February monetary policy decision – no change is expected.

 

Market Map Feb 12 2015

 

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