(WEDNESDAY 22ND FEBRUARY- 08:27 - JAMES GERRISH)...The US MKT was HIGHER overnight with the DOW JONES up +15pts while the S&P 500 was up +0.07%. European mkts were LOWER (FTSE off -0.29%, German DAX off -0.58%, French CAC off -0.21%) while locally, the SPI FUTURES mkt is pricing a LOWER open down -19pts when trading kicks off here this morning.
Yesterday, the ASX 200 closed HIGHER up +35pts or +0.82% to 4291 - the first time in 2.5 months that the index has risen three consecutive days.
Its also interesting to note that the 4300 resistance level for the ASX 200 is still well an truly in play. We still haven't broken this level and until that happens, we'll retain some fire on the sidelines.
OVERSEAS MKTS; Greece was obviously the big news yesterday with an agreement on the bailout reached. The reaction on the mkt was pretty anemic and we probably expected a bit more out of it but I think that will come in time.
To recap, here is what happened in Europe;
- European Finance Ministers passed a 130 billion euro aid package to Greece
- This package brings the total assistance for Greece, Ireland & Portugal to 386 million euro
- Private holders of Greek debt have taken a 53% haircut on the value of their holdings
- Greek debt is forecast to come back to 121% of GDP by 2020. Without the package, we would have seen debt to GDP of 200% by 2012 (forecasts show).
Although its a positive move, its not a silver bullet for Greece - they still have a long road to travel and default is a distinct possibility. In fact, if history is a guide then a default in the years following a bailout is the most probable outcome and this is exacerbated by the fact that Greece is the least competitive nation in the eurozone (as measured by the world economic forum) - and is likely to remain that way.
From a mkts perspective, the main aspect with this deal, is its ability to contain the situation to Greece. Greece is manageable but Spain or Italy may not be. That's why we've been so keen to monitor bond yields from these countries.
So the real game changer for mkts isn't this deal with Greece, it was the Long Term Refinancing Operations (LTRO) by the ECB back in December and again this month that has proved critical.
We just needed the deal with Greece to go through to take the perceived risk off the table. To get rid of the threat that a messy default was going to happen and unsettle mkts. We now have a greater chance that Greece (and the rest of Europe) will muddle through.
We won't have a liquidity event like Lehman Brothers. Even if Greece defaults, European leaders have bought some time to focus on getting the larger nations (Spain/Italy etc) in order. In the short term, I think the focus will turn to these countries. That's what mkts tend to do. When one crisis is averted the next possible risk gets some attention - so expect some media noise here as they fill the void left by the Greek deal.
In the US overnight, the DOW JONES actually traded above 13000 for the first time since May 2008 - but unfortunately could hold above it to close just shy of it.
AUSSIE MKT; Reporting season heated up yesterday with the best day yet. Some standouts included Flightcentre (FLT), Oil Search (OSH), Boart Longyear (BLY), Monodelphous (MND), One Steel (OST), Downer (DOW), iinet (IIN)
If you want any information about these reports, please email me.
Woodside a big one today.
COMMODITIES; For a full list of overnight prices, CLICK HERE
The commodity mkts were strong overnight with the CRB index sharply higher. We think the easing in China, the deal with Greece and liquidity injections by the ECB are likely to see commodities higher in the short/medium term - for confirmation of this we need to see the break of the current range as the chart shows.
AUSTRALIAN DUAL LISTED STOCKS
In New York, News Corp fell by US$0.04 to US$20.21, equivalent to A$18.96, A$0.09 below its last close on the ASX.
ResMed fell by US$0.18 to US$28.93, equivalent to A$2.71, A$0.02 below its last close on the ASX.
In London, Rio Tinto fell 6.5 pence to £37.00, A$0.10 lower in Australian currency terms.
BHP-Billiton rose 2.5 pence to £20.80, A$0.04 higher in Australian currency terms.
Henderson Group Plc was unchanged at £1.26.
