SCOREBOARD: Ready, steady, Europe

US markets were closed for the Martin Luther King (Jnr) birthday holiday, consequently there wasn't a great deal of action.

Stocks did trade over in Europe (on light volumes), where the mood was generally positive and stocks are now re-testing two-year highs. Whether it was the decision by the GOP to extend the debt ceiling by three to four months, the expectation the Bank of Japan is going to put a little more effort into printing money, momentum or a combination of the above – it was a decent session.

No reason to sell off I guess and the major indices all closed higher. The FTSE closed around 0.4 per cent stronger – and at its highest since 2008 – and the Dax and CaC closed 0.6 per cent higher, while S&P futures closed up 0.3 per cent. Our own SPI is off smalls and it’s interesting to note that while markets in the US and UK are the highest in four or five years – our market is still some 20 per cent away from that. The obvious reason is that many of our companies are too busy talking their own businesses down, talking the countries growth prospects down instead of planning and investing for the future.

You can guess that price action elsewhere was pretty quiet as well, so the Australian dollar for instance moved on a 15 pip range and is little changed from yesterday afternoon at 1.0518. It’s the same story for the euro at 1.33317, while the yen edged up to 89.75.

In the commodity space moves were very small, either side of zero. Gold is at $1689, while crude (WTI) sits at $95.47. As for rates? Yields generally pushed higher - the 10-year German bund was up 3 to 4 bps to 1.53 per cent. Gilts up about the same to 2.05 per cent, while Italian and Spanish yields rose about 4 bps or so to 4.18 per cent and 5.14 per cent on the 10-year.

Bits and pieces otherwise. It was interesting to note comments made by Jens Weidmann, the President of Germany's Bundesbank. He is becoming increasingly concerned about the currency wars and the loss of central bank independence noting that "it is already possible to observe alarming infringements”. On the economy, the Bundesbank reckons that Germany’s economic downturn won’t last long, that the outlook has improved and that the bottom could already have been reached.

Also of note is that the European Bank for Reconstruction and Development cut its growth forecast for central and South-eastern Europe to 1.4 per cent in 2013 from 1.7 per cent. It also noted a reduction in the risks facing emerging Europe.

As for the data, German producer prices fell by 0.3 per cent in December to be about 1.5 per cent higher annually, while in the UK house prices, according to Right Move, rose 0.2 per cent in January to be 2.4 per cent higher annually. There really wasn't too much else.

So, looking at the day ahead, we see the outcome of the Bank of Japan’s two-day meeting. Everyone expects it to print, especially the new Prime Minister who has threatened that the bank will lose its autonomy if it doesn’t do as he says.

Outside of that we get the German Zew survey, the Chicago Fed National activity index, existing home sales and the Richmond Fed manufacturing survey. Nothing for Australia.

Have a great day…

Adam Carr is a leading market economist.

See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

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If the last few years have demonstrated anything it is the need to totally re-assess the parameters whereby we judge whether a nation's economy is flourishing or not. Stock exchange prices and the like really only indicate gambling trends.
Surely the parameters should be set around the living conditions of the people, including the size of the minimum incomes from whatever source, including welfare. These living conditions really indicate the state of the economy.
Is investment in public education at all levels in good order? Is infrastructure sufficient or even at a desireable level? On a day to day basis what is the quality of life, the state of medical services and availability of treatment?
How much do citizens possess? How drastic is the division between rich and poor. How well provided for are the disabled, the sick and the aged? How well are the unemployed treated - are retraing programmes in good order? Are our cities in a good state of maintenance and repair?
If our economies were more assessed in this fashion - quality of life - instead of in terms of the narrow spectrum of financial operation and movement of Capital, the attractiveness of particular nations for investment would naturally follow. Much investment seeks not just short term profit but stability and a secure buffer against inflation.
Maybe the days of vastly swinging and oscillating prices need to be over - replaced by steady growth that is based on genuine overall improvement in the quality of life for all our people. I would have thought this a far better way to assess what it a good economy and what is not
Shift the focus and that shift may well itself alter our behaviour patterns - and ultimately that is what we all need. (SCOREBOARD: Ready, steady, Europe, January 22).
Yes! Yes! Yes! To Phil Clarke comment..As for autonomy for the Bank of Japan, sound to me like they have already lost it (SCOREBOARD: Ready, steady, Europe, January 22).