The Monday Report

This story features NATIONAL AUSTRALIA BANK LIMITED. For more info SHARE ANALYSIS: NAB

By Greg Peel

Rowdy protesters are again camped outside the Greek parliament as they again await the passage of yet another bill which will again, in theory, save Greece from default. Yes, we've seen this movie before – more than once. Bill Murray just woke up to the strains of Sonny and Cher.

It is expected the Greek parliament will pass the bill on a lesser of two evils basis as members from all sides contemplate what Greek life might be like outside of the support of the eurozone. On the weekend the Greek cabinet ministers approved the bill ahead of its tabling in parliament but not before six cabinet ministers resigned in protest. Representatives of the major parties had spent a week arguing over the spending cuts demanded by the troika before finally putting a consensus draft to the gathered EU ministers on Friday. The ministers sent it back for more cuts and seemingly without further lengthy discussion the Greek politicians concurred. Which brings us to today.

The deadline for the passage of the bill is midnight Athens time, or 9am Sydney time. Experience has shown, however, that debate can run over time, so we may or may not have a result by this morning's market open. While a positive result is expected, we may see a better open than the SPI Overnight move of down 19 points (0.5%) suggests. The move is a response to Friday night's Wall Street session at which time the only news was that the EU had rejected the draft bill, causing a bit of risk-off. The Dow closed down 89 points or 0.7% and the S&P lost 0.7% to 1342. The Dow had been almost 150 points down at one point but again found those buyers who insist that despite the charade, Europe will sort itself out in the end.

Assuming the bill passes, the next step is Wednesday night's EU ministers meeting at which the rubber stamp is brought out. But it won't end there. This round of shenanigans is to secure the total 2012 Greek bail-out package but the money is released in tranches over the year with troika scrutiny of progress determining whether or not each next tranche will be forthcoming. If 2011 is any guide, we'll spend 2012 going through this farce over and over and possibly over again. Assuming the bill is passed and the money earmarked, Greece will avoid default at its March 20 debt rollover. In April the general election will be held and there is little doubt the incumbent coalition government will be wiped out. As to what motley crew of a left-leaning coalition can be formed from the dust is unclear.

Friday night's session can pretty much be dismissed now as a response to bad news that has since been overturned. It does, however, serve as a warning as to global reaction were anything else to go wrong in Europe.

The US dollar index rose 0.7% as the euro fell and the Aussie risk indicator slash carry trade fell 1.2 cents to US$1.0664. Gold is always a bit two-faced in these circumstances, battling between the safe haven buyers and the cash-raising sellers. It fell US$7.60 to US$1721.10/oz.

Base metals were slammed in London, with aluminium falling 1%, tin 2%, copper, lead and zinc 3% and nickel 4%. Brent crude fell US$1.38 to US$117.31/bbl and West Texas fell US$1.17 to US$98.67/bbl.

The US ten-year bond yield fell 8 basis points to 1.97% while the VIX volatility index on the S&P 500 jumped 12% to be sitting just over 20.

We await the next set of developments.

In the meantime, we'll have home loan and lending finance data out in Australia today. We should also have ANZ job ads given it's unemployment week, although the entry has slipped off some calendars. That will be followed by NAB's business confidence survey tomorrow along with the ABARES crop report. Wednesday it's Westpac's consumer confidence survey and vehicle sales and on Thursday we see the January employment numbers.

A busy week for data in the US begins on Tuesday with business inventories and retail sales, while Wednesday brings the Empire State manufacturing index, industrial production, housing market sentiment and the minutes of the Fed's last meeting. On Thursday it's housing starts, the Philly Fed manufacturing index and the PPI and Friday brings the CPI and a leading economic index.

This week will also see December quarter GDP assessments from Japan and the eurozone, and a busy week in Europe (apart from anything else) sees industrial production and the trade balance along with the influential German ZEW activity report.

On the local stock front, strap in because things really hot up this week as far as earnings season is concerned. There are too many major reports out this week to list them all but suffice to say today kicks off with JB Hi-Fi ((JBH)) and Leighton ((LEI)).

Perhaps worth mentioning specifically is the Commonwealth Bank ((CBA)) result on Wednesday. There is heightened speculation as to whether CBA and National ((NAB)) will match the other two big banks with small out of cycle interest rate rises. Commentary centres around the banks all moving outside of RBA movements. Get used to it – the banks are finally trying to steer Australian thinking away from the overnight cash rate as any kind of realistic price determinant for 20-year mortgages, particularly as global risk sends medium-term funding costs higher.

Rudi will appear on Sky Business on Thursday at noon. 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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