Weekly Market Commodity Report week commencing 18th June

In Australia there were two speeches made by the RBA Governor Glen Stevens in which he encouraged Australians and the market to look at the positive aspects of the economy. This glass half full perspective was in contrast to the confidence reports released this week which suggested that Australian businesses and consumers do not share the governor's view and remained concerned about global growth and the European Debt Crisis. The NAB Business survey showed that confidence fell sharply in May from +4 to -2 with Australian business now expecting weaker near term activity. The Westpac consumer sentiment survey revealed an increase of just +0.3% in June following a rise of +0.8% in May. This result was particularly disappointing given the survey was taken around the time of the better than expected GDP and unemployment results of last week and after the RBA had cut the cash rate by another 25 points. Towards the end of the week market volatility subsided as all eyes turned to the Greek election held on June 17.

In overseas news Moody's downgraded Spain's credit rating by three notches to Baa3 and placed it on review for a further downgrade. Moody's cited Spain's Eur 100bn bailout as the main reason for the downgrade which has left Spain's credit rating one notch above junk bond status. The US markets rallied strongly on Thursday night after reports that the Bank of England and other central banks were preparing to provide massive liquidity injections into the financial markets if the Greek election result was unclear.
 
The markets look set to open in a positive manner this morning due to the result of last night’s Greek elections in which pro-bailout parties have claimed victory. The pro-austerity program New Democrats have won with 29.5% of the vote, ahead of the anti-austerity Syriza with 27.1%. The likely Government is ND + PASOK which would hold 54% of the 300 seat parliament (ND gets a 50 seat boost for winning) and possibly + DIMAR for 59%. Markets loved the news, the Euro up nearly 100bps in early Monday trade to 1. 2738 and the Aussie is higher too at around 1.0115.

Ahead of the Greek elections on the weekend, equities rallied on leaked polls that ND would win and hopes of coordinated central bank easing. This follows the UK Government’s decision to provide £100bn boost to the economy; and comments by the ECB’s Draghi and the BoJ that they stand ready to inject liquidity.  Reuters quoted a G-20 source saying that the central banks of leading economies were ready to provide extra liquidity if required.  There are also hopes of a Fed easing this week.

International events will once again dominate the markets with the RBA minutes due out on Tuesday the only major news locally. Other major events next week include the Group of 20 nations meeting in Los Cabos, Mexico that begins on Monday.