It has been a pretty dull last 24 hours for market direction and volumes as investors are probably awaiting clarity on Greece before committing at the moment. Indeed yesterday saw S&P 500 Futures trading volumes drop to the lowest level this year, or around 30% below its 20-day moving average. We were at activity levels normally associated with holidays. Perhaps with the New York Giants winning the Superbowl, Manhattan was too busy celebrating. As an England cricket and Liverpool fan I wasn't celebrating much yesterday!

Given the lack of any major news flow, the RBA’s unexpected decision overnight to leave its key rate unchanged at 4.25% was perhaps the biggest surprise for the market over the last 24 hours. The market was expecting a rate cut with 24 out of 27 economists polled by Bloomberg predicting 25bp off rates. The AUD/USD responded with a spike higher to 1.078 from around 1.070 just before the news. In
other markets overnight, Asian equities are softer across the board as investors hold off ahead of further clarity in Greece (more below). As we type the Nikkei (- 0.33%) and the Shanghai Composite (-1.9%) are both weaker. An IMF report overnight warned that Chinese economic growth could be halved this year in the event of a sharp recession in Europe given the global trade links. As we go to print, UBS just announced a Q4 pre tax profit of CHF584m which is short of analysts’ estimates of CHF855m according to Bloomberg.

In terms of yesterday’s market moves the S&P 500 index (-0.04%) closed marginally lower as declines in 6 major sectors outweighed the strength in Energy (+1.11%) and Telecoms (+0.33%). Sentiment was affected as Greek debt discussions were delayed for another day. That said credit markets were fairly resilient with Xover closing 5bp tighter at 549bp after having pulled back from intraday wides of 569bp.

In the commodity market, Brent was up again yesterday for the 5th successive day to $116/bbl and is +8.5% since the start of the year. There were some concerns around Iranian supply on reports that Israeli Foreign Minister travelled to the US yesterday to discuss an embargo on Iranian oil. The White House yesterday ordered a freeze on all Iranian government and central bank assets held in the US citing “deceptive practices” of the Iranian central bank and the “unacceptable risk” posed to the international financial system.

Turning to Greece, coalition party leaders will meet today and there are some signs of progress on some outstanding issues. The WSJ noted that Greece has agreed to cut 15,000 public sector jobs by the end of this year as part of their need to comply with conditions imposed by the Troika. This will be done by abolishing or cutting back a number of public sector entities. That said, the Journal said that there is still no agreement on wage cuts although two senior government officials said that despite the delays, leaders of the coalition parties were close to agreeing on a 20% cut in Greece’s minimum wage. In what seems to be an effort to ring-fence EU/IMF monies from financing Greece’s primary deficit (ie wages and pensions), Merkel and Sarkozy yesterday proposed to set up a separate account to service Greece’s government bonds. Merkel also said she couldn’t quite understand the delay given that time is running out.

Staying on the peripherals, Greece’s PM was reported to have asked the finance ministry to study the economic consequences of abandoning the euro. Away from Greece, Portugal denied a story by the IFR which reported that the sovereign has discreetly sounded out
advisors on options to restructure its debt. Elsewhere the ECB settled only EU124m in peripheral bond purchases and kept its SMP portfolio size steady at EU219bn. Weekly purchase volumes have declined sharply as this follows a mere EU63m in the previous week.

While we await further news from Greece’s politicians, a 24-hour protest is being planned by the two largest unions in the country. Merkel is scheduled to speak at a student event today about Europe’s future. We will also know more about industrial production in Germany and
the trade data in France. Across the pond Bernanke will testify to the Senate Budget Committee and we will see some second tier data from the US (Consumer Credit and IBD/TIPP Economic Optimism). There is a bills auction in Greece and a $32bn 3yr UST supply
today. The Coca-Cola Company, Walt Disney, BP and GlaxoSmithKline are some of the key names reporting today.