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• Greece package wins approval.
• Economic data is mixed locally.
• Budget delivers a conservative theme plus a mining tax.

Going into last weekend, the risk correlated markets were falling heavily as the prospect of policy makers not coming to an agreement on the bailout package, kept the market on a knife-edge. The Eurozone policy makers worked around the clock to finalise an agreement before the Asia markets opened on Monday, and shortly after Asian trade began a press release stated that terms had been agreed to surrounding a USD1T package. The ECB noted that it would ease “severe tensions” in “certain” markets by purchasing debt in the secondary market whilst the Bank of Japan pumped USD$22B into the financial system to support the money markets.

The  package is focussed on arresting the widening yield premiums paid when issuing government debt for Greece, Portugal and Spain and the markets were buoyed by the agreement which overcame political hurdles and previous debt covenants. The size of the package prompted risk appetite to roll-on with the S&P500 up 4.4% in Monday’s session, as the risk correlated AUD capped losses and bounced against the USD and JPY. Since Tuesday’s local session the short-term performance of the global economy has been called into question as the medium term affects on European economies and the impact on Asian markets becoming the pertinent issue.

The economic data locally was mixed this week with the Trade Balance widening on the back of purchases of capital goods and investment in mining which strengthened the economy and brought it closer to the long-term trend. Retail Sales grew 0.3% in March which was lower than expectations, in a sign that seven hikes in six meeting had taken a toll on consumer spending. Other data released was down on market estimates including ANZ Job Advertisements -1.2%, Home Loans -3.4% and NAB Business Confidence at 13 whilst in the US, Nonfarm Payrolls were the strong performer out at 290K.

The Budget released on Tuesday night was supportive of some broad ranging health reforms being offset by taxes to smoking. There was something in it for the voters with a minor tax cut across the board, whilst the budget had a conservative theme to it with the beaming Treasuer Wayne Swan saying that he’ll cap spending at 2 percent until the surplus reaches 1 percent of GDP. The other major reform was that of the 40% tax on the mining sector, with local analysts noting that there would be a 29% reduction in valuation to iron-ore producer Fortescue.