CMC Markets Weekly Report
U.S. stocks closed sharply higher Friday to finish their best week almost two years following a stronger-than-expected manufacturing report that helped calm some doubts over the slowing recovery.
U.S. stocks closed sharply higher Friday to finish their best week almost two years following a stronger-than-expected manufacturing report that helped calm some doubts over the slowing recovery.
Stocks rallied all week on thin trading volume on the heels of a handful of positive economic news and over optimism that Greece's debt crisis would see a resolution.
The Dow Jones Industrial Average rose 168.43 points on Friday, or 1.36 percent, to close at 12,582.77. The S&P500 gained 19.03 points, or 1.44 percent, to end at 1,339.67 and the tech-heavy Nasdaq climbed 42.51 points, or 1.53 percent, to finish at 2,816.03.
The pace of growth in the manufacturing sector picked up for the first time in four months in June, according to the ISM report which provided a level support to the market.
Commodity markets were nevertheless less enthusiastic with London, the centre for base metals and Brent crude, reflecting on the wider and weaker range of PMI results across the UK and eurozone as well as strong trading in the prior sessions. Base metals were mostly around a percent weaker, with the exception of copper. Copper has been quietly forging its way ahead on expectations of Chinese restocking meeting tighter supply. Brent crude was down US71c to US$111.77/bbl while West Texas fell US67c to US$94.75/bbl.
Currency markets also decided to take a breather after a tumultuous week of Greek-related action. The euro was steady and the US dollar index slipped slightly to 74.30, although the Aussie Battler still posted another 0.4% gain to US$1.0769 on Australia's solid PMI.
Gold is currently bouncing around the US$1500 mark looking for direction after the easing of European fears with a lack of physical demand out of Asia threatening further downside. Gold fell US$13.10 to US$1486.50/oz on Friday and silver dropped 2.5% to US$33.80.
Markets are expected to be relatively subdued today with the US Markets closed for Independence day holiday and Australia awaits the central banks decision on interest rates tomorrow after Reserve Bank of Australia Governor Glenn Stevens has put the financial markets on notice that he's likely to raise interest rates.
On the economic front, U.S. factory orders kick off the week on Tuesday followed by the all important ADP employment report and ISM non-manufacturing index on Wednesday. Thursday investors can expect jobless claims and oil inventories whilst Friday rounds off the week with non-farm payroll, wholesale trade and consumer credit.
Locally, we can expect building approvals, retail sales, TD Securities inflation and AIG Construction index today with the trade balance and RBA's decision on the cash rate tomorrow. Thursday rounds off the economic news week for Australia with the unemployment rate.
The ECB is widely expected to raise its cash rate by 25bps on Thursday to 1.5% given the hints already dropped by Jean-Claude Trichet and the resolution in Greece. The euro is reflecting such expectation. The Bank of England is expected to leave its 0.5% rate unchanged at the same time.
Frequently Asked Questions about this Article…
U.S. stocks rallied on a stronger-than-expected ISM manufacturing report and optimism that the Greek debt crisis might be resolved, though trading was thin. The Dow rose 168.43 points (1.36%) to 12,582.77, the S&P 500 gained 19.03 points (1.44%) to 1,339.67 and the Nasdaq climbed 42.51 points (1.53%) to 2,816.03.
The ISM report showed manufacturing growth picked up for the first time in four months in June, which helped calm doubts about the slowing recovery and provided support to markets. For everyday investors, a stronger ISM can signal improving economic activity and boost confidence in equities.
Commodity markets were mixed: Brent crude fell about US$0.71 to US$111.77/bbl and West Texas Intermediate dropped roughly US$0.67 to US$94.75/bbl. Base metals were mostly around 1% weaker, while copper outperformed on expectations of Chinese restocking meeting tighter supply.
Gold was trading around the US$1,500 mark but eased to US$1,486.50/oz (down US$13.10) as European fears eased and physical demand from Asia was weak; silver fell about 2.5% to US$33.80. Precious metal moves matter for investors as they reflect risk sentiment, inflation expectations and currency movements.
The euro was steady and the U.S. dollar index slipped slightly to 74.30. The Australian dollar gained about 0.4% to US$1.0769, helped by a solid Australian PMI reading, showing how local economic data can lift the AUD.
Investors should watch the Reserve Bank of Australia’s decision — with Governor Glenn Stevens indicating a likely rate rise — as well as the European Central Bank, which was widely expected to raise its cash rate by 25 basis points to 1.5%. The Bank of England was expected to keep its rate at 0.5%.
Key U.S. data to watch include factory orders, the ADP employment report, the ISM non-manufacturing index, weekly jobless claims, oil inventories, and Friday’s non-farm payrolls plus wholesale trade and consumer credit. These releases can move markets by changing expectations for growth and inflation.
Australia’s schedule includes building approvals, retail sales, TD Securities inflation, the AIG Construction index, the trade balance and the RBA’s cash rate decision, followed by the unemployment rate. These reports influence the RBA’s policy outlook and can drive moves in the AUD, local equities and rates markets.
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