CMC Markets Weekly Report
The Dow finished lower Friday, but stocks overall closed the week in positive territory following a handful of robust earnings and a finalised bailout package for Greece.
The Dow finished lower Friday, but stocks overall closed the week in positive territory following a handful of robust earnings and a finalised bailout package for Greece.
The Dow Jones Industrial Average slipped 43.25 points, or 0.34 percent, to finish at 12,681.16 whilst the S&P500 gained 1.21 points, or 0.09 percent to close at 1,345.01. The tech-heavy Nasdaq rose 24.40 points, or 0.86 percent, to end at 2,858.83.
Gold gained above the $1,600 level again as scepticism over Greece's bailout plan and concerns over the ongoing U.S. debt ceiling debate prompted investors to flee to the metal as a safe haven.
Base metals were mostly higher in London, with aluminium the star. Falling inventories have been putting arguably the market's least favourite metal in the spotlight recently, and on Friday aluminium gained another 2%.
The oil market is becoming increasingly more territorial. It is well known that North Sea supplies of Brent are dwindling and, as per usual, Nigerian supplies, which are the clear substitute for Brent, are being disrupted. On Friday it was also noted Norway is a major North Sea player, with traders not discounting more than just a one-off tragedy in Oslo. Brent crude rose another US$1.16 to US$118.67/bbl. West Texas crude is abundant, albeit weekly inventories continue to fall short of market expectations. WTI was up US68c to US$99.81/bbl.
European banks and insurers rose after Greece's private sector creditors agreed to take a 21 percent loss on their debt holdings as part of the Greek rescue plan. Having had a good couple of sessions, the euro found some sellers on Friday allowing the US dollar index to rise 0.3% to 74.25. The Aussie was relatively steady at US$1.0852.
With the clock ticking toward an August 2 deadline to raise the U.S. debt ceiling, the focus shifts to Washington where efforts to avoid a U.S. default enter crunch time. The main obstacle remains the issue of tax increases that Obama's Democrats demand and Republicans vehemently oppose. House Speaker John Boehner, said an agreement is “not even close” but continues to seek a way to avert a U.S. default. At a news conference, Boehner said the House has "done its job" toward resolving the impasse over raising the government's debt limit and says it's time for the Senate to act.
The debt ceiling debate will inevitably dominate this week's trade, while US corporate results roll on.
On the economic data front, tonight sees the Chicago national activity index and Tuesday brings the Richmond Fed manufacturing index, along with new home sales. Wednesday it's durable goods orders and the Fed Beige Book and Thursday it's pending home sales.
Friday will be important this week, given the release of the first estimate of US June quarter GDP. At 1.7%, the consensus forecast is down from March's 1.9% but has also been pulled back a long way from earlier assumptions in the 2-3% range. Friday also sees the Chicago PMI along with fortnightly consumer sentiment.
The number to keep in mind in Australia this week is 0.7%, being the expected increase in June quarter CPI (quarter on quarter) which would take the annualised CPI to 3.4%, up from March's 3.3%. Economists also expect the trimmed mean – one of the RBA's core CPI measures to rise 0.7%. The RBA has signalled that the CPI result will determine monetary policy from here, implying that an upside surprise could trigger a rate hike. Both Westpac's economists, and the futures market, are at odds with the RBA, expecting the next move in rates to be down. Were the CPI to come in much lower than expected, perhaps this view will be granted more currency.
The CPI is out on Wednesday, with the PPI out today. RBA chairman Glenn Stevens will make a speech in Sydney tomorrow but it won't be of much consequence ahead of the CPI result. The Conference Board provides its leading economic index on Tuesday before Friday brings private sector credit and the RP Data-Rismark monthly house price index.
On the local stock front, this week brings the last of the resource sector quarterly production reports as we now transition into full-year earnings mode. This week sees the first trickle but it is the last two weeks of August in which all hell breaks loose.
Production reports this week will come from Oil Search (OSH) tomorrow, Macarthur Coal (MCC), Whitehaven Coal (WHC), Aston Resources (AZT) and ROC Oil (ROC) on Wednesday, Beach Energy (BPT) on Thursday and AWE (AWE), Murchison Metals (MMX) and Minara Resources (MRE) on Friday.
Full-year results will be posted by Alesco (ALS) on Tuesday and GUD Holdings (GUD) on Thursday while interim results will come from Australand (ALZ) on Wednesday, OceanaGold (OGC) on Thursday and Coal & Allied (CNA), Energy Resources of Australia (ERA) and Austar (AUN) on Friday.
On Thursday, Macquarie Group (MQG) will hold its always significant AGM and on Friday Coles (WES) will report June quarter sales.
Around the rest of the world, the UK will also make its first estimate of June quarter GDP this week, on the Tuesday, while Friday will be a big day in Japan where inflation, industrial production, manufacturing and unemployment data are all released.