CMC Markets Weekly Report
Stocks in the U.S. closed at session highs Friday, lifted by reports that central banks are prepared to provide liquidity after Sunday's Greek elections and amid growing hopes for action from the Fed in light of some recent disappointing economic data.
Stocks in the U.S. closed at session highs Friday, lifted by reports that central banks are prepared to provide liquidity after Sunday's Greek elections and amid growing hopes for action from the Fed in light of some recent disappointing economic data.
The Dow Jones Industrial Average jumped 115.26 points, or 0.91 percent, to close at 12,767.17, the S&P500 rallied 13.74 points, or 1.03 percent, to finish at 1,342.84 whilst the Nasdaq gained 36.47 points, or 1.29 percent, to end at 2,872.80.
Officials from the G20 nations, who are scheduled to meet this week, said central banks were ready to take steps to stabalise the financial markets by providing liquidity and prevent any credit squeeze if severe market strains emerged after the election in Greece.
Britain is expected to pump more than 100 billion pounds ($155.43 billion) into its banking system as it looks to improve the amount of credit being fed through to the real economy, according to the governor of the Bank of England.
Meanwhile, the Bank of Japan kept monetary policy steady but pledged to do its utmost to ensure the country's banking system remains stable if a Greek election this weekend ignites fresh global market turmoil.
European shares closed higher. Spanish and Italian government bond yields eased, strength in the euro led the US dollar index to fall 0.3 percent to 81.59. The Aussie finished up 0.6 percent on Friday night to US$1.0083.
Copper rallied 2 percent and all other base metals bar aluminium were also slightly stronger. The oils were not much changed at US$97.61/bbl for Brent and US$84.18/bbl for West Texas. Gold ticked up US$3.80 to US$1626.70/oz.
On the economic front, consumer sentiment tumbled to a six-month low in June, according to the Thomson Reuters/University of Michigan's preliminary reading.
Manufacturing in New York state fell sharply to its lowest level since November, according to the New York Federal Reserve's "Empire State" general business conditions index. Industrial production also slipped in May, according to the Federal Reserve.
This week's global economic data will be mostly overlooked as the world awaits what may yet be long drawn out party negotiations in Greece with the aim of forming a government.
All eyes will be on the Fed on Wednesday night, assuming no developments in the interim, as the FOMC holds its scheduled meeting and Bernanke provides one of his few press conferences. It is otherwise a housing week in the US, with housing sentiment out tonight, housing starts on Tuesday, and existing home sales and the FHFA house price index on Thursday. Thursday also sees a US leading economic index and the Philadelphia Fed manufacturing index.
Today in Australia sees vehicle sales, and tomorrow brings the minutes of the June RBA meeting, which gave us the follow-up 25 point cut. With Greece hanging in the balance, the minutes may largely be old news. Wednesday sees two leading index releases and Thursday brings the RBA's June quarter bulletin.
There are some important data out in the UK and eurozone this week, including the influential ZEW and IFO surveys and the estimate of the eurozone's June composite PMI. New Zealand will announce its March quarter GDP result on Thursday and on Friday HSBC will offer its flash estimate of China's June manufacturing PMI.
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U.S. stocks closed at session highs after reports that central banks stood ready to provide liquidity if needed following the Greek elections and amid rising hopes the Fed might act after some disappointing economic data. The Dow jumped 115.26 points (0.91%) to 12,767.17, the S&P 500 rose 13.74 points (1.03%) to 1,342.84, and the Nasdaq gained 36.47 points (1.29%) to 2,872.80.
G20 officials said central banks are prepared to step in with liquidity to stabilise financial markets and prevent a credit squeeze if severe strains emerge after the Greek election. The Bank of England indicated it may pump more than £100 billion into its banking system to support credit flow, while the Bank of Japan kept policy steady but pledged to do its utmost to ensure banking stability if needed.
The FOMC holds a scheduled meeting Wednesday night, with Fed chair Ben Bernanke expected to give one of his few press conferences. Markets are closely watching for any signs of policy action because recent U.S. data — including weak consumer sentiment and softer industrial indicators — has raised hopes the Fed may respond.
The euro strengthened, pushing the U.S. dollar index down about 0.3% to 81.59. The Australian dollar finished up 0.6% at US$1.0083. In commodities, copper rallied about 2% and most base metals were slightly stronger (aluminium was an exception). Brent crude was near US$97.61/bbl and WTI around US$84.18/bbl, while gold ticked up roughly US$3.80 to US$1,626.70/oz.
Several U.S. measures came in weak: consumer sentiment fell to a six-month low in June (Thomson Reuters/University of Michigan preliminary reading), New York state manufacturing plunged to its lowest level since November (NY Fed ‘Empire State’ index), and industrial production slipped in May (Federal Reserve data).
This week is a housing-focused week in the U.S.: housing sentiment is released tonight, housing starts are due Tuesday, and existing home sales plus the FHFA house price index are on Thursday. Thursday also brings the U.S. leading economic index and the Philadelphia Fed manufacturing index — all data that can influence market direction.
In Australia, vehicle sales are released today, the minutes of the June RBA meeting (which followed up with a 25-point rate cut) are due tomorrow, two leading index releases land on Wednesday, and the RBA's June quarter bulletin is due on Thursday. With Greece in focus, the minutes may be seen as less market-moving.
Key international releases include the UK and eurozone ZEW and IFO surveys, the eurozone June composite PMI estimate, New Zealand’s March quarter GDP on Thursday, and Friday’s HSBC flash estimate of China’s June manufacturing PMI — all of which could influence investor sentiment globally.
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