CMC Markets Weekly Report

Stocks in the U.S finished the final trading day of a weak second quarter with a huge bang as Wall Street cheered a surprise agreement by EU leaders to help the region's struggling banks.

The Dow Jones Industrial Average surged more than 2 percent for the session, whilst the S&P500 and the Nasdaq also soared to post their best trading day in 2012.

EU leaders at a summit in Brussels agreed that euro area rescue funds could be used to stabilise bond markets without forcing countries that comply with EU budget rules to adopt extra austerity measures or economic reforms.

The deal had followed Spain and Italy's earlier withholding of support for a growth package. European shares jumped to finish at a seven week high following the deal announcement, but exact details of the agreement have yet to be worked out.

The euro surged by 2.4 percent, sending the US dollar index plummeting 1.4 percent to 81.59. Commodity prices soared. West Texas crude jumped 9% or US$7.18 to US$84.87/bbl. Brent rose 7 percent or US$6.44 to US$97.80/bbl. Previously weary base metals prices leapt 2-6 percent, with copper up 4 percent.

Gold surged 3 percent, or US$47.10 to US$1599.10/oz. In this move gold is not wearing a “safe haven” hat, but a monetary inflation (and reverse of the USD) hat. Silver jumped over 4 percent. The Aussie dollar is up over two cents to US$1.0255.

Results of the EU summit trumped a batch of tepid economic news. Consumer sentiment dipped to its lowest levels this year, while consumer spending was flat in May for the first time in five months.

The pace of business activity in the Midwest edged up in June, according to the Institute for Supply Management-Chicago's business barometer.

In the week ahead, the RBA meeting is tomorrow, preceded by the release of the TD Securities inflation gauge today and the RP Data-Rismark house price index. Australia will follow on from China with its manufacturing PMI and tonight sees PMIs from the eurozone, UK and US. China will provide its services PMI tomorrow and the world will follow suit on Wednesday.

Tomorrow in Australia also brings building approvals. On Wednesday it's retail sales, on Thursday the trade balance, and Friday's construction PMI wraps up a busy week. This week also introduces – just in case you've been living under a rock – the carbon and mining taxes.

In the US we'll see construction spending tonight along with the manufacturing PMI, and on Tuesday it's factory orders and vehicle sales. The NYSE will close at 1pm on Tuesday (3am Sydney time) ahead of the Independence Day holiday on Wednesday, for which all US markets will be closed. The holiday pushes the release of the ADP private sector unemployment numbers to Thursday, along with chain store sales, and on Friday it's non-farm payroll day.