CMC Markets Weekly Report

Stocks in the U.S. finished higher in a tight-range session Friday, with the Dow and S&P 500 logging gains following a pair of better-than-expected economic reports.

The Dow Jones Industrial Average gained 25.09 points, or 0.19 percent to close at 13,275.90, but a few points below its closing high of December 2007. The blue-chip index traded in a tight 36-point range, its narrowest in more than two years.

The S&P500 eked out a gain of 2.65 points, or 0.19 percent, to finish at 1,418.16. The Nasdaq climbed 14.20 points, or 0.46 percent, to end at 3,076.59.

On the economic front, consumer sentiment ticked up to its highest level since May, in its August preliminary reading, according to the Thomson Reuters/University of Michigan consumer sentiment survey. And leading indicators gained in July, according to the Conference Board, thanks to a drop in jobless claims and gains in housing permits.

European shares hit 13-month highs, extending their longest weekly winning streak in seven years, amid hopes that euro zone policymakers will work closely to tackle the debt crisis. German Chancellor Angela Merkel reiterated her support for ECB President Mario Draghi's plans to fight the region's sovereign debt crisis. Merkel is scheduled to meet with French President Francois Hollande later this week.

The US dollar index was up 0.2 percent on Friday to 82.56, gold was steady at US$1615.70/oz, and base metals were all a bit stronger.

The oil market was surprised by a Reuters report acknowledging a “source within the White House” that the president was contemplating releases of crude from the Strategic Reserve to stop high oil prices from undermining sanctions against Iran. Officials will monitor US gasoline prices, the source suggested, to make sure they drift typically lower in September as the US summer driving season winds down.

The report was immediately questioned, and if assumed true, written off as a political ploy to reduce gasoline prices before the election. It was Brent crude that took the fall, dropping US$1.56 to US$113.71/bbl, while West Texas actually rose US61c to US$96.21/bbl.

In Australia on Friday, media reports suggested Australian Treasury officials were concerned over the stubbornly high currency and its effect on the economy, and that the issue could impact monetary policy decisions. The market took it as a hint of potential RBA currency intervention, the Aussie plunged a cent to US$1.0415.

ANZ Bank economists released a report on Friday, suggesting that recent RBA rhetoric implied a desire to assess the impact of the rate cuts to date before taking further action. As a result, ANZ no longer expects another rate cut in 2012, albeit the economists have only pushed out their expectations to 2013.

In other economic news this week, Thursday will be the critical day macro-wise, as all of the flash PMIs for China (from HSBC), the eurozone and the US will be released. The US will see the release of the minutes of the last Fed meeting on Wednesday, along with existing home sales, while Thursday brings new home sales and the FHFA house price index. Friday wraps with durable goods. The UK will also revise its June quarter GDP estimate on Friday.

In Australia, we'll see the Westpac leading economic index for June released on Wednesday and the Conference Board equivalent on Friday. June quarter housing affordability will be revealed on Thursday and on Friday RBA governor Glenn Stevens will make a regular testament to the Senate Finance Committee, having released the minutes of the last RBA meeting on Tuesday.

On the micro level, this week is the busiest for the local earnings season. Highlights include BHP Billiton (BHP) will report, as will Woodside (WPL), Qantas (QAN) and Woolworths (WOW).