CMC Markets Weekly Report
Stocks in the U.S. rallied to close near session highs on Friday after Bernanke reiterated that there is further room for the central bank to act and following reports the ECB is considering setting yield band targets in a new bond-buying program.
Stocks in the U.S. rallied to close near session highs on Friday after Bernanke reiterated that there is further room for the central bank to act and following reports the ECB is considering setting yield band targets in a new bond-buying program.
The Dow Jones Industrial Average rallied 100.51 points, or 0.77 percent, to close at 13,157.97. The S&P500 rose 9.05 points, or 0.65 percent, to end at 1,411.13 whilst the Nasdaq gained 16.39 points, or 0.54 percent, to finish at 3,069.79.
Shortly after a weak open, the market popped as traders reacted to a letter from Bernanke, obtained by the Wall Street Journal, who said there is "scope for further action" by the Fed to ease financial conditions and support the economy.
The Chairman's comments echoed remarks from the Fed's latest meeting minutes from earlier this week.
Growing doubts over whether the Fed will introduce further stimulus measures put a damper on equities in the previous session. Around the same time, equities were also boosted after a report ECB is considering setting yield band targets under a new bond buying program that could help contain borrowing costs for Greece, Spain and other eurozone countries.
Stocks initially opened lower amid jitters over Greece's future in the eurozone. German Chancellor Angela Merkel said the debt-ridden nation must stick to its commitments to stay in the euro area, and did not commit to granting more time for Greece to complete the required reforms to receive bailout loans.
On the economic front, durable goods orders jumped in July, thanks to robust aircraft demand, according to the Commerce Department.
Base metals were a little stronger in London on the US data and despite the weaker dollar. Gold was steady nevertheless at US$1670.50/oz and the Aussie has slipped 0.3 percent to US$1.0407.
The US dollar's rise did send oil, which has been running to the upside of late, lower, with Brent down US$1.42 to US$113.59/bbl and West Texas down US12c to US$96.15/bbl despite the build up of Tropical Storm Issac in the Caribbean.
On the local economic front, the countdown to next week's June quarter GDP result is now on in earnest with quarterly construction work done due on Wednesday and private sector capex on Thursday, the latter being of particular interest to the RBA. We'll also see monthly new home sales on Tuesday, building approvals on Thursday and private sector credit on Friday.
The US will see the first revision of its June quarter GDP estimate on Wednesday and economists are expecting a lift to 1.7% from the initial 1.5%. Monthly pending home sales are out tonight, the Case-Shiller house price index, Richmond Fed index, and consumer confidence on Tuesday, personal income and spending and chain store sales on Thursday and factory orders on Friday. On Wednesday the Fed will release its Beige Book anecdotal assessment of activity in each Fed region, and on Thursday, as we know, all cameras and microphones will be trained on Wyoming.
UK markets are closed tonight for a holiday, so no base metals.
Friday marks the end of August and thus the last week of the local results season. The week will be topped and tailed by retail with Billabong (BBG) reporting today and Harvey Norman (HVN) on Friday, while Worley Parsons (WOR), Transfield (TSE), Perpetual (PPT), Lend Lease (LLC) and Paladin Energy (PDN) providing highlights.
Frequently Asked Questions about this Article…
US stocks rallied after Federal Reserve Chairman Ben Bernanke said there is "scope for further action" to ease financial conditions and reports surfaced that the ECB may set yield band targets in a new bond‑buying program. The Dow rose 100.51 points to 13,157.97, the S&P 500 climbed 9.05 points to 1,411.13, and the Nasdaq gained 16.39 points to 3,069.79.
Bernanke told the Wall Street Journal that the Fed has "scope for further action" to support the economy, echoing recent Fed meeting minutes. Markets popped after the letter, as investors interpreted it as a sign the Fed could undertake additional measures to ease financial conditions.
The article reports the European Central Bank is considering setting yield band targets under a new bond‑buying program. That proposal could help contain borrowing costs for stressed euro‑area countries like Greece and Spain, and news of it helped lift equities by reducing concerns about sovereign debt stress.
Key US data mentioned include a jump in July durable goods orders (driven by aircraft demand) and the first revision of June‑quarter GDP, where economists expect a lift to 1.7% from the initial 1.5%. Other releases to watch are pending home sales, the Case‑Shiller house‑price index, the Richmond Fed index, consumer confidence, personal income and spending, chain‑store sales, factory orders and the Fed's Beige Book.
Locally, the countdown to the June‑quarter GDP release is on: quarterly construction work done and private‑sector capex (of particular interest to the RBA) are due, plus monthly new‑home sales, building approvals and private‑sector credit. It's also the last week of the local reporting season, with Billabong (BBG) reporting today and Harvey Norman (HVN) on Friday; other highlights include Worley Parsons (WOR), Transfield (TSE), Perpetual (PPT), Lend Lease (LLC) and Paladin Energy (PDN).
Base metals were a little stronger in London, gold was steady at about US$1,670.50/oz, and the Australian dollar slipped about 0.3% to US$1.0407. Oil fell despite a developing Tropical Storm Isaac: Brent was down about US$1.42 to US$113.59/bbl and West Texas Intermediate fell roughly US$0.12 to US$96.15/bbl.
Yes—stocks initially opened lower amid jitters over Greece's future in the eurozone. German Chancellor Angela Merkel said Greece must stick to its commitments to remain in the euro area and did not commit to granting more time for required reforms, which added to early‑session volatility before later central‑bank news helped markets recover.
The update highlights how central‑bank signals (from the Fed and ECB), economic data revisions (like US GDP and durable goods), corporate earnings season and geopolitical/debt concerns (eg, Greece) can move markets. Everyday investors should watch upcoming data and company results, be aware that policy news can quickly change sentiment, and follow commodity and currency moves that can affect portfolios.
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