Investing.com Weekly Wrap-Up 20 June 2014

June 20th, 2014
in contributors, syndication, forex

U.S. stocks gain on interest rate outlook; Dow rises 0.15%

by Investing.com Staff, Investing.com

U.S. stocks finished Friday higher in a session void of major economic indicators, as investors digested the Federal Reserve's somewhat dovish Wednesday policy investing.com-logostatement and traded on sentiments that borrowing costs will remain low for some time to come.

At the close of U.S. trading, the Dow 30 rose 0.15%, the S&P 500 index rose 0.17%, while the NASDAQ Compositeindex rose 0.20%.

Follow up:

The Volatility S&P 500 index, which measures the outlook for market volatility, was up 0.85% at 10.71.

The Federal Reserve on Wednesday left benchmark interest rates unchanged at 0.00-0.25% and cut its monthly bond-buying program to $35 billion from $45 billion in a widely expected move.

While the Fed did not clear up uncertainty over how much time will elapse from when bond purchases end and rate hikes begin, language suggested that markets should be comfortable knowing borrowing costs will remain low for a while.

"It likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored," the Fed said in its Wednesday policy statement.

Energy stocks saw gains stemming from the Iraqi insurgency.

Iraqi security forces fought with Sunni militants for control of a 300,000 barrel-per-day refinery on Thursday, which pressured prices higher by stoking supply concerns.

Still, many of the country's major oilfields remain far south of the fighting, which kept broader stock prices somewhat steady.

U.S. President Barack Obama said on Thursday that he was sending up to 300 U.S. military advisers to Iraq and added he was prepared to take "targeted" military action later if deemed necessary.

Iraq produced approximately 3.5 million barrels a day of oil last month, making it OPEC's second-biggest oil producer behind Saudi Arabia.

Leading Dow Jones Industrial Average performers included Caterpillar Inc (NYSE:CAT), up 1.99%, Dupont Fabros Technology Inc (NYSE:DFT), up 1.55%, and Johnson & Johnson (NYSE:JNJ), up 1.43%.

The Dow Jones Industrial Average's worst performers included Walt Disney Company (NYSE:DIS), down 1.13%, The Travelers Companies Inc (NYSE:TRV), down 1.05%, and Nike Inc (NYSE:NKE), down 0.71%.

European indices, meanwhile, ended the day largely lower.

After the close of European trade, the DJ Euro Stoxx 50 fell 0.24%, France's CAC 40 fell 0.48%, while Germany's DAX fell 0.17%. Meanwhile, in the U.K. the FTSE 100 rose 0.25%.

Forex

The dollar traded largely higher against most major currencies on Friday after investors brushed off the Federal Reserve's dovish monetary policy statement issued earlier this week and snapped up attractive greenback positions.

In U.S. trading on Friday, EUR/USD was down 0.11% at 1.3594.

The Federal Reserve on Wednesday left benchmark interest rates unchanged at 0.00-0.25% and cut its monthly bond-buying program to $35 billion from $45 billion in widely expected move.

The dollar weakened, however, after the U.S. central bank stopped short of offering a timetable as to when interest rates may rise.

Markets viewed the Fed's language as somewhat dovish.

Bottom fishers, however, brought the dollar back up on Friday as the U.S. economy is still seen as moving forward on the road to recovery.

Meanwhile in the euro zone, official data earlier showed that German producer price inflation fell 0.2% last month, compared to expectations for a 0.2% rise, after a 0.1% downtick in April.

The dollar was up against the yen, with USD/JPY up 0.19% and trading at 102.14, and up against the Swiss franc, with USD/CHF up 0.17% at 0.8956.

The greenback was up against the pound, with GBP/USD down 0.17% at 1.7011.

In the U.K., official data revealed that public-sector net borrowing rose to £11.48 billion in May from a upwardly revised £9.00 billion the previous month. Analysts had expected public sector net borrowing to rise to £12.00 billion last month.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.58% at 1.0756, AUD/USD down 0.14% at 0.9385 and NZD/USD down 0.24% at 0.8696.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.07% at 80.45.

Commitments of Traders data from the CFTC (Commodity Future Trading Commission) showed a reversal to bullish for the Japanese yen, a sharp decrease in bearishness for the euro and a surge in bullishness for the British pound. The Mexican peso reversed sentiment to strongly bearish and bearishness increased for the New Zealand dollar.

cot-2014-jun-20

Gold

Gold futures held onto the week's gains on Friday, buoyed by dovish language out of the Federal Reserve as well as concerns the U.S. may get dragged deeper into the Iraqi insurgency and risk slowing economic recovery.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at 1,316.10 a troy ounce during U.S. trading, up 0.15%, up from a session low of $1,307.20 and off a high of $1,322.40.

The August contract settled up 3.25% at $1,314.10 on Thursday.

Futures were likely to find support at $1,258.00 a troy ounce, Tuesday's low, and resistance at $1,322.00, Thursday's high.

The Federal Reserve on Wednesday left benchmark interest rates unchanged at 0.00-0.25% and cut its monthly bond-buying program to $35 billion from $45 billion in widely expected move.

The dollar weakened and gold strengthened, however, after the U.S. central bank stopped short of offering a timetable as to when interest rates may rise. Gold and the dollar tend to trade inversely with one another.

Geopolitical concerns kept gold prices elevated.

Iraqi security forces fought with Sunni militants for control of a 300,000 barrel-per-day refinery on Thursday, which pressured oil prices higher by stoking supply concerns, and gold prices followed suit on concerns higher oil and gasoline prices could slow the pace of U.S. recovery.

Still, many of the country's major oilfields remain far south of the fighting, which eased fears somewhat and allowed gold to give back some of its gains in profit taking.

U.S. President Barack Obama said on Thursday that he was sending up to 300 U.S. military advisers to Iraq and added he was prepared to take "targeted" military action later if deemed necessary.

Meanwhile, silver for July delivery was up 1.36% at $20.928 a troy ounce, while copper futures for July delivery were up 1.42% at $3.122 a pound.

Oil

Crude futures rose on Friday as a bloody Iraq insurgency continued to stoke fears shipments from the oil-rich country will be affected, while the U.S. said it was sending military advisors to the troubled country in an effort to end the violence.

In the New York Mercantile Exchange, West Texas Intermediate crude oil for delivery in August traded at $106.75 a barrel during U.S. trading, up 0.66%. New York-traded oil futures hit a session low of $105.82 a barrel and a high of $106.77 a barrel.

The August contract settled up 0.44% at $106.05 a barrel on Thursday.

Nymex oil futures were likely to find support at $105.11 a barrel, Thursday's low, and resistance at $106.84 a barrel, the high from June 13.

Iraqi security forces fought with Sunni militants for control of a 300,000 barrel-per-day refinery on Thursday, which pressured prices higher by stoking supply concerns.

Still, many of the country's major oilfields remain far south of the fighting, which kept prices steady.

U.S. President Barack Obama said on Thursday that he was sending up to 300 U.S. military advisers to Iraq and added he was prepared to take "targeted" military action later if deemed necessary.

Iraq produced approximately 3.5 million barrels a day of oil last month, making it OPEC's second-biggest oil producer behind Saudi Arabia.

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for August delivery were down 0.40% and trading at US$114.60 a barrel, while the spread between the Brent and U.S. crude contracts stood at US$7.85 a barrel.

Natural Gas

Natural gas futures carried Thursday's data-driven losses into Friday as investors priced in a bearish supply report into trading, while weather forecasts calling for a break in a heat wave also pushed down prices.

On the New York Mercantile Exchange, natural gas futures for delivery in July traded at $4.536 per million British thermal units during U.S. trading, down 1.06%. The commodity hit a session high of $4.614 and a low of $4.520.

The July contract settled down 1.61% on Wednesday to end at $4.584per million British thermal units.

Natural gas futures were likely to find support at $4.504 per million British thermal units, the low from June 11, and resistance at $4.773, Wednesday's high.

The U.S. Energy Information Administration reported Thursday that natural gas storage in the U.S. in the week ending June 13 rose by 113 billion cubic feet, above forecasts for an increase of 110 billion cubic feet.

Stockpiles increased by 92 billion cubic feet in the same week a year earlier, while the five-year average build for the week is 87 billion.

Total U.S. natural gas storage stood at 1.719 trillion cubic feet. Stocks were 706 billion cubic feet less than last year at this time and 851 billion cubic feet below the five-year average of 2.570 trillion cubic feet for this time of year.

Producers would need to add approximately 2.6 trillion cubic feet to storage by November 1 to meet typical winter demand, analysts have said.

Meanwhile, updated weather-forecasting models called for a break in a heat wave across portions of the central U.S., which pressured prices lower.

Still, the southern U.S. will remain warm, which prevented the commodity from falling too far.

Demand for natural gas tends to rise in the summer months as warmer temperatures increase the need for gas-fired electricity to power air conditioning.

Coal

Despite the abundance of natural gas in the U.S. and Europe's efforts to reduce greenhouse gas emissions, coal, the fastest-growing fossil fuel, met 30.1 percent of the world's energy demands last year, its highest share since 1970, according to BP's Statistical Review of Energy unveiled Thursday.

Rapidly-growing China and India accounted for 88 percent of global growth in coal consumption, a 3 percent rise in 2013, while growth in natural gas consumption actually decelerated everywhere except North America, according to the review. There are several reasons: coal is relatively abundant around the world, is cheap to burn compared to other methods of generating electricity and in the past two years, prices for coal have declined.

The strong demand for coal shows how difficult it will be to replace as efforts by developed nations to reduce pollution and add renewable energy to their power grids will be overwhelmed by the growth of developing nations relying on coal.

Only oil meets a larger share of global energy demand, 32.9 percent last year, according to BP. Massive investment in shale fueled the world's largest increase in oil production in the U.S. last year and one of the largest increases in oil production the world has ever seen, offsetting numerous disruptions in global oil markets and keeping prices stable, BP's chief executive Bob Dudley wrote about the report.

However, there's a possibility coal could outpace oil. The International Energy Agency (IEA) forecasted in 2012 that coal would become the world's top energy source by 2017. IEA expects that between 2012 and 2017, annual global coal consumption will rise by 1.2 billion tons, the amount of coal now consumed by both Russia and the U.S.

Still, coal consumption's growth last year was below its 10-year average of 3.9 percent, and new government regulations like those U.S. President Barack Obama and his administration has imposed will force many coal plants to close. Much of coal's future depends on China, which accounts for nearly half of global coal consumption but is trying to reduce smog and increase its use of natural gas. China's demand for coal grew in 2013, but at its slowest rate since 2008, according to BP.

 









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