Investing.com Weekly Wrap-Up 21 November 2014

November 21st, 2014
in contributors, syndication, forex

U.S. stocks gain on Chinese rate cut, Draghi comments; Dow rises 0.51%

by Investing.com Staff, Investing.com

China's move to loosen monetary policy coupled with the European Central Bank's hints at taking similar steps to stimulate its economy sent U.S. stocks rising on Friday. investing.com-logo

At the close of U.S. trading, the Dow 30 rose 0.51%, the S&P 500 index rose 0.52%, while the Nasdaq Composite index rose 0.24%.

The S&P 500 VIX index, which measures the outlook for market volatility, was down 5.01% at 13.58.

Follow up:

Stocks rose after ECB President Mario Draghi reiterated on Friday that the central bank is prepared to act rapidly if low inflation persists.

Draghi also expressed concerns over the euro zone's weak growth, pointing out he saw no improvements in the coming months.

The ECB head was speaking at the 24th European Banking Congress "Reshaping Europe," in Frankfurt, and his comments sparked expectations for fresh stimulus.

The ECB's current stimulus program includes purchases of asset-backed securities and covered bonds, though markets are keeping a close eye out for plans to announce purchases of government debt, a stimulus tool known as quantitative easing that sends stocks rising as a side effect.

Also supporting the dollar was news that China cut its benchmark one-year deposit rate by 25 basis points to 2.75% and trimmed its one-year lending rate by 40 basis points to 5.6% to spur recovery.

Still, gains were muted at times on concerns that headwinds facing European and Asian economies may slow business among U.S. companies and their peers overseas.

Leading Dow Jones Industrial Average performers included Caterpillar Inc (NYSE:CAT), up 4.27%, United Technologies Corporation(NYSE:UTX), up 1.36%, and Chevron Corporation (NYSE:CVX), up 1.08%.

The Dow Jones Industrial Average's worst performers included Microsoft Corporation (NASDAQ:MSFT), down 1.51%, Intel Corporation(NASDAQ:INTC), down 0.97%, and American Express Company(NYSE:AXP), down 0.25%.

European indices, meanwhile, ended the day higher.

After the close of European trade, the Euro Stoxx 50 rose 2.97%, France's CAC 40 rose 3.67%, while Germany's DAX 30 rose 2.62%. Meanwhile, in the U.K. the FTSE 100 rose 1.08%.

Forex

The dollar traded largely higher against most major currencies on Friday after dovish comments from European Central Bank President Mario Draghi coupled with a Chinese rate cut sparked safe-haven demand for the greenback.

Profit taking capped the dollar's advance at times, as the currency has seen hefty demand in recent sessions as markets prepare for U.S. monetary tightening while Europe and Japan move in the opposite direction.

In U.S. trading on Friday, EUR/USD was down 1.20% at 1.2391.

The euro came under pressure after ECB President Mario Draghi reiterated on Friday that the central bank is prepared to act rapidly if low inflation persists.

Draghi also expressed concerns over the euro zone's weak growth, pointing out he saw no improvements in the coming months.

The ECB head was speaking at the 24th European Banking Congress "Reshaping Europe," in Frankfurt, and his comments sparked expectations for fresh stimulus.

The ECB's current stimulus program includes purchases of asset-backed securities and covered bonds, though markets are keeping a close eye out for plans to announce purchases of government debt, a stimulus tool known as quantitative easing.

Also supporting the dollar was news that China cut its benchmark one-year deposit rate by 25 basis points to 2.75% and trimmed its one-year lending rate by 40 basis points to 5.6% to spur recovery.

Upbeat U.S. data released on Thursday continued to support the dollar as well.

The Federal Reserve Bank of Philadelphia reported that its manufacturing index improved to 40.8 this month from 20.7 in October.

Analysts had expected the index to decline to 18.5 in September.

Also on Thursday, the Labor Department reported that the U.S. consumer price index was unchanged in October, beating expectations for a 0.1% dip.

On a year-over-year basis consumer prices rose 1.7% last month, unchanged from September, and stronger than market calls for a 1.6% jump.

Core inflation, which strips out volatile food and energy components, rose by 0.2% during the month, pushing the annual rate up to 1.8%, both figures in line with market forecasts.

The dollar was down against the yen, with USD/JPY down 0.37% at 117.74, and up against the Swiss franc, with USD/CHF up 1.22% at 0.9699.

The greenback was up against the pound, with GBP/USD down 0.30% at 1.5646.

In the U.K. on Friday, the Office for National Statistic reported that public-sector net borrowing rose by £7.05 billion in October, after a revised increase of £10.57 billion the previous month.

Analysts had expected public sector net borrowing to rise by £6.90 billion.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.57% at 1.1240, AUD/USD up 0.53% at 0.8665 and NZD/USD up 0.10% at 0.7878.

Statistics Canada said that consumer price inflation rose 0.1% last month, compared to expectations for a 0.3% fall, after a 0.1% uptick in September.

Core consumer prices, which exclude the eight most volatile items, rose 0.3% in October, more than the expected 0.2% gain, after a 0.2% increase the previous month.

The US dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.79% at 88.40.

Gold

Gold prices jumped up on Friday on news that China had cut interest rates, which sparked safe-haven demand for the precious metal.

Gold often serves as a hedge to sliding currencies, the product of loose monetary policy.

On the Comex division of the New York Mercantile Exchange, goldfutures for December delivery were up 0.50% at $1,196.80, up from a session low of $1,186.30 and off a high of $1,207.10.

The December contract settled down 0.25% at $1,190.90 on Thursday.

Futures were likely to find support at $1,173.90 a troy ounce, Wednesday's low, and resistance at $1,235.50, the high from Oct. 28.

Gold prices rose on news that China cut its benchmark one-year deposit rate by 25 basis points to 2.75% and trimmed its one-year lending rate by 40 basis points to 5.6% to boost its economy.

The news helped offset dovish comments from European Central Bank President Mario Draghi, which strengthened the dollar.

Gold and the dollar tend to trade inversely with one another.

Draghi reiterated on Friday that the central bank is prepared to act rapidly if low inflation persists.

Draghi also expressed concerns over the euro zone's weak growth, pointing out he saw no improvements in the coming months, which fueled demand for the greenback as the euro slid.

The ECB head was speaking at the 24th European Banking Congress "Reshaping Europe," in Frankfurt, and his comments sparked expectations for fresh stimulus.

The ECB's current stimulus program includes purchases of asset-backed securities and covered bonds, though markets are keeping a close eye out for plans to announce purchases of government debt, a stimulus tool known as quantitative easing.

Elsewhere, silver for December delivery was up 1.35% at $16.355 a troy ounce, while copper futures for December delivery were up 0.42% at $3.032 a pound.

Oil

Crude futures trimmed gains on Friday, wiping out earlier advances stemming from a surprise Chinese rate growth, as investors concluded the move won't fuel enough growth to make a major dent in a global supply glut.

In the New York Mercantile Exchange, West Texas Intermediate crude oil futures for delivery in January traded up 0.11% at $75.93 a barrel during U.S. trading, up from a session low of $75.63 a barrel and off a high of $77.80 a barrel.

The January contract settled up 1.81% at $74.85 a barrel on Thursday.

Support for the commodity was seen at $73.92 a barrel, Wednesday's low, and resistance at $79.80 a barrel, the high from Nov. 10.

Oil prices shot up earlier on news that China cut its benchmark one-year deposit rate by 25 basis points to 2.75% and trimmed its one-year lending rate by 40 basis points to 5.6% to boost its economy.

By afternoon U.S. trading, prices moved lower, even back into negative territory at times, on concerns that the move won't send China's economy growing to the point it will make a serious dent in a global supply glut.

Market talk that OPEC oil countries may move to trim production at their Nov. 27 meeting supported the commodity as well.

Libya recently hinted at a need to trim output to shore up prices.

Oil ministers from Iran, Libya, Venezuela, Ecuador and Algeria have asked for action to prevent further price declines, while Saudi Arabia and Kuwait have resisted calls to lower production.

Markets are speculating that a Saudi-backed willingness to let prices slide will prompt U.S. shale producers to halt operations as a result, as such production costs more than traditional drilling.

Once U.S. shale producers table their operations for profitability reason, prices would presumably rise as the global economy absorbs excess supply.

Separately, on the ICE Futures Exchange in London, Brent oil futures for January delivery were up 0.33% at US$79.60 a barrel, while the spread between Brent and U.S. crude contracts stood at $3.67.

Natural Gas

Natural gas futures dropped on Friday after frigid U.S. temperatures gave way to milder mercury readings, leaving markets betting that demand for heating will wane across the country.

On the New York Mercantile Exchange, natural gas futures for delivery in December were down 4.90% at $4.269 per million British thermal units during U.S. trading. The commodity hit a session low of $4.260, and a high of $4.531.

The December contract settled up 2.70% on Thursday to end at $4.489 per million British thermal units.

Natural gas futures were likely to find support at $4.113 per million British thermal units, Monday's low, and resistance at $4.544, the high from Nov. 10.

A blast of cold air has moved out for much of the U.S., with milder temperatures settling in, prompting investors betting that thermal power plants will burn less natural gas as demand for heating falls.

While more shots of cold air are due to sweep across the country into early December, updated weather-forecasting models earlier Friday scaled back on their intensity, which sent prices tumbling.

Investors also continued to digest Thursday's weekly U.S. supply report.

The U.S. Energy Information Administration reported that natural gas storage in the U.S. in the week ending Nov. 14 fell by 17 billion cubic feet, more than expectations for a decline of 12 billion and compared to a gain of 40 billion in the previous week.

The five-year average change for the week is a decrease of 10 billion cubic feet.

Total U.S. natural gas storage stood at 3.594 trillion cubic feet. Stocks were 201 billion cubic feet less than last year at this time and 244 billion cubic feet below the five-year average of 3.838 trillion cubic feet for this time of year.









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.















 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved