Forexpros Weekly Wrap-Up 07 December 2012

Closing the Week with Forexpros

by Forexpros Staff

U.S. stocks finished mixed to higher on Friday, buoyed by a strong November jobs report, though a weak consumer sentiment report dampened gains.

At the close of U.S. trading, the Dow Jones Industrial Average rose 0.62%, the S&P 500 index was up 0.29%, while the Nasdaq Composite index fell 0.38%.

In the U.S. earlier, the Bureau of Labor Statistics reported that the economy added a net 146,000 nonfarm payrolls in November, up from a downwardly revised 138,000 increase during October.

The headline unemployment rate fell to 7.7% in November from 7.9% in October, surpassing market calls for the figure to remain unchanged.

Analysts were expecting the economy to add only 93,000, though Superstorm Sandy inflicted less damage to the broader labor market than anticipated for November.

The news sent stocks jumping early in the session, though soft consumer sentiment figures brought prices back down.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to a seasonally adjusted 74.5 for December from 82.7 in November, missing analysts’ calls for an 82.4 reading.

U.S. fiscal uncertainty dampened the rally somewhat as well.

Republican lawmakers and the Democratically controlled White House continue to negotiate a 2013 fiscal framework.

Failure to reach a deal will allow tax breaks to expire in January at the same time deep spending cuts are due to kick in, a combination known as a fiscal cliff, and failure to avoid it could tip the U.S. economy into a recession next year.

Earlier on Friday, House Speaker John Boehner, an Ohio Republican, said both sides had made no significant progress during budget talks.

Leading Dow Jones Industrial Average performers included JP Morgan Chase & Co., up 2.65%, Bank of America, up 1.72%, and Caterpillar, up 1.22%.

The Dow Jones Industrial Average’s worst performers included Microsoft, down 1.05%, Alcoa, down 0.82%, and Cisco Systems, down 0.72%.

European indices, meanwhile, finished mixed.

After the close of European trade, the EURO STOXX 50 fell 0.15%, France’s CAC 40 rose 0.11%, while Germany’s DAX 30 finished down 0.22%. Meanwhile, in the U.K. the FTSE 100 rose 0.22%.

Currencies

A strong November jobs report wasn’t strong enough to entice investors out of the dollar and into higher-yielding asset classes on Friday.

Weak consumer sentiment figures in the U.S. and disappointing data in the U.K. and Germany dampened appetite for risk and kept investors parked in the safe-haven U.S. currency.

In U.S. trading on Friday, EUR/USD was down 0.34% at 1.2927.

The dollar remained attractive after the Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to a seasonally adjusted 74.5 for December from 82.7 in November, missing analysts’ calls for an 82.4 reading.

The dollar also saw demand after Germany’s Bundesbank slashed the country’s 2013 growth forecast to 0.4% from a 1.6% prediction made in June.

The German central bank added the country’s economy will grow 0.7% this year, down from its previous forecast of 1%.

Separately, official data revealed that industrial production in Germany contracted 2.6% in October, well beyond market calls for a 0.5% decline and off from a 1.3% decline the previous month.

In the U.K., official data revealed that manufacturing production dropped 1.3% in October, far more than an expected 0.2% decline and much softer than a 0.1% rise the previous month.

Industrial production in the U.K. declined unexpectedly in October, falling 0.8% after a 2.1% drop the previous month. Analysts had expected industrial production to rise 0.7% in October.

The dollar also saw demand amid U.S. fiscal uncertainty as well, as Republican lawmakers and the Democratically controlled White House continue to negotiate a 2013 fiscal framework.

The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.10% at 1.6036.

The dollar was up against the yen, with USD/JPY trading up 0.05% at 82.44 and up against the Swiss franc, with USD/CHF trading up 0.20% at 0.9342.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD trading down 0.07% at 0.9908 AUD/USD up 0.02% at 1.0489 and NZD/USD trading down 0.03% at 0.8326.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.22% at 80.41.

Gold

Gold prices rose in afternoon trading on Friday amid sentiment that despite a stronger-than-expected November jobs report, the Federal Reserve will stick with its ultra-loose monetary policies.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were up 011.% at USD1,703.65 a troy ounce in U.S. trading, up from a session low of USD1,685.75 and down from a high of USD1,706.75 a troy ounce.

Gold futures were likely to test support at USD1,685.75 a troy ounce, the earlier low, and resistance at USD1,708.25, Wednesday’s high.

Despite the strong employment numbers, market participants went long on the precious metal on sentiment the economy has not strengthened to the point the Federal Reserve will alter its currently very loose monetary policies.  The dramatic fall in the Thomson Reuters/University of Michigan preliminary index of consumer sentiment number for November reinforced the feeling the Fed would not change policy.

The Fed will address interest rates at a two-day meeting beginning Dec. 11.

Meanwhile on the Comex, silver for March delivery was down 0.08% and trading at USD33.088 a troy ounce, while copper for March delivery was up 0.52% and trading at USD3.663 a pound.

Oil

Crude oil futures erased earlier gains in U.S. trading on Friday as investors sold for profits despite stronger-than-expected jobs data hitting the wire in the U.S.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD86.07 a barrel on Friday, down 0.22%, off from a session high of USD86.98 and up from an earlier session low of USD85.91.

Oil prices spiked after the U.S. earlier after the Bureau of Labor Statistics reported that the economy added a net 146,000 nonfarm payrolls in November, up from a downwardly revised 138,000 increase during the previous month.

A more robust economy will demand more fuels and energy going forward, though consumer sentiment data painted a picture of a U.S. economy still battling headwinds.

Gloomy news out of Europe kept oil prices at bay as well.

In Europe, Germany’s Bundesbank slashed the country’s 2013 growth forecast to 0.4% from a 1.6% prediction made in June.

The central bank added the German economy will grow 0.7% this year, down from its previous forecast of 1%.

Separately, official data revealed that industrial production in Germany contracted 2.6% in October, well beyond market calls for a 0.2% decline and off from a 1.3% decline the previous month.

Mixed data and dreary German growth forecasts sparked demand for the dollar, which tends to send commodities prices falling.

Meanwhile on the ICE Futures Exchange, Brent oil futures for January delivery were up 0.13% at USD107.17 a barrel, up USD21.10 from its U.S. counterpart.