Investing.com Weekly Wrap-Up 11 January 2012

Closing the Week with Investing.com

by Investing.com Staff

U.S. stock prices ended Friday largely flat as investors jumped to the sidelines to await more fourth-quarter earnings next week, when many players from the financial sector are due to release results.

A widening trade deficit kept investors away from stocks as well.

At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.13%, the S&P 500 index was largely unchanged, while the Nasdaq Composite index rose 0.12%.

Many U.S. financial firms will release fourth-quarter earnings next week, and many investors opted to spend Friday away from trading desks to see how earnings come in.

Elsewhere, the U.S. government reported earlier that the country’s trade deficit widened unexpectedly in November, expanding to USD48.7 billion from a USD42.1 billion deficit reported during the previous month.

Analysts had expected the trade deficit to narrow to USD41.3 billion in November, though gains in imports of consumer goods painted a picture of improving consumer demand in the U.S., which gave investors room to breathe easier and take on some risk, which bolstered stocks.

Consumer spending drives about 70% of total U.S. economic output.

Higher-than-expected Chinese inflation figures capped gains after fueling sentiments Beijing may hold off on stimulus measures, which would boost stock prices globally.

In a report, the National Bureau of Statistics of China reported that the country’s December consumer price index rose 2.5% on year from 2.0% in the preceding month.

Analysts had expected the Chinese CPI to rise by 2.3% last month.

Leading Dow Jones Industrial Average performers included Microsoft, up 1.40%, Chevron, up 1.15%, and Merck, up 1.08%.

The Dow Jones Industrial Average’s worst performers included Boeing, down 2.52%, Bank of America, down 1.27%, and Pfizer, down 0.86%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.35%, France’s CAC 40 rose 0.08%, while Germany’s DAX 30 finished up 0.09%. Meanwhile, in the U.K. the FTSE 100 finished up 0.33%.

Forex

The dollar traded mixed to lower against most of its peers on Friday after the U.S. government reported the country’s trade deficit widened in November, defying expectations for the gap to narrow.

In U.S. trading on Friday, EUR/USD was up 0.49% at 1.3336.

Meanwhile, the euro continued to see support in wake of the ECB’s unanimous decision to leave interest rates unchanged at 0.75% after a Thursday monetary policy meeting.

While most market participants were expecting the monetary authority to leave benchmark lending rates unchanged, not all did, while others were expecting more cautious language from ECB President Mario Draghi, who predicted recovery to gain steam later this year.

The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.31% at 1.6118.

The pound slumped against other currencies after government data revealed that U.K. manufacturing production fell unexpectedly in November, ticking down 0.03% after a 1.3% decline the previous month.

Analysts had expected manufacturing production to rise 0.5% in November.

In addition, industrial production in the U.K. rose 0.3% in November, less than the expected 0.8% increase, after a 0.9% contraction the previous month.

The dollar strengthened against the yen on Friday Japanese Prime Minister Shinzo Abe’s government announced plans to spend JPY20 trillion to stimulate the economy, with USD/JPY up 0.45% at 89.19.

The dollar, meanwhile, was down against the Swiss franc, with USD/CHF trading down 0.08% at 0.9134.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.10% at 0.9843, AUD/USD down 0.62% at 1.0531 and NZD/USD trading down 1.09% at 0.8364.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.23% at 79.64.

Gold

Gold prices fell on Friday after investors sold the yellow metal to take profits, especially after Chinese inflation rates came in higher than expected.

Gold made solid gains earlier this week after the European Central Bank voted unanimously to leave interest rates unchanged at 0.75%, sparking a risk-on trading session that sent the U.S. dollar tumbling and the euro gaining, a recipe for a gold rally.

Gold and the dollar traditionally trade inversely from one another.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 1.10% at USD1,659.55 a troy ounce in U.S. trading, up from a session low of USD1,653.55 and down from a high of USD1,676.25 a troy ounce.

Gold futures were likely to test support USD1,643.25 a troy ounce, Monday’s low, and resistance at USD1,678.75, Thursday’s high.

In Europe, the ECB voted unanimously to leave interest rates unchanged, which sent gold prices soaring on Thursday to levels ripe for profit taking, which kicked in Friday.

While most market participants were expecting the monetary authority to leave benchmark lending rates unchanged, not all expected unanimous support, while others were expecting more cautious language from ECB President Mario Draghi, who predicted recovery to gain steam later this year.

Gold prices rallied to levels ripe for profit taking especially after Chinese inflation data came in stronger than expected, quelling expectations for Beijing to stimulate its economy, a potentially bullish event for gold.

In a report, the National Bureau of Statistics of China reported that the country’s December consumer price index rose 2.5% on year from 2.0% in the preceding month.

Analysts had expected the Chinese CPI to rise by 2.3% last month.

Meanwhile on the Comex, silver for March delivery was down 1.67% and trading at USD30.403 a troy ounce, while copper for March delivery was down 1.33% and trading at USD3.660 a pound.

Oil

Crude oil futures fell on Friday after data revealed the U.S. ran a wider trade deficit than expected in November.

Fears that demand for fuels and energy may ease sent prices falling as well.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD93.36 a barrel on Friday, down 0.49%, off from a session high of USD94.10 and up from an earlier session low of USD92.67.

The commodity did see some support, as gains in imports of consumer goods painted a picture of improving consumer demand in the U.S.

Fears demand for oil may cool kept prices in negative territory as well.

Saudi Arabia said earlier this week that it had cut its crude oil production by about 700,000 barrels per day over the last two months of 2012, bringing December output at around 9 million barrels per day, Reuters reported, quoting an industry source familiar with the country’s oil policy.

Saudi Arabia over the past year ramped up production to offset any output snags should tensions with Israel and Iran escalate into military conflict and disrupt supply, though talk the oil-rich kingdom cut output to account for still sluggish demand amid a tepid global recovery allowed crude prices to soften.

Meanwhile, China’s consumer price index rose more than expected in December, official data showed on Friday.  The numbers sparked talk that Beijing may hold off on plans to roll out economic stimulus measures, which tend to push up demand for oil.

Meanwhile on the ICE Futures Exchange, Brent oil futures for February delivery were down 1.35% at USD110.38 a barrel, up USD17.02 from its U.S. counterpart.

Natural Gas

Natural gas futures shot up on Friday as weather services reported that cooler temperatures are due to return for a good portion of the U.S. in the coming weeks.

Government reports that supplies are on the decline pushed up prices as well.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD3.333 per million British thermal units, up 4.40%.

The commodity hit a session low of USD3.179 and a high of USD3.337.
In the U.S., MDA Weather Services reported earlier that colder-than-normal temperatures will settle in over the northeastern U.S. and Great Lakes region from Jan. 21 through Jan. 25.

The news sent natural gas prices soaring on sentiments businesses and households will turn up the heat as temperatures fall, demanding more of the commodity in the process.

Falling supplies pushed up prices as well.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended Jan. 4 fell by 201 billion cubic feet, compared to expectations for a decline of 186 billion cubic feet.

Inventories fell by 95 billion cubic feet in the same week a year earlier, while the five-year average change for the week represented a decline of 149 billion cubic feet.

Total U.S. natural gas storage stood at 3.316 trillion cubic feet as of last week. Stocks were 88 billion cubic feet less than last year at this time and 320 billion cubic feet above the five-year average of 2.996 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 93 billion cubic feet above the five-year average, following net withdrawals of 113 billion cubic feet.

Stocks in the Producing Region were 156 billion cubic feet above the five-year average of 996 billion cubic feet, after a net withdrawal of 61billion cubic feet.