Investing.com Weekly Wrap-Up 23 August 2013

by Investing.com Staff, Investing.com

Markets Find Good News In Weak Home Sales

Stocks finished higher for a second day in a row, with the Dow Industrials Index closing above its 15,000 mark as the markets overcame downbeat housing data to end the week with moderate gains.

U.S. markets closed as follows:

• Dow Jones Industrial up 46.62 (+0.31%) to 15,010.36
• S&P 500 up 6.51 (+0.39%) to 1,663.47
• Nasdaq up 19.08 (+0.52%) to 3,657.79

Forex

The dollar traded largely lower against most major currencies on Friday after official data revealed new home sales tanked in July and kept expectations alive that the Federal Reserve will continue stimulating the economy with dollar-weakening asset purchases for longer than once anticipated.

In U.S. trading on Friday, EUR/USD was up 0.18% at 1.3380.

The Commerce Department reported earlier that new home sales in the U.S. dropped 13.4% to 394,000 units in July, far worse than market expectations for a 1.4% decline.

In June, new home sales rose 3.6% to 455,000 units.

The numbers kept expectations going that while the Federal Reserve remains ready to begin scaling back the pace of its USD85 billion in monthly asset purchases this year, a start date may come later rather than sooner.

Stimulus tools such as monthly bond purchases drive down interest rates to spur recovery, weakening the dollar in the process.

Fed officials have said they will pay close attention to economic indicators before deciding when to taper stimulus programs.

On Thursday, the Department of Labor reported the number of people filing for initial jobless claims last week rose by 13,000 to 336,000, a little higher than forecasts for 330,000, which helped soften the dollar in quiet trading.

Meanwhile in Europe, Germany’s gross domestic product grew 0.7% in the second quarter from the first, in line with market expectations.

The greenback was up against the pound, with GBP/USD down 0.09% at 1.5575.

Official data revealed that the U.K. gross domestic product grew by 0.7% in the second quarter from the first, beating expectations for a 0.6% expansion.

The U.K. Office for National Statistics said in a preliminary report earlier that business investment rose 0.9% in the second quarter, surpassing expectations for a 0.6% increase after a 1.9% contraction in the first quarter.

Still, profit taking sent the pound falling.

The dollar was down against the yen, with USD/JPY down 0.04% at 98.69, and down against the Swiss franc, with USD/CHF trading down 0.14% at 0.9220.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.10% at 1.0508, AUD/USD up 0.26% at 0.9030 and NZD/USD trading down 0.20% at 0.7814.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.11% at 81.41.

Gold

Gold prices shot up on Friday after weak U.S. housing data hit the wire and left investors concluding that the Federal Reserve will decide to taper stimulus programs later rather than sooner

Stimulus tools such as the Fed’s USD85 billion in monthly bond purchases tend to weaken the dollar by driving down interest rates, making gold an attractive hedge.

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

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,396.60 during U.S. afternoon hours, up 1.88%.

Gold prices hit a session low of USD1,368.40 a troy ounce and high of USD1,398.40 a troy ounce.

Gold futures were likely to find support at USD1,351.90 a troy ounce, Tuesday’s low, and resistance at USD1,423.25, the high from June 6.

The December contract settled up 0.05% at USD1,370.80 a troy ounce on Thursday.

Elsewhere on the Comex, silver for September delivery was up 4.36% at USD24.040 a troy ounce, while copper for September delivery was up 0.44% and trading at USD3.345 a pound.

Oil

Crude oil futures extended Thursday’s gains into Friday on better-than-expected European and Chinese manufacturing gauges and shrugged off sluggish U.S. home sales figures.

On the New York Mercantile Exchange, light sweet crude futures for delivery in October traded at USD106.69 a barrel during U.S. trading, up 1.58%.

The October contract settled up 1.14% at USD105.03 a barrel on Thursday.

The commodity hit a session low of USD104.32 and a high of USD106.91.

London-based Markit Economics reported Thursday that its flash euro zone manufacturing purchasing managers’ index rose to 51.3 in August from a final reading of 50.3 in July.
Analysts were expecting the index to come in at 50.8.

The flash euro zone services PMI rose to a 24-month high of 51.0 from 49.8 in July, better than market calls for a 50.2 reading.

Elsewhere, a preliminary reading of China’s HSBC manufacturing PMI rose to a 4-month high of 50.1 in August from 47.7 in July. Analysts were forecasting a 48.3 reading.

The weaker dollar, in light of the possible delay of the Fed taper starting, also buoyed the dollar price of oil.

A weaker greenback makes oil an attractively-priced commodity on dollar-denominated exchanges.

Ongoing unrest in the Middle East boosted prices as well.

On the ICE Futures Exchange, Brent oil futures for October delivery were up 1.11% at USD111.12 a barrel, up USD4.43 from its U.S. counterpart.

Natural Gas

Natural gas prices fell on Friday after investors locked in gains stemming from Thursday’s bullish supply data and sold the commodity for profits.

Prices also fell as investors priced in currently hot summer weather into trading and prepared for waning demand that comes with cooler fall temperatures.

On the New York Mercantile Exchange, natural gas futures for delivery in September traded at USD3.489 per million British thermal units during U.S. afternoon trading, down 1.59%. The September contract settled up 2.46% at USD3.545 per million British thermal units on Thursday.

The commodity hit a session low of USD3.484 and a high of USD3.560.

The U.S. Energy Information Administration said in its weekly report on Thursday that natural gas storage in the U.S. in the week ending Aug. 16 rose by 57 billion cubic feet, well below market expectations for an increase of 69 billion cubic feet, which sent prices gaining to levels ripe for profit taking on Friday.

Inventories increased by 43 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a build of 56 billion cubic feet.

Total U.S. natural gas storage stood at 3.063 trillion cubic feet as of last week. Stocks were 238 billion cubic feet less than last year at this time and 44 billion cubic feet above the five-year average of 3.019 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 103 billion cubic feet below the five-year average, following net injections of 47 billion cubic feet.

Stocks in the Producing Region were 88 billion cubic feet above the five-year average of 969 billion cubic feet after a net injection of 4 billion cubic feet.

Updated weather forecasting models meanwhile called for normal to below-normal temperatures for much of the country with the arrival of September, which should dampen demand for natural gas at the country’s thermal electricity generators as homes and businesses power down their air conditioning.

Pockets of hot weather will stick around over the central U.S. in early September, which curbed the commodity’s losses.

Natural gas accounts for about a quarter of U.S. electricity generation.