Precious metals & oil updates

February 4, 2011 – 10:17AM

The  market has opened higher after receiving mixed leads from offshore trading overnight, with Wall Street flat to slightly higher, European markets mixed, Asian markets mostly closed and precious metals higher. Oil was down a touch.

In early trade, the benchmark S&P/ASX200 index rose 15.2 points, or 0.3 per cent, to 4835.8 and the All Ordinaries gained 13.2 points, or 0.3 per cent, to 4932.5.

What’s out today

In economics news, the Reserve Bank of Australia releases its quarterly Statement on Monetary Policy.

The Australian Office of Financial Management conducts a tender process to issue $700 million of the November 2012 bond line.

In equities news, Aristocrat Leisure manager for Australia and NZ, Trevor Croker, appears before a public hearing in Sydney of the Joint Select Committee on Gambling Reform.

In the news this morning

Qantas chief Alan Joyce has questioned the viability of its full-service international operations without a change of direction.

Murdoch’s latest project is a US-only, iPad-only “newspaper of the 21st century” that takes the tablet bar to a new high.

The wealth contained within Lang Hancock’s discovery in Western Australia’s Pilbara has propelled his daughter to the top of Australia’s rich list.

And world food prices have hit a new high, the United Nations has said.

Plus, Malcolm Maiden asks whether wireless is the hair in the NBN soup, Ian Porter on industry policy and Harold Mitchelllooks ahead to a great year.

Offshore overnight

US stocks kicked up in late trading, after dipping as concerns over violent protests in Egypt weighed against better-than-expected economic news in the US, including retail sales data that gave Wall Street a late boost.

Clashes continued in Egypt between pro- and anti-government demonstrators, leaving some analysts worried about their impact on oil-rich countries throughout the Middle East like Saudi Arabia and the stability of the region.

But better-than-expected December sales figures sent retail companies higher. Consumer discretionary companies in the Standard and Poor’s 500-stock index gained 1 per cent after national chains reported that sales were nearly double what analysts had forecast despite heavy snowstorms in much of the nation. Costco Wholesale Corp, Limited Brands, Nordstrom and Gap all gained more than 4 per cent.

During afternoon trading, too, US Federal Reserve chairman Ben Bernanke, opened the door for more stimulus to the US economy if the bank judged it necessary.

The S&P 500 – the benchmark for most US mutual funds – rose 3.07 points, or 0.24 per cent, to 1307.1. The Dow Jones industrial average closed up 20.29 points higher, up 0.17 per cent, at 12,062.26. The Nasdaq composite rose 4.32 points, or 0.16 per cent, to 2753.88.

European stock markets retreated and the euro dropped lower against the US dollar on Thursday as the ECB kept interest rates on hold, better-than-expected US data and ongoing unrest in Egypt.

London’s FTSE 100 index of leading shares dipped 0.28 per cent to 5983.34 points, and in Paris the CAC 40 dropped 0.74 per cent to 4036.59 points.

In Frankfurt, the DAX bucked the trend to close up 0.14 per cent at 7193.68 points.

Elsewhere in Europe, Swiss stocks ended off 0.13 per cent, Brussels slipped 0.14 per cent, Lisbon dipped 0.41 per cent, Amsterdam shed 0.68 per cent, Milan dropped 0.93 per cent, and Madrid fell 1.36 per cent.

In foreign exchange trade, the euro ran into profit-taking ahead of an interest rate call from the European Central Bank, and fell further thereafter, suggesting markets had curbed expectations of a rate hike early this year.

The shared euro zone unit retreated to 1.3648 dollars, compared with 1.3808 dollars late in New York.

How we fared yesterday

The Australian stock market closed in the black following gains in the mining sector on the back of record copper prices overnight.

Insurance stocks rebounded amid relief that the impact of Cyclone Yasi was less devastating than expected.

The benchmark S&P/ASX200 index was up 24.1 points, or 0.5 per cent, at 4820.6 points, while the broader All Ordinaries index added 21.4 points, or 0.44 per cent, to 4919.3 points.


At one point, Brent North Sea crude for delivery in March climbed to $US103.37 a barrel — the highest level since September 26, 2008.

It later stood at $US102.27 in London trade, down seven cents compared with Wednesday’s close.

New York’s main futures contract, light sweet crude for March, dipped 33 US cents to $US90.53 per barrel in late afternoon trade.

The oil market is jittery due to fears the crisis in Egypt could spill over to other countries in the crude-rich but politically volatile Middle East. Although Egypt is not a major crude producer, it controls the Suez Canal, which carries about 2.4 million barrels daily, roughly equal to Iraq’s output.

Hasegawa added that the spread in the price between Brent crude and the benchmark New York contract, also known as West Texas Intermediate (WTI), was likely to widen further because of oversupply in the US port of Cushing, Oklahoma.

The latest weekly stockpiles report from the US Department of Energy showed reserves had increased sharply for a third week in a row.

Crude oil stocks rose 2.6 million barrels to 343.2 million in the week ending January 28, in line with expectations, official data showed on Wednesday.

At the almost-full depot at Cushing, reserves rose 600,000 barrels to a record high of 38.3 million.

Gold rose over 1 per cent in volatile trade as strong buying by exchange traded funds and safe-haven demand driven by ongoing unrest in Egypt triggered large buy orders.

After trading lower in most of the morning session, gold rallied at midday in New York, just ahead of a speech by Federal Reserve Chairman Ben Bernanke and with financial markets already worried about escalating political tensions in Egypt and the Middle East.

Sizeable volume of buy-orders from ETFs — which were sellers earlier — hit the market once gold prices rose to $US1345 an ounce, Perez-Santalla said.

Gold also benefited from the latest remarks by Bernanke, who said that the US economic recovery still needs help from the Fed despite signs of improvement.

Bullion investors are paying close attention to Friday’s US January nonfarm payroll data. Traders said that gold prices could retreat sharply if the data promotes an optimistic view of the economy.

Spot gold rose 1.3 per cent to $US1353.55 an ounce after trading as low as $US1324.79.

US gold futures for April delivery settled up $US20.90, or 1.6 per cent, at $US1353. Volume was in line with its 30-day moving average after notching lower than usual turnover in the past three sessions.

Silver climbed 1.5 per cent to $US28.77 an ounce.

What you need to know

  • The $A was up at 101.58 US cents
  • In the US, the S&P500 was up 3.07 points to 1307.1
  • In Europe, the FTSE 100 fell 16.73 points to 5983.34
  • Gold was up $US20.90 an ounce to $US1353.00
  • Oil fell 8 US cents a barrel to $US90.78
  • The Reuters Jefferies CRB Indexfell 0.81%

AAP, with BusinessDay

Sourced & published by Henry Sapiecha

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