FXST: Bullishness In Stock Markets Continued To Boost Oil Price
Expiring today, WTI crude oil for August delivery rose +0.7% to settle at 63.98 after surging to as high as 64.54 Tuesday while the most active September contract gained +1.6% to close at 65.29. Others in the energy complex also advanced with heating oil gaining +2.9% and gasoline adding +1.1% to close at 1.69 and 1.79, respectively.
The greatest support to crude oil was the stock market and encouraging economic indicator. Dow Jones Industrial Average and S&P 500 Index climbed +1.2% and +1.1% to 8848 and 951, respectively, as CIT group secured $3B loans from bondholders and was able to avoid going bankrupt for the time being. Moreover, Goldman Sachs Group forecast S&P 500 Index will reach 1060 by December 31, compared with its previous projection of 940. This represents a +11% increase from Monday's close, +15% from the level on June 30 and the steepest rally in the second half since 1982. In Europe, UK's FTSE 100 gained +1.25% to close at 4444. Germany's DAX and France CAC 40 also rose +1.63% to close at 3271.
Today in Asia, Japan's Nikkei soars +1.4% to 9522, after the public holiday Monday, catching up the rallies in other markets yesterday. The MSCI Asia Pacific Index rises +1.2% while Australia's S&P/ASX Index edges 0.1% higher.
US leading indicator rose +0.7% in June, more than consensus of +0.5%, after gaining +1.3% in the prior month. The gauge has increased for 3 consecutive months and suggested the market has turned more optimistic on the economic outlook in the coming 3-6 months.
Gold price rallied to 5-week high at 955.4 as oil price advanced and the dollar fell. However, the yellow metal pulled back in NY session and settled at 948.8, +1.2%. On the other hand, silver gained +1.7% while platinum and palladium added +1.1% and +2.6% to 1189 and 56, respectively.
USD plummeted against major currency and retreated to 1.423 (the lowest since June 5) and 1.655 (the lowest since June 30) against the euro and the pound, respectively. The focus today will be the Fed Chairman Ben Bernanke's Testimony. The market is looking for indications on further asset purchase program and exit strategies. Should Bernanke signal the end of credit easing after completion of the existing one and discuss about potential exit strategies, dollar will benefit as concerns about USD's stability due to huge fiscal deficit can be eased.
In South Africa, wage negotiation between mining companies and labor union remained unresolved. Impala raised its offer to a +8.5% increase which was still rejected by the National Union of Mine workers (NUM) which lowered its request to +15.5%. The negotiation continued to post a threat on production disruption.
