Markets / Commodities: US Debt, Techs, Copper, Gold

Only one issue this week for markets to fret over, the US debt ceiling brawl which seems to be continuing towards a very large cliff with no real attempt to resolve it once and for all.

In fact a temporary fudge will probably result this week to postpone the much tougher decisions on future spending cuts and tax increases for months, perhaps more than a year.

[Kick off your day with Global Markets Daily]

The collapse on Friday night of the serious talks, and then fitful talks over the weekend leaves us no closer to resolution.

The debt ceiling brawl between President Obama and the Republicans is a proxy for the 2012 Presidential election campaign well ahead of time, so expect the negotiations to drag on as the battle of wills continues.

So, with the regular headaches of weak US growth (more news out this week), good news about earnings, especially from tech majors, concern about unemployment and Europe (the Greece deal late last week hasn't resolved the problem once and for all), the markets remain wary, but prone to excitable rallies as we saw last week.

Friday saw some realism in US trading as the euphoria of Wednesday and Thursday ('Debt deal done, Greece saved, again') faded and smart investors realised the concerns hadn't gone away at all.

Gold rose, oil traded slightly higher, trading volumes were weak in many markets (gold, oil and Wall Street) as the northern summer sent investors to the beach (a serious drought is expanding out of Texas and across the lower third of the US).

Spot gold closed at $US1602 an ounce, adding $US12 for the day, while West Texas Intermediate crude oil ended just under the $US100 a barrel mark.

In the US the Dow ended down 43.25 points, or 0.3%, to 12,681.16.

Component and equipment maker Caterpillar fell 5.8% on weak results from Japan, but McDonald's shares rose 2.3% on the back of more eating by struggling consumers in the US and Europe.

For the week, the Dow gained 1.6%.

The S&P 500 Index gained 1.22 points, or 0.1%, to 1,345.02 on Friday. For the week it gained 2.2%.

Technology companies fared the best last week thanks to the strong report from Apple, Google the week before and other tech leaders.

The Nasdaq Composite Index added 24.4 points, or 0.9%, to 2,858.83. It gained 2.5% for the week and the Nasdaq 100 (a leaders index) hit a ten year high on Friday.

In Australia, the market will open a touch higher after the Share Price Index futures contracted added 3 points to 4590 early Saturday morning.

That was after the ASX200 index ended up 46.9 points, or 1%, on Friday at 4602.9, a gain of 2.9% for the week, the best weekly performance in eight months.

The All Ordinaries index gained 47.9 points for the day, or 1%, to 4674.1.

The Australian dollar ended the week at $US1.0851, up two cents from the week before, and all coming Thursday night and Friday in the wake of the Greek debt deal.

The Aussie hit a peak of $US1.060, the highest point for two months.

The currency gained nearly 2% over the week on the greenback.

Friday saw the banks back in favour as the Greek deal settled nerves for the time being.

The National Australia Bank rose 2.5% to $25.22, Macquarie Group rallied 3.3% to $30.06, coming off more than two-year lows hit the week before.

ANZ added 47c, or 2.2%, to $21.73, while Westpac was up 46c, or 2.2%, at $21.60.

The Commonwealth Bank rose 78c, or 1.6%, at $50.52, following the surprise announcement chief executive Ralph Norris will retire in November and be replaced by insider Ian Narev (a former consultant, not banker) as CEO.

BHP Billiton fell 15c to $43.42, while Rio Tinto added 11c to $82.45 after saying it was considering selling off one of its UK coal-fired power stations before the commencement of new environmental laws.

News Corp stocks were down again here on Friday, falling 25c, or almost 2%, at $15.23, while its non-voting stock dropped 17c, by more that 1%, to $14.73. News shares fell 0.7% in New York on Friday night to $US16.85.

BSky, the UK satellite Pay TV giant 39% owned by News Corp, reports quarterly earnings on Friday in London.

They will underline the damage to News Corp of the hacking scandal which forced News to abandon a bid for BSkyB at 7 pounds a share. The shares ended at 7.43 pounds on Friday night.

News Corp is due to release 4th quarter and 2010-11 full year results on August 4 in New York.

ConnectEast Group independent directors recommended a takeover proposal from Horizon Roads. That saw ConnectEast Group's securities up 9c, or 20%, to 54 c.

The biggest loser was TV operator Austar, which slumped 16.2% to $1.085 after the ACCC raised concerns that a planned $2 billion takeover by bigger rival Foxtel, part-owned by Rupert Murdoch's News Corp, would create a pay TV monopoly.

Austar reports its first half earnings later in the week.

Elsewhere in Asia, the MSCI Asia Pacific Index rose 2.5%, its biggest advance this month and the highest close since May 5.

Japan's Nikkei and South Korea's Kospi Index both increased 1.2% on Friday, Taiwan's Taiex Index gained 0.6% and Hong Kong's Hang Seng Index jumped 2.1%.

For the week the Nikkei was up 1.6%, (and within 1% or moving into a gain for the year), South Korea's Kospi Index climbed 1.%, Australia's ASX 200 Index added 2.9%, while Hong Kong's Hang Seng Index rose 2.6%.

European stocks climbed last week, ending two weeks of losses, as euro-region leaders agreed on a second bailout package for Greece.

Banks led gains in the Stoxx Europe 600 Index, which finished up 1.9% for the week by the close on Friday.

Bloomberg said national benchmark indexes rose in all 18 western European markets, except Iceland.

France's CAC 40 jumped 3.1%, London's FTSE 100 gained 1.6% and Germany's DAX gained 1.5%.

Greece's ASE surged 9.3% in the biggest increase since October 2008. Milan's FTSE-MIB fell 0.15%.

In commodities, the copper market is watching a developing strike at BHP Billiton's huge Escondida copper mine in Chile where miners have voted to indefinitely extend a strike at the mine, which started late last week.

News agencies reported that the 2,350-strong Escondida Mine Workers Union No. 1 "unanimously voted" to extend the work stoppage (requires google account), which began Thursday night and was initially due to end 24 hours later on Friday night.

The union members struck over unmet contract demands, including an increase of their year-end bonuses.

After meeting with the labor-relations representatives from Minera Escondida, the company that runs the mine, and "not reaching a favorable agreement to our demands...workers decided to extend the strike indefinitely", the union said on its website shortly after voting was completed.

Escondida, which produced 1.09 million tonnes of copper last year, stands to lose around 3,000 tonnes (worth around $US30 million) of copper metal output for every day workers are on strike.

The strike extension will likely boost already strong copper prices.

The most actively traded Comex contract for September delivery settled 0.6% higher Friday in New York at $US4.410 a pound.

The strike at Escondida comes on the heels of Chilean state copper company Corporacion Nacional del Cobre's first general strike in 18 years earlier this month.

Most of the 16,000 staff workers at Codelco, as the state-owned company is called, walked off their posts to protest restructuring and what they see as the first steps toward privatisation.

The companywide strike at Codelco left losses on 4,900 tonnes of lost copper production.

Not enough to change supply/demand, but the Escondida strike could if it continues for more than a week.

Meanwhile oil futures closed higher in New York, while Comex's August gold futures added $US14.50 to $US1,601.5 an ounce.

Gold futures settled higher on Friday night, ending 90c short of a record.

The contract rose as high as $US1,607.70 an ounce intraday.

Gold on Monday notched a nominal record close of $US1,602.50 an ounce.

And spot gold hit a nominal high of $US1609.51.

Comex September silver rose $US1.18, or 3%, to $US40.12 an ounce.

Reuters reported on Friday that analysts in its semi annual gold market survey, have boosted gold price forecasts for this year and next because of worries about the eurozone crisis, and fresh worries over the US recovery and debt.

Reuters said that the poll of precious metals price forecasts found that just over half of the 52 respondents who returned gold views expect prices to average $US1,500 an ounce or more this year, against just over one in five who responded to a similar poll conducted in January.

"The survey returned a median average price forecast of $US1,510 an ounce, up from $US1,453 an ounce in January, when many investors had hopes the global economy was on track to steadily recover," Reuters reported.

"Next year respondents expect prices to average $US1,575 an ounce, against expectations for $US1,425 in the earlier poll, continuing the metal's bull run for a twelfth successive year."

Reuters said analysts in the survey were more cautious about silver prices, after they fell sharply from early May.

Silver has fluctuated between just over $US26 and nearly $US50 an ounce this year, showing far greater volatility than gold.

It is expected to average $US36.60 an ounce this year with the strong performance up to early May boosting prices from the $US30 forecast in January.

"Next year prices are expected to average $US36.25 an ounce, well above January's estimate of $28 an ounce," Reuters said.

And oil futures rose Friday in New York and London, extending gains for a fourth session.

Nymex West Texas Intermediate in New York rose 74c, or 0.8%, to end at $US99.87 a barrel.

In London Brent crude oil jumped 1%, or $US1.16, to close at $US118.67 a barrel on Friday.

For the week, US crude oil futures rose $US2.63, a fourth straight week of gains, while Brent rose $US1.14, recovering from the previous week's losses.

More from IBT Markets:
Follow us on Facebook.
Follow us on Twitter.
Subscribe to get this delivered to your inbox daily