At the peaks seen earlier Wednesday, oil prices were not quite back at last week's highs, but with tensions in the Middle East and North Africa escalating, the market was targeting a move toward recent 30-month highs.
Commodities ended mixed on the session, with precious metals (+1.7%), energy (+0.6%), and industrials (+0.1%) all posting gains, while grains (-1%), softs (-0.9%) and livestock (-0.7%)all posted losses.
May crude oil rallied for 0.7% to close at $105.75 per barrel. Today's closing price marks crude oil's best in ~2.5 yrs.
Global unrest, including recent attacks in Israel, sent the precious metals higher in a flight to safety. April gold rallied for 0.7% to finish at $1438.00 per ounce, while May silver surged 2.5% to end at $37.19 per ounce.
The euro slumped against most of its major counterparts as Portugal began debating a budget that may lead the government to fall and European leaders pushed back a decision on funding a regional bailout mechanism.
The 17-nation currency fell for a second day against the dollar before a Portuguese vote that may force the nation to an early election and bailout and reports the expansion of the European Union European Financial Stability Facility will not be decided until June.
The yen strengthened against most of its major counterparts as Luxembourg Prime Minister Jean-Claude Juncker said Europe, the U.S. and the Group of Seven are “ready” to act to curb the currency’s rise.
Demand for Japanese debt rose as radiation levels at Japan’s Fukushima Dai-Ichi nuclear power plant hampered efforts to repair reactors.
The yen rose against most major currencies even after Jean- Claude Juncker said the Japanese currency is “slowly moving in the wrong direction”. The G-7 nations intervened March 18 to bring the currency down from a postwar high.
Juncker also said March 21 his “personal guess” is that the EFSF would be decided in June and would increase guarantees. The decision won’t be made by the end of this week’s meeting of policy makers, Reuters reported citing a draft document.
“Portugal has been on the radar screen, but the statement that was most damaging is that the EFSF was put off to the end of June,” said Steven Englander at Citigroup Inc.. “Everything we heard and seen for the last three months was telling us that everything would be wrapped up this weekend and now it’s not.”
The pound fell against all its major counterparts after the Bank of England minutes showed policy makers voted 6-3 to keep rates steady on March 10.
Chancellor of the Exchequer George Osborne said the British economy will more grow more slowly this year than previously forecast.
The Office for Budget Responsibility predicts annual growth in 2011 of 1.7 percent, down from the 2.1 percent forecast in November, Osborne said.
USD/JPY easing lower, trades near Y80.80 area, a bit higher the overnight low at Y80.70. Bids were mentioned in place from Y80.80 to Y80.60. There is a risk of tight stops under the overnight low. Below there, Y80.50 a focus, bids said in place but with stops in place below.
Spot gold is trading at $1439.25/oz, on the high side of the day's $1426.20/$1.440.90 range. The precious metal is back at two-week highs, but has not yet tested the life-highs of $1444.40, seen March 7. Initial resistance is found at the life highs, with the daily Bollinger top at $1446.90. Beyond that, additional resistance is seen at the November 9 resistance line at $1456.60. Support comes in at the 5-day moving average at $1424.
USD/CAD holds C$0.9820 as the dollar back off from earlier high at C$0.9843 where further stops are seen. Canadian budget vote due later this week, does not have opposition support and thus could see a vote of no confidence that, if passed, would lead to general elections.
Financials, now down 1.2%, continue to trade with the worst loss of any major sector. Bank stocks have been the biggest burden for the financial sector; the KBW Bank Index is currently down 1.4%.
Materials stocks are down only 0.1%. Newmont Mining (NEM 54.45, +1.28) is a leader in that space for the second straight session.
Andy Chaveriat, chief technical analyst at BNP Paribas, sees the "current dollar rally is not a shift in the larger dollar downtrend". He suggests using pullbacks in the euro to the $1.4100/$1.4050 as a dollar selling opportunity. Buying the euro the first target comes at $1.4220 then owards $1.4282 major resistance.
New home sales for February fell to an annualized rate of 250,000 from the prior month's upwardly revised rate of 301,000.
The lower-than-expected tally is close to a record low and has caused stocks to pull back from a recent upturn. The broad market now sits at its morning low.
Declining Sectors: Financials (-1.1%), Utilities (-0.8%), Consumer Discretionary (-0.8%), Telecom (-0.6%), Health Care (-0.6%), Industrials (-0.5%), Energy (-0.5%), Materials (-0.5%), Tech (-0.4%), Consumer Staples (-0.3%).
U.S. stocks were poised for a flat start Wednesday, as investors remained nervous about the spreading unrest in the Middle East region and Japan's recovery efforts.
Economy: Investors will get February new home sales figures from the Census Bureau at 14:00 GMT. Economists are looking for 288,000 annualized units for February, up slightly from 284,000 units in January.
The government's weekly report on crude inventories will also be released after the opening bell.
Companies: Before the bell, General Mills (GIS) said its fiscal-third quarter earnings rose 18%. The cereal maker, which raised prices in October, said it expects strong earnings growth in the fourth quarter.
Shares of homebuilder PulteGroup (PHM) rose 5% in premarket trading after Goldman Sachs raised its price target on the stock.
Bank of America (BAC) shares slid 1.7% premarket. The bank said in that it would need to revise its dividend plan after the Fed objected to the company's original proposal.
Oil for May delivery, which became the front-month contract Wednesday, gained 42 cents to $105.39 a barrel.
Gold futures for April delivery rose $5.50 to $1,433.10 an ounce.
The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 3.30% from 3.33% late Tuesday.
The pound weakened as minutes of the Bank of England’s March 10 showed fewer dissenting policy makers calling for an interest-rate increase than some investors predicted.
Policy makers voted 6-3 to keep rates steady on March 10 and saw “merit in waiting” to assess the effect of higher oil prices on the economy, the Bank of England minutes showed.
“There was some hope that another voter could go for a rate hike this month,” Nomura’s Kendrick said. “There is some disappointment that it was still a 6-3 split.”
The euro, dollar and yen were little changed versus each other.
The franc appreciated before a Portuguese vote that may push the nation to an early election and European bailout, boosting demand for the safest assets.
EU leaders are divided over how to let the euro-region stopgap fund spend its full capacity of 440 billion euros ($624 billion) to ease credit woes as a March 24-25 summit approaches. Policy makers have settled on a permanent rescue fund able to lend 500 billion euros as of 2013.
US data starts at 1400GMT, when the pace of new home sales is expected to rise to a 290,000 annual rate in February after sharp movements in the previous two months. The pace of home sales remains well below its year ago level, even this far into the recovery. The weekly EIA Crude Oil Stocks data then follows at 1430GMT.
But some investors remained cautious ahead of a key parliamentary vote on austerity measures in Portugal that could see the country's government brought down, and others were focused on the continued political uncertainties in the Middle East and North Africa.
Cross has rallied strongly back from the earlier floor at Y114.21 and breaking in to offers now through Y115.00. Rate has matched the Asian session high at Y115.03 and faces further supply at Y115.30, ahead of Y115.50/55.
Moves back above $1.4200 and triggered stops through $1.4205/10 eventually reaching $1.4215. Offers now seen placed to $1.4220, with stronger interest noted from above $1.4240 and option related interest between $1.4250/70. Barrier noted at $1.4250 and $1.4275. Main demand remains at $1.4150/40.
The Bank of England's Monetary Policy Committee again split four ways at its March meeting, with one member voting to extend quantitative easing, six voting for unchanged policy, two for a 25 basis point rate hike and one for a 50 bps increase. The minutes of the Mar meeting showed that while the vote on the MPC was unchanged from Feb, the committee was wrestling with the new shocks of a sharp rise in oil price and developments in the Middle East and North Africa. The minutes said some MPC members believed the case for a rise in Bank Rate had risen.
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