Silver, Gold and Oil Drive U.S. Stocks

Darlington Musarurwa
04 Jun, 2009
New York City

Investors are increasingly looking for direction in commodities and currencies markets. Stocks after eleven-week rally appear to face headwind but speculation in silver, gold, crude oil and agriculture markets has lifted prices to six-month highs. European central banks leave rates on hold.

[R]5:00 PM New York, 10:00 PM London, 8:00AM Sydney – Investors are increasingly looking for direction in commodities and currencies markets. Stocks after eleven week rally appear to face headwind but speculation in silver, gold, crude oil and agriculture markets has lifted prices to six-month highs. European central banks leave rates on hold.[/R]

Increasingly currents in the stock markets are driven by the activities in the commodities, currencies and bond markets. And today, it was the commodities. Crude oil and natural gas surged but commodities both metals and agriculture, reached higher.

Silver is now more than 50% higher from its lows in seven months, gold is inching near $990 level and sugar and wheat are trading six-month high.

U.S. indexes closed higher but retailers faltered. Weaker than expected same store sales in May dragged teenage retailers, discount and department stores and niche retailers.

U.S. retailers reported weaker than expected sales in May. Same store sales declined sharply at teenage retailers more than anticipated. Abercrombie & Fitch sales plunged 28%. American Eagle Outfitters sales declined 7%. Costco Wholesale sales excluding gasoline at U.S. locations increased 1%.

U.S. auto sale rebounded from April confirming seasonal trend and are likely to dip again in June and the rest of the year. For the year auto sales are expected to stay below 10 million, a level at which none of the automakers are expected to be profitable.

The European Central Bank and the Bank of England left their interest rates unchanged. Retail sales in the EU-16 area edged up in April from March but unemployment in France increased to 9.1%.

German Vice Chancellor and Foreign Minister Frank-Walter Steinmeier said that decision regarding bailout of Arcandor may be taken as early as this weekend. He also said that insolvency at the retailer is not preferred.

Mining stocks declined in London trading after the $15.5 billion between Australia based Rio Tinto and China based Chinalco may have been canceled. The Bank of England left its key lending rate unchanged. Home prices in May increased 2.6% and lifted financial and real estate stocks.

The Indian government in its agenda focused on sustaining higher economic growth, increasing stake sale of companies controlled by the state and keep debt under check. The latest read on wholesale inflation showed a decline.

Australia recorded a surprise trade deficit in April. The largest Australian deal between Rio Tinto and China based Chinalco of $19.5 billion appear to have collapsed. Rio Tinto is expected to raise $15 billion in public offering or a deal with BHP Billiton.

North American Markets

Dow Jones Industrial Average increased 74.96 or 0.9% to a close of 8,750.24, S&P 500 Index increased 10.70 or 1.2% to 942.46, and Nasdaq Composite Index edged higher 24.10 or 1.3% to close at 1,850.02. Toronto TSX Composite Index closed up 187.12 or 1.8% to 10,477.24.

Of the stocks in S&P 500 index, 351 increased, 143 declined and 5 were unchanged.

Abercrombie & Fitch Co led the decliners in the S&P 500 index with a loss of 11.8% followed by losses in The Gap, Inc of 7.1%, in Nordstrom Inc of 6.9%, in Family Dollar Stores, Inc of 5.2% and in Qwest Communication of 4.8%.

KeyCorp led gainers in the S&P 500 index with a rise of 20% followed by gains in of SLM Corp 12%, in AIG of 11.6%, CIT Group Inc of 10.9% and in Micron Technology and AK Steel Holding of 10.6%.

South American Markets Indexes

Mexico Bolsa Index increased 96.71 or 0.4% to 24,748.02. Brazil Bovespa Stock Index added 1,377.27 or 2.6% to 53,463.90.

Argentina Merval Index regained 3.4%, Chile Stock Market Select index increased 0.5% and Peru Lima General Index surged 3.5%. Colombia IGBC General Index edged higher 1.1% and Venezuela Stock Market Index edged down 0.2%.

Europe Markets Review

In London FTSE 100 Index closed higher 3.52 or 0.08% to 4,386.94, in Paris CAC 40 Index increased 2.38 or 0.07% to close at 3,312.03 and in Frankfurt DAX index higher 10.27 or 0.20% to close at 5,064.80. In Zurich trading SMI increased 37.50 or 0.70% to close at 5,422.21.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 72.71 or 0.75% to 9,668.96, Hang Seng index in Hong Kong decreased 73.70 or 0.40% closed to 18,502.77, CSI 300 index in China higher 14.36 or 0.49% closed to 2,953.75. The ASX 200 index in Australia decreased 82.60 or 2.06% closed to 3,934.60. The KL Composite index in Malaysia higher 8.57 or 0.81% closed to 1,063.97.

The Kospi Index in South Korea decreased 36.75 or 2.60% to close at 1,378.14. SET index in Thailand closed higher 11.35 or 1.95% to 593.60 and JSE Index in Indonesia increased 21.80 or 1.08% closed to 2,032.72. The Sensex index in India increased 137.78 or 0.93% closed to 15,008.68.

Commodities, Metals, and Currencies

Crude oil increased $2.58 to close at $68.70 a barrel for a front month contract, natural gas increased 8 cent to $3.85 per mBtu and gasoline increased 6.01 cents to 196.17 cents.

Wheat futures closed up 17.75 cents in Chicago trading and closed at $6.35 a bushel. Sugar increased 0.35 cent in trading at 15.24 cents a pound. Soybean future closed up 48 cent to $12.87 a bushel.

Gold decreased $16.40 in New York trading to close at $982.00 per ounce, silver closed up $0.59 to $15.89 per ounce and copper for the front month delivery increased 9.70 cents to $2.31 per pound.

Dollar edged lower against euro to $1.4192 and closed up against the Japanese yen to 96.54.

Yields on 10-year U.S. bonds increased to 3.71% and with 30-year maturities closed up at 4.58%.