Closing Market Recap: Markets Bounced Around by Oil Volatility

Market Updates | Written by CEP News | Aug 11 08 20:40 GMT |
(CEP News) - Energy traders were in the driver's seat on Monday as equity and currency markets looked to oil for direction in a day that lacked a clear trading focus.

U.S. equity markets opened the day in negative territory but the S&P 500 strengthened as crude prices declined. The index was up more than 16 points shortly after midday, and hit 1300 for the first time since June 26, but halved its gains into the close.

Equity markets moved in tandem with crude oil prices. Crude was higher overnight as the Russian-Georgia conflict escalated over the weekend. But oil prices were unable to mount a strong rally and the bears once again took charge, pushing WTI as low as $112.76.

Crude later mounted a modest recovery but it was the selloff that caught the attention of equity and forex markets.

"The impact of Russia's military incursion into Georgia has not been enough to stem the drop in oil prices, but the conflict might still have an impact, and oil prices did begin to edge upward early in the Asian session weighing on U.S. stocks and USD/JPY," wrote currency strategists from RBC Capital Markets in a client note.

At its highs, the U.S. dollar was able to break the 1.07 mark against Canadian dollar and the 1.49 handle against the euro.

The Canadian dollar was down 0.0027 to 0.9352 against the U.S. dollar (1.0694 USD/CAD) and down 0.27 to 103.01 against the yen.

The U.S. dollar was down 0.03 to 110.15 against the yen and the Dollar Index was up 0.389 to 76.234.

The euro was down 0.0106 to 1.4899 against the U.S. dollar, down 0.0078 to 1.5933 against the Canadian dollar, down 0.0010 to 0.7803 against the pound sterling and was lower by 1.26 to 164.11 against the yen.

The pound sterling was down 0.0118 to 1.9094 against the U.S. dollar and down 0.0076 to 2.0420 against the Canadian dollar.


WTI crude oil was unchanged at $115.20. The front month gold contract at the Chicago Board of Trade was down $34.50 to $830.00 per ounce.

Toronto's S&P/TSX composite index closed down 139 points to 13203, the Dow Jones industrial average clsoed up 48 points to 11782, the S&P 500 finished the day up 9 points to 1305 and the Nasdaq closed up 26 points to 2440.

In fixed income, the Canadian market outperformed in a U.S. selloff. Strategists point to Canadian housing starts figures that fell much more than expected in July to 186,500, down from a downwardly revised 215,900, according to the Canada Mortgage and Housing Corporation. Economists expected housing starts to fall to 210,000.

Millan Mulraine, an economics strategist at TD Securities, called the decline in starts "massive," noting it was the biggest decline since last December and "much worse than the drop to 210k expected by the markets."

Yields on two-year Canadian government bonds were up 4.9 bps to 2.76%, with five-year yields up 4.2 bps to 3.13%, 10-year yields up 2.5 bps to 3.64% and 30-year yields flat at 4.06%. The December 08 BAX contract was down 4.0 ticks to 97.20.

U.S. market watchers took note of the Federal Reserve's July Senior Loan Officer Opinion Survey on Bank Lending Practices. The survey showed 57.7% of banks raising standards with 38% indicating "considerable" tightening - both are cyclical highs.

Treasuries were selling off throughout the session but mounted a 2-3 basis point recovery following the survey and late-session weakness in stocks.

Traders complained of volumes that were less than 65% of normal and focused in the 6-month bill sector.

"We saw very few flows of significance," UBS strategist Benjamin Cheng wrote in a note.

Looking ahead, the energy market should get some guidance from the U.S. Department of Energy's short-term outlook on Tuesday. Otherwise, overnight CPI data from the UK and North American trade balance figures are the only releases of note.

All data taken at 4:28 p.m. EDT.

By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.