Oil Is Steady After Rising More Than $4 on Gasoline-Supply Drop

By Mark Shenk

July 31 (Bloomberg) -- Crude oil was little changed after rallying more than $4 a barrel yesterday, the biggest gain since July 10, as a U.S. Energy Department report showed gasoline inventories declined for the first time in five weeks.

Supplies fell 3.53 million barrels to 213.6 million barrels last week, the department said yesterday. Stockpiles were forecast to rise 350,000 barrels, according to a Bloomberg News survey. Oil supplies fell less than forecast and inventories of distillate fuel, which includes heating oil and diesel, rose.

``We are focused on the gasoline number because it had the greatest variance from expectations,'' said Tim Evans, an energy analyst for Citi Futures Perspective in New York. ``This is the first bullish gasoline news in weeks.''

Crude oil for September delivery was unchanged at $126.77 a barrel at 8:22 a.m. Sydney time. Prices are up 75 percent from a year ago. Futures gained $4.58, or 3.8 percent, to settle at $126.77 a barrel yesterday, the highest close since July 22. They touched $120.42 a barrel July 29, the lowest since May 6.

U.S. fuel consumption averaged 20.2 million barrels a day in the past four weeks, down 2.4 percent from a year earlier, the department said.

Gasoline demand in the U.S. peaks during the summer, when Americans take to the highways for vacations. The so-called driving season lasts from the Memorial Day weekend in late May to Labor Day in early September.

`Eye-Opening' Number

``The gasoline number is eye-opening,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``It's getting most of the attention, but the driving season is coming to an end with only one month left and supplies are still ample.''

The drop in gasoline inventories last week left stockpiles 3 percent higher than the five-year average for the period, the department said.

Gasoline for August delivery rose 12.74 cents, or 4.2 percent, to settle at $3.1351 a gallon in New York, the highest close since July 22. It was the biggest one-day increase since June 11. Prices touched $2.9801 July 29, the lowest since May 5. Futures reached a record $3.631 a gallon on July 11.

Pump prices are following changes in futures. Regular gasoline, averaged nationwide, fell 1.5 cents to $3.926 a gallon, AAA, the nation's largest motorist organization, said on its Web site. Prices reached a record $4.114 a gallon on July 17.

``Gasoline has been the weakest link in the energy complex,'' said Kyle Cooper, an analyst at IAF Advisors in Houston. ``The gasoline number is a little bright light for the bulls, because otherwise the report is pretty bearish.''

Distillate Supplies

Crude oil supplies declined 81,000 barrels to 295.2 million barrels last week, the report showed. A 1.3 million barrel drop was forecast in the Bloomberg News survey.

Inventories of distillate fuel rose 2.4 million barrels to 130.5 million barrels last week, the report showed. A gain of 2.05 million was forecast, according to the median of 12 analyst estimates.

``I believe the distillate build is more important than the gasoline number,'' Mueller said. ``It shows that refiners are turning their attention to the winter.''

Goldman Sachs Group Inc., the world's biggest securities firm, said oil will recover to reach $149 a barrel by the end of this year because consumer demand has been ``restrained, but not destroyed,'' by record prices.

``The gasoline number obviously started the move higher,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``It's also part technical because we failed to take out $120. The Goldman Sachs Group Inc. is also a part of what's moving things higher.''

Nigerian Oil

Falling Nigerian output is also supporting prices. Nigeria is now producing less than 1 million barrels of crude a day because of attacks by militants, ThisDay reported, citing an unidentified energy ministry official. Nigeria was the fourth- biggest source of U.S. oil imports during the first five months of the year, according to the U.S. Energy Department.

Prior to the escalation of militant attacks that began in February 2006, Nigeria pumped as much as 2.6 million barrels a day, the paper said. The country was Africa's biggest oil producer until April when it was surpassed by Angola.

Iranian Supreme Leader Ayatollah Ali Khamenei said his country will push forward with its nuclear program. The nation's highest authority spoke before a deadline for Iran to reply to an offer from world powers of economic and diplomatic incentives in exchange for the suspension of its uranium-enrichment activities.

``Iran will pursue its peaceful nuclear energy,'' state television cited Khamenei as saying yesterday. ``No one can undermine the nation's attempt to progress.''

Concern that the dispute over Iran's nuclear program might disrupt shipments from the country has supported prices since January 2006.

Brent crude oil for September settlement rose $4.39, or 3.6 percent, yesterday to settle at $127.10 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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Asia Currencies to Drop Even With $100 Oil, Morgan Stanley Says

By Patricia Lui

July 31 (Bloomberg) -- Asian currencies have yet to feel the full force of the ``oil shock'' and will decline even if the price of crude falls to $100 per barrel, Morgan Stanley says.

Record fuel import costs have sent the current-account balances of South Korea, India and Thailand into deficit, posing ``tremendous headwinds'' for the economies, said Stephen Jen, chief currency economist at Morgan Stanley in London. The impact on inflation and consumer spending has been limited because of fuel subsidies that aren't sustainable, he said.

``The biggest shock to Asia is not the U.S. housing crisis but the oil shock,'' Jen said in an interview. ``Asia was not built on $100 per barrel oil. Even if oil prices stabilize at $100, Asia will have a lot of work to do.''

Indonesia's rupiah, the Philippine peso and India's rupee will be ``first to go'' as these countries' governments are the least able to maintain subsidies, Jen said.

The rupiah will slide 2.6 percent to 9,367 per dollar this year, the peso 3.6 percent to 45.82, and the rupee 6.4 percent to 45.23, he predicts. South Korea's won will decline 5.9 percent to 1,076 a dollar and Malaysia's ringgit 3.5 percent to 3.38 per dollar, he added.

Crude prices this week fell to 12-week lows on speculation that global demand will wane as housing slumps and tighter credit curbs economic growth in the U.S. and Europe. Crude for September delivery was at $126.49 a barrel, down 28 cents a barrel, the New York Mercantile Exchange at 8:16 a.m. in Tokyo. It's down 14 percent from the record $147.27 reached July 11. That's still 62 percent higher than a year ago.

`Quite Immense'

``The negative terms of trade shock throughout Asia is quite immense, especially for Korea and Japan,'' Jen said.

South Korea posted current-account deficits for each of the six months through May and India reported deficits for the past four quarters. The current account tracks the flow of goods, services and investment income between an economy and its trading partners. China, Japan, South Korea and India are the four largest consumers of crude oil in Asia.

Fuel subsidies in China, India, Indonesia and Malaysia have merely delayed the effect of higher oil prices and these countries may not be able or willing to continue subsidies as costs escalate, Jen said. Malaysia's bill would balloon to 29 billion ringgit ($8.9 billion) should oil average $140 a barrel, from 8.8 billion ringgit in 2007, Domestic Trade and Consumer Affairs Minister Shahrir Samad said in an interview this week.

Fuel Subsidies

China plans to deregulate gasoline and diesel prices, with increases possible after the Olympics end next month, the China Daily reported two days ago. India, Indonesia, Malaysia and Vietnam have all raised prices of diesel and gasoline in the past two months to limit government spending on subsidies.

``Even countries which do not have subsidies are benefiting from their neighbors' subsidies as their trade partners are posting growth faster than they should be,'' Jen said.

Inflation may also trigger capital outflows as central banks are forced to raise interest rates, spurring investors to exit the stock market, Jen said. Central banks in India, Indonesia, the Philippines and Thailand have all raised key interest rates this month.

``Inflation forces central banks to react in ways that are not consistent with the oil shock,'' Jen said.

Overseas investors have sold $26.6 billion more of South Korean stocks than they bought so far this year, according to data compiled by Bloomberg. In Japan, foreigners have sold a net $18.5 billion of shares and in India the figure is $6.7 billion.

Singapore and Taiwan's dollar will end the year little changed at $1.3700 and NT$30.05 per dollar, Jen said. China's yuan will gain to 6.6300 per dollar from 6.8272, he predicts.

To contact the report on this story: Patricia Lui in Singapore at plui4@bloomberg.net.

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Dollar Trades Near One-Month High Versus Euro Before GDP Report

By Stanley White and Kosuke Goto

July 31 (Bloomberg) -- The dollar traded near a one-month high against the euro before a government report that is forecast to show the pace of U.S. economic growth doubled in the second quarter.

The U.S. currency was also near a one-month high versus the yen after a report from ADP Employer Services yesterday showed companies unexpectedly added jobs this month. The industry report is a leading indicator of tomorrow's Labor Department data on nonfarm payrolls. The pound fell toward a three-week low after U.K. consumer confidence slid to the weakest on record.

``The dollar is forming a solid base and further downside moves are limited,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Economic growth data are forecast to show quite good numbers. ADP data underpins sentiment.''

The dollar traded at $1.5577 per euro as of 11:12 a.m. in Tokyo, after touching $1.5522 yesterday, the strongest since June 24. The U.S. currency was at 107.99 yen after reaching 108.33 yesterday, the highest since June 25. The euro traded at 168.23 yen from 168.41 yesterday. The dollar may rise to $1.5520 per euro and 108.30 yen today, Ishikawa forecast.

The pound declined to $1.9795 from $1.9817 yesterday, when it reached $1.9746, the lowest since July 10. GfK NOP's index of consumer confidence fell to minus 39 in July, the lowest since the data began in 1974, the market research organization said today in London.

Australian Dollar

Australia's dollar fell toward its lowest in six weeks after a government report showed retail sales dropped the most since 2002, adding to signs the economy is slowing. The currency slid to 94.34 U.S. cents from 94.71 cents in late Asia yesterday as a Reserve Bank of Australia report showed lending to business and consumers rose at the slowest pace in almost six years.

U.S. gross domestic product probably rose at an annual rate of 2.3 percent in the second quarter after growing 1 percent in the first three months of the year, according to the median forecast of 79 economists surveyed by Bloomberg News. The Commerce Department is scheduled to release the report at 8:30 a.m. in Washington.

``We're waking up to the fact that we will have solid GDP numbers,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon, the world's largest custodial bank, with more than $23 trillion in assets.

Payrolls Report

The U.S. dollar strengthened yesterday after ADP Employer Services reported that companies added 9,000 jobs in July after cutting a revised 77,000 positions in the previous month. The Labor Department may report tomorrow that non-farm payrolls fell 75,000 this month following a decline of 62,000 in June, according to the median forecast in a Bloomberg News survey.

The U.S. payroll report, which includes government hiring, has shown a reduction in jobs each month this year, while ADP has recorded only two declines.

``The dollar may have hit a major bottom already,'' said Kosuke Hanao, head of foreign exchange in Tokyo at HSBC Bank, Europe's biggest bank by market value. ``But it needs further bullish factors to break through the key 108.60 yen level. Good GDP numbers are not strong enough to push up the dollar above it, especially before important jobs data tomorrow.''

The so-called resistance level of 108.60 yen is near the dollar's four-month high set on June 16. A resistance level marks the point where sellers are expected to outweigh buyers.

The dollar's advance may stall at 108.50 yen today, Hanao forecast.

The dollar fell to an all-time low of $1.6038 per euro on July 15 on concern losses at financial firms and record fuel prices may prolong the U.S. economic slowdown.

Emergency Lending

The Federal Reserve has extended its emergency lending programs to Wall Street firms through January after policy makers judged that markets are still too weak to operate without a backstop from the central bank.

``It suggests the market is still fragile and we're not out of the woods yet,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``That means the Fed won't raise rates any time soon. I'm not buying the dollar.''

Futures contracts on the Chicago Board of Trade showed yesterday a 38 percent chance of the Fed raising its 2 percent target rate for overnight loans between banks by at least a quarter-percentage point by Sept. 16, down from 45 percent odds a day earlier. Most traders expect policy makers to keep borrowing costs unchanged when they next meet Aug. 5.

European Inflation

Losses in the euro may be limited by speculation a report today will show inflation in Europe accelerated to the fastest pace in more than 16 years in July, increasing pressure on the European Central Bank to raise interest rates.

The inflation rate rose to 4.1 percent, the highest since April 1992, from 4 percent in June, according to the median estimate of 36 economists in a Bloomberg News survey. The European Union statistics office in Luxembourg is scheduled to publish its initial estimate of the data at 11 a.m. today.

The ECB, which aims to keep the inflation rate just below 2 percent, raised its benchmark rate to 4.25 percent on July 3, the highest level since 2001. ECB council member Klaus Liebscher said on July 24 the bank has room to raise rates again even as economic growth falters.

``ECB officials remain hawkish even though the European economy is slowing,'' said Satoru Ogasawara, an economist at Credit Suisse Group in Tokyo. ``Provided economic figures continue to be not so bad, strong inflation figures will reignite expectations of a rate hike by the ECB.''

The euro may rise to $1.65 against the dollar in three months, he said.

To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.netKosuke Goto in Tokyo at kgoto2@bloomberg.net

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Australia Stocks: ABC Learning, Australand, Rio Tinto, Portman

By Shani Raja

July 31 (Bloomberg) -- The S&P/ASX 200 Index jumped 72.60 points, or 1.5 percent, to 5,009.30 at 10:25 a.m. in Sydney, headed for a 3.9 percent monthly decline. The broader All Ordinaries Index climbed 72, or 1.4 percent, to 5,080.70, while the futures index expiring in September gained 1.9 percent to 4,990.

Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, rose A$1.01, or 2.6 percent, to A$40.27, the highest since July 11. Rio Tinto Group (RIO AU), the third largest, jumped A$3.46, or 2.9 percent, to A$124.96, the highest in almost three weeks.

A measure of six metals traded on the London Metal Exchange advanced 0.8 percent. Copper rose 1.3 percent and nickel 3.9 percent.

Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, advanced A$1.88, or 3.6 percent, to A$53.65, the most since July 11. Santos Ltd. (STO AU) rose 78 cents, or 4.4 percent, to A$18.60, the most in more than two months.

Crude oil rose more than $4 a barrel, the biggest gain since July 10, after the U.S. Energy Department reported the first decline in gasoline inventories in five weeks. Crude for September delivery rose 3.8 percent, to settle at $126.77 a barrel at 2:54 p.m. on the New York Mercantile Exchange, the highest close since July 22, leading U.S. energy shares to their biggest gain in six years.

ABC Learning Centres Ltd. (ABS AU), the world's biggest publicly traded owner of child-care centers, slipped 7 cents, or 9.1 percent, to 75 cents, the second-biggest loser on the benchmark index. The company said it made a pretax full-year loss of A$437 million ($412 million) after writing down the value of some assets.

Australand Property Group (ALZ AU), Australia's fourth- biggest residential developer, tumbled 25 cents, or a record 26 percent, to a record low 72 cents, after net income fell 79 percent and the company sold new shares to pay down debt.

CSR Ltd. (CSR AU), Australia's second-biggest producer of ethanol, rose 2 cents, or 1 percent, to A$2.07, the highest since July 21, after saying it has the potential for a ``significant'' expansion of renewable energy generation to tap expected increases in prices.

Felix Resources Ltd. (FLX AU) climbed 40 cents, or 2 percent, to A$20.62, the highest in more than a month. The best performer on Australia's benchmark index this year said full-year earnings rose fivefold because of record prices for the fuel.

Portman Ltd. (PMM AU), Australia's third-largest iron-ore mining company, advanced 24 cents, or 1.3 percent, to a record high A$18.19, after saying profit in the second quarter rose more than fourfold to a record because of higher prices for the steelmaking raw material.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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Japanese Stocks Climb on U.S. Jobs Data, NTT DoCoMo Earnings

By Patrick Rial

July 31 (Bloomberg) -- Japanese stocks climbed for a second day after a report the U.S. unexpectedly increased payrolls and as NTT DoCoMo Inc. boosted earnings.

Honda Motor Co., which made more than half of its sales in North America last year, rose for the first time in five days. NTT DoCoMo, Japan's largest mobile-phone operator, surged to the highest level since January after net income soared 41 percent in the first quarter. Nintendo Co., maker of the Wii video game machine, plunged the most in six months after its first-quarter profit failed to impress analysts and investors.

``This rebound that we're experiencing looks like it will continue for the time being,'' said Juichi Wako, a strategist at Nomura Holdings Inc., in an interview with Bloomberg Television. ``Employment numbers helped lift U.S. stocks and provide some encouragement that the economy isn't as bad as we'd thought, which is positive for manufacturer shares.''

The Nikkei 225 Stock Average added 39.24, or 0.3 percent, to 13,407.03 as of 9:47 a.m. in Tokyo. The broader Topix index swung between gains and losses, and was up 1.48, or 0.1 percent, to 1,304.47. The Nikkei has slipped 0.4 percent in July, while the Topix has lost 1.1 percent.

ADP Employer Services said U.S. payrolls grew by 9,000 in July, while economists had braced for a drop of 60,000. That helped the Standard & Poor's 500 Index jump 1.7 percent to finish at the highest level since July 1. The official government report on unemployment is scheduled to be released later today.

Earnings Reports

NTT DoCoMo added 2.9 percent to 176,600 yen. The company boosted profit in spite of declining revenue as it has been losing subscribers to rivals KDDI Corp. and Softbank Corp. Analysts had expected recent price competition among the companies would erode profitability.

Capcom Co., the Japanese publisher of ``Resident Evil'' games, jumped 4 percent to 3,360 yen after saying yesterday first-quarter net income more than doubled, driven by sales of its ``Monster Hunter'' game series.

Meanwhile, Nintendo sank 8 percent to 53,000 yen in Osaka after reporting a 34 percent jump in first-quarter profit.

``We think the company needs to step up efforts in Japan, where Wii and DS hardware sales are declining,'' Soichiro Fukuda, an analyst at Nikko Citigroup Ltd., wrote in a note to clients.

Jay Defibaugh, a Tokyo-based analyst at Credit Suisse Group, said Nintendo's first-quarter results were ``in line to modestly disappointing'' in a note to clients.

Non-financial companies on the main board of the Tokyo bourse have so far reported an 11 percent drop in pretax profit with the number of companies cutting earnings forecasts outnumbering those raising by three to one, according to data from Shinko Securities Co.

Oil Spike

Mitsubishi Corp., Japan's largest trading company and which reports earnings today, gained 1.2 percent to 3,300 yen. Inpex Holdings Inc., the country's biggest oil explorer, jumped 3.6 percent to 1.109 million yen.

Crude oil for September delivery rose 3.8 percent to $126.77 a barrel in New York, the biggest gain since July 10. The U.S. Energy Department reported the first decline in gasoline inventories in five weeks, while analysts had predicted an increase.

TDK Corp., Japan's largest maker of magnetic heads for hard- disk drives, added 0.9 percent to 6,660 yen. The company will buy a majority stake in German electronic parts maker Epcos AG for as much as 200 billion yen ($1.85 billion), the Nikkei newspaper reported. TDK said it has not made a takeover agreement.

Nikkei futures expiring in September advanced 0.5 percent to 13,440 in Osaka and added 0.6 percent to 13,445 in Singapore.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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Asian Stocks Climb, Led by Commodity Producers; BHP Advances

By Chua Kong Ho

July 31 (Bloomberg) -- Asian stocks rose for a second day, led by commodity producers after oil climbed more than $4 a barrel and prices of metals advanced.

BHP Billiton Ltd., the world's largest mining company, and Woodside Petroleum Ltd., Australia's second-biggest oil producer, led gains. NTT DoCoMo Inc., Japan's No. 1 mobile-phone operator, advanced after saying first-quarter profit rose 41 percent. NEC Electronics Corp., Japan's third-biggest chipmaker, climbed to a six-week high after swinging to a first-quarter operating profit.

The MSCI Asia Pacific Index gained 0.6 percent to 132.88 as of 9:09 a.m. in Tokyo. About six stocks rose for each that declined. All 10 of the index's industry groups advanced, with raw-materials producers posting the biggest gain.

Japan's Nikkei 225 Stock Average added 0.6 percent to 13,448.51. Australia's S&P/ASX 200 Index rose 1.5 percent, and South Korea's Kospi Index gained 1.1 percent.

In the U.S., the Standard & Poor's 500 Index rose 1.7 percent, led by the biggest gain in energy shares in six years as oil prices increased and a private report showed an unexpected rise in jobs.

Crude oil rose $4.58, or 3.8 percent, to $126.77 a barrel yesterday, the highest close since July 22, after a U.S. Energy Department report showed gasoline inventories declined for the first time in five weeks.

A measure of six metals traded on the London Metal Exchange advanced 0.8 percent. Copper rose 1.3 percent and nickel 3.9 percent.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net;



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Economic Calendar Eco Data 7/31/08

GMT Ccy Events Actual Consensus Previous Revised 23:01 GBP U.K. Gfk Consumer confidence Jul -39 -37 -34 23:15 JPY Japan Manufacturing PMI Jul N/A 46.5 01:30 AUD Australia Trade balance (aud) Jul -100M -965M 01:30 AUD Australia Retail sales M/M Jul 0.00% 0.70% 05:00 JPY Japan Housing starts Y/Y Jun -18.10% -6.50% 05:00 JPY Japan Construction orders Jun N/A -25.20% 05:45 CHF Swiss CPI M/M Jul -0.50% 0.20% 05:45 CHF Swiss CPI Y/Y Jul 3.00% 2.90% 06:00 GBP U.K. Nationwide hse price M/M Jul -1.20% -0.9 06:00 GBP U.K. Nationwide hse price Y/Y Jul -7.20% -6.30% 08:00 EUR Germany Unemployment rate Jul 7.80% 7.80% 08:00 EUR Germany Unemployment change Jul -20.0K -38.0K 09:00 EUR Eurozone HICP flash Y/Y Jul 4.10% 4.00% 09:00 EUR Eurozone Euro zone CPI est. Y/Y Jul 4.10% 4.00% 09:00 EUR Eurozone Unemployment rate Jun 7.20% 7.20% 12:30 CAD Canada GDP M/M May 0.20% 0.40% 12:30 USD U.S. GDP annualised A Q2 1.90% 1.00% 12:30 USD U.S. GDP Price Index Q/Q A Q2 2.40% 2.70% 12:30 USD U.S. Personal consumption Q2 1.40% 1.10% 12:30 USD U.S. PCE core Q/Q A Q2 2.20% 2.30% 12:30 USD U.S. Jobless claims 390K 406K 13:45 USD U.S. Chicago PMI Jul 49 49.6

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US Dollar: Will Q2 GDP Erase US Recession Fears?

Daily Forex Fundamentals | Written by DailyFX | Jul 30 08 22:55 GMT |

What Are The Markets Facing? The ongoing housing recession, mounting job losses, and indications of slowing consumer spending leads many to believe that the US economy is in the midst of a real economic recession, and the upcoming GDP report will go a long way to dispel or confirm such pessimistic sentiment at 8:30 EDT. However, the median consensus forecast calls for the advanced Q2 GDP figure to actually jump 2.3 percent after rising 1 percent in Q1. There is a huge range when it comes to these forecasts, as the lowest estimate comes in at 0.9 percent while the highest comes in at a whopping 4.2 percent, and traders should note that not one of the 79 economists polled by Bloomberg News predicts a negative GDP release. Given this clear bias for an optimistic reading, a weaker-than-expected result is likely to have the greatest impact on US assets, especially if GDP does show a surprise contraction. On the other hand, a strong GDP reading in line with or above expectations should lead to gains for the greenback, Treasury yields, and the DJIA. Thursday's Euro-zone CPI release could also be a huge market-mover for European assets, including EUR/USD, but will it lead the ECB to hike again? Also, find out the Top 5 Events you should be watching overall this week. Bonds - 10-Year Treasury Note Futures Treasuries have been confined to a range over the past week or so as the contract consolidates below resistance at 114-14. However, upcoming US data could lead Treasuries to break out as Q2 GDP will be released. This is the advanced reading, so it is likely to be revised later on, but the news will nevertheless be a market-mover. If GDP proves to be disappointing and misses expectations of 2.3 percent by a large margin, Treasuries could surge toward trendline resistance and the 100 SMA near 115-22. On the other hand, if GDP rises in line with or more than expectations, the contract could pull back sharply toward the bottom of the recent range near 113-00. FX - EUR/USD From a long-term perspective, EUR/USD continues to trade within a wide range of 1.5365 - 1.6000, as the US dollar consolidates across the majors. Since we've already had a test of 1.60 and a break below the 100 SMA at 1.5665, the next logical move is toward the multi-month lows at 1.5365. However, a break below near-term support at 1.5550 will be required first. Looking ahead to Thursday, Euro-zone CPI is expected to rise 4.1 percent in June from a year earlier, which could lead EUR/USD higher during the European trading session. However, at 8:30 EDT, US GDP will hit the wires and is anticipated to have jumped 2.3 percent in Q2. If the data is as strong as, or better than expectations, a US dollar rally could pull EUR/USD down toward 1.55. On the other hand, if GDP disappoints the markets, US dollar weakness could return and push EUR/USD up toward 1.5650 once again. Equities - Dow Jones Industrial Average The Dow Jones Industrial Average managed to rally once again on Wednesday and even broke above former resistance at 11,500. However, traders should keep an eye on financial market news, as indications of distress amongst financial institutions could trigger widespread sell-offs in the global equity markets (and for that matter, forex carry trades). Looking ahead to Thursday, US Q2 GDP data could shake up the markets a bit, with better-than-expected readings likely to help the DJIA continue rallying above near-term resistance at 11,634 toward the 50 SMA at 11,837. On the other hand, disappointing news will only add to recession fears, which could lead the index to fall back below 11,500. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Fed Announcement and ADP Helps to Lift the Dollar

Daily Forex Fundamentals | Written by DailyFX | Jul 30 08 22:52 GMT |

Euro Continues to Slide on Mixed Economic Data British Pound Headed Lower - Watch Out for Consumer Confidence Fed Announcement and ADP Helps to Lift the Dollar Positive economic data has continued to drive the US dollar higher. Payroll provider ADP reported a 9k rise in jobs this month. As one of the leading indicators for non-farm payrolls, this along with stronger consumer confidence numbers is good news going into this Friday’s non-farm payrolls report. However don’t expect positive job growth in the month of July. The only thing that the ADP number suggests is that the number of job losses could be less severe than the prior month. The four week moving average of jobless claims have also fallen in the week ending July 19 even though initial claims climbed to 406,000. Nonetheless, we can not forget the countless layoff announcements that have surfaced over the past two months and the fact that US companies are cutting back. ADP has a track record of being notoriously optimistic about projecting payrolls. Non-farm payrolls dropped in each of the past six months but between January and June, the ADP employment survey on the other hand only dropped 2 out of the 6 months. ADP has consistently missed to the high side and we expect the same this month. Meanwhile a surprising announcement from the Federal Reserve has also helped to rally the US dollar and US stocks. “In light of continued fragile circumstances in financial markets,” the Federal Reserve extended the tenure of their Primary Dealer Credit and Term Securities Lending Facilities. This means that in addition to their 28-day loans, they will also be selling 84-day loans. In response, the European Central Bank and the Swiss National Bank will also be making 84-day funds available at dollar auctions. These actions should help to calm the markets, especially as the rally in the stock market continues to ease risk aversion. However the changes are incremental since the Fed is simply tweaking their existing programs to give themselves more flexibility when there are times of “elevated stress.” As we have been mentioning all week, the dollar should continue to rally. The advance release of second quarter GDP is due for release tomorrow. Despite the inherent problems within the US economy, GDP growth is expected to accelerate thanks to the rise in retail sales. Euro Continues to Slide on Mixed Economic Data The Euro continued to trend lower despite mixed economic data. Eurozone Retail PMI rose from 36.3 to 38.2 in July thanks to stronger activity in Germany and Italy. However despite the improvement, the index remains at very low levels, reflecting the troubles in the overall economy. Consumer and business confidence on the other hand continues to trend lower. This is in line with the drops in the German IFO report and the ZEW survey. We still believe that the EUR/USD is headed for further losses and a break below 1.55 may just be a matter of time. German unemployment data is due for release tomorrow along with Eurozone consumer prices. The rise in the employment component of service PMI suggests that the number of people claiming unemployment benefits will fall once again. As for consumer prices, the number should continue to reflect strong inflationary pressures. Meanwhile Switzerland’s KoF report of leading indicators was weaker than expected. Despite the rise in the UBS consumption index, the outlook for the Swiss economy has deteriorated. However we still believe that Switzerland is faring much better than many of its other G10 counterparts. British Pound Headed Lower - Watch Out for Consumer Confidence The British pound struggled amidst dollar strength and news that Lloyds TSB, a major UK bank reported a 63 percent drop in income. Like many other banks around the world, Lloyds has been hit by the credit crunch and slowdown in investment banking. We continue to believe that the UK economy is in bad shape and the pace of deterioration will accelerate. There was no economic data released this morning, but the GfK consumer confidence survey is due for release tonight. Rising food prices, falling house prices and problems in the labor market should weigh heavily on UK consumer confidence and the British pound. The only other piece of UK data due for release this week is PMI on Friday. Australian and New Zealand Continue to Fall The Australian, New Zealand and Canadian dollars have fallen under the weight on lower commodity prices and broad dollar strength. Gold broke below the psychological $900 an ounce mark on an intraday basis to hit a monthly low (it has since recovered). Australian building approvals were much weaker than expected, dropping by 0.7 percent last month instead of rising by 1.0 percent like the market expected. RBNZ Governor Bollard talked down the Kiwi when he said that the weak economy justifies the easing bias. In other words, he is confirming that interest rates will continue to fall and for that reason, we expect the New Zealand dollar to make a run below 70 cents. Canadian economic data on the other hand was very positive with industrial product and raw material prices rising strongly in the month of June. Yen Crosses Struggle Despite Stock Market Rally The Japanese Yen crosses struggled despite the rally in US stocks. Japanese industrial production was weaker than the market expected, reflecting the overall problems in the Japanese economy. Labor cash earnings are due for release tomorrow and even though the market is expecting earnings to rebound, there is a greater chance that it will miss. Looking ahead, we still expect further gains in USD/JPY and consider this latest retracement a hiccup before a move towards 110. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Greenback Flat Ahead of Important Data

Daily Forex Fundamentals | Written by CMS Forex | Jul 30 08 22:48 GMT |

The dollar traded near recent highs after a report showed private employers unexpectedly added jobs in July and the Federal Reserve said it will extend its emergency lending programs to financial institutions through January. The yen and Swiss franc were little changed, at significant support. The USD/CAD was unable to challenge the 1.03 resistance. The GBP/USD was higher, above the 1.98 support. The AUD/USD fell below the 0.95 support after a government report showed Australian home-building approvals unexpectedly dropped in June for a second month. The EUR/USD was little changed after falling below the 1.56-handle that is now resistance. The pair is modestly overbought. We expect it to trade between 1.54 and 1.56, but an unexpected GDP or employment data may push the EUR/USD outside this range. We expect a slightly better GDP than the consensus forecast tomorrow and a relatively weak US employment report Friday. Financial and Economic News and Comments US & Canada ADP and Macroeconomic Advisers forecast US private sector jobs rose 9,000 in July. This is much stronger than the consensus forecast. The ADP employment report provides a snapshot of the private sector job market ahead of Friday's official payrolls report. ADP's forecast has been too optimistic the previous months. The Federal Reserve said it is extending emergency lending to investment banks through January and expanding several other direct-loan programs created over the past year amid continued stress in credit markets. The Fed also boosted its swap line with the European Central Bank. Policy makers said markets are still “fragile.” President George Bush signed a massive housing bill intended to provide mortgage relief for 400,000 struggling US homeowners and stabilize financial markets and provide support to Fannie Mac and Freddie Mac. Europe European consumer confidence dropped the most since the 9/11 terrorist attacks as rising energy costs, continued credit crunch and slowing economic growth dimmed the outlook. The eurozone sentiment index fell a larger-than-expected 5.3 points to 89.5 in July, according to the European Commission. This is the latest weak data indicating a serious economic downturn. The June sentiment indicator was revised down from a provisional reading of 94.9. The services confidence indicator fell to 1 from 9, while the consumer confidence indicator declined to -20 from -17. Germany inflation held steady at a 3.3% annual rate in July, same as in June, according to preliminary data. The index rose a stronger-than-forecast 0.6% m/m in July, mainly driven by double-digit increases for holiday homes and package tours. Asia-Pacific Japan's industrial production fell a larger-than-expected 2.0% m/m in June after rising 2.8% m/m in May, the Trade Ministry said. The Trade Ministry lowered its assessment of industrial production, saying output is weakening after previously describing it as flat with signs of weakness. According to the survey, Japanese companies plan to cut production 0.2% m/m in July and 0.6% m/m in August. Australian approvals to build new homes unexpectedly fell 0.7% m/m in June, the Australian Bureau of Statistics said. Permits fell 7.8% y/y to 12,237 units in June. FX Strategy Update EUR/USD USD/JPY GBP/USD USD/CHF USD/CAD AUD/USD EUR/JPY Primary Trend Positive Negative Negative Negative Negative Positive Positive Secondary Trend Neutral Neutral Neutral Neutral Neutral Neutral Neutral Outlook Neutral Neutral Neutral Neutral Neutral Neutral Neutral Action None Sell Sell None None None None Current 1.5589 108.01 1.9831 1.0466 1.0232 0.9441 168.38 Original Position N/A 107.95 1.9790 N/A N/A N/A N/A Objective N/A N/A N/A N/A N/A N/A N/A Stop N/A 108.70 2.0135 N/A N/A N/A N/A Support 1.5580 1.5400 105.00 103.00 1.9780 1.9600 1.0200 0.9980 1.0000 0.9800 0.9300 0.9000 166.00 162.00 Resistance 1.5800 1.6020 108.20 110.00 2.0100 2.0300 1.0500 1.0600 1.0300 1.0400 0.9800 1.0000 170.00 172.00 Thursday's Economic Calendar Time (EDT) Region Data Period Change Our Forecast Median Forecast Last 2:00 Germany Unemployment rate Jun 7.8% 7.8% 5:00 EMU Unemployment rate Jun 7.2% 7.2% 8:30 Canada GDP May 0.2% 0.4% 8:30 US Initial jobless claims 7/26 -8K 34K 8:30 US Advance GDP 2Q 2.3% 1.0% 8:30 US Employment cost index 2Q 0.7% 9:45 US Chicago PMI Jul 51.0 49.6 Hans Nilsson Capital Market Services, L.L.C. www.cmsfx.com ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C.

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Aussie and Kiwi Sink, While Dollar Boost from ADP Data Short Lived

Daily Forex Fundamentals | Written by CMS Forex | Jul 30 08 22:42 GMT |

JPN Industrial Production Falls 2% in June Preliminary data showed that Japan's industrial production declined 2% in June compared to May. It was slightly worse than the pace expected by a consensus of economists. Japan's main trading partners are all showing slowing growth and therefore weaker demand, as companies around the world face higher credit costs. AUS Building Approvals Dissapoint Expectations, Decline 0.7% Meanwhile, Australian building approvals fell 0.7% in June, undershooting forecasts of a 1% increase. On an annual basis approvals are down 7.8%. AUD/JPY - Aussie Slides vs Yen Following Its Housing Release The Aussie-Yen pair sank 100 pips from its session open near 103 to trade near the 102 level. The building approvals data had a clear impact around its release, and the Aussie continued falling overnight and into NY trading. NZD/USD - Kiwi Falls on RBNZ Governor Bollard Comments The New Zealand Dollar is also on the defensive these days as expectations for more interest rate cuts from the Reserve Bank increase. The bank's Governor Alan Bollard said borrowing costs "have room to fall" in a n earlier meeting. The Kiwi-US Dollar pair is down about 120 pips from its yesterday's intra-day high. EUR Economic Sentiment Plunges and Consumer Confidence Continues its Decline European economic sentiment fell 5.3 points to 89.5 in July, the sharpest decline since the month after the Sept. 11th terrorist attacks. The consumer confidence portion of the index declined to -20, as consumers face the highest inflation in 16 years. EUR Business Climate Index Falls, So Does Retail Activity Soaring energy costs, the Euro's climb against the Dollar, and the credit crunch are working to pressure Euro-zone business activity. The business climate indicator fell to negative 0.21 with orders and expectations for industrial goods falling. In a separate release, the Bloomberg Retail PMI stood at 46.0, another month of contraction as the figure is below the 50 boom-bust level. SWZ KOF Leading Index Falls to 0.90 In Switzerland, the leading index fell to 0.90, more than expected by economists. This puts the index, which tries to predict activity in 6 months time, at a 5 year low. EUR/CHF - European Stock Gains Propel Euro Higher vs Swiss Franc European stocks gained overnight, which boosted the Euro-Swiss Franc. The pair's overnight rally stalled following the European releases but continued to climb afterwards. The 1.63 level was important resistance last week and yesterday, and the pair managed to stay above it after a slide to begin the global session. US ADP Shows Surprising Gain of 9K Jobs in July In the US, the ADP measure of employment for July was an increase 9K, handily beating the expected decline of 55K. It was welcoming news to Dollar bulls who used the data to bid up stocks and the US Dollar during the NY open. Still, the number is not impressive in its own right and shows that the labor market in the US remains weak. USD/JPY - Dollar Boosted by Jobs Report, But Weakens in Afternoon Trading The Dollar-Yen pair fell overnight after yesterday's sharp rally to trade near 107.80 prior to the NY open. The Dollar got a boost following the better than expected jobs report, but the level around 108.25 proved to be an important point of resistance. With stocks giving up some of their earlier gains, and oil prices climbing in early afternoon trading, the Dollar pared its gains and was below its open for the session by 2 PM. CAN Producer Prices Increase More Than Expected In Canada, producer prices rose 1.3% in June, more than expected, and May's figure was revised up as well. Higher prices for oil and coal products, up 6.1% in June, were the main contributors to the increase in prices at factory gates. The Raw Materials Price Index continued its upward trend, climbing 4.4% in June, up from its 3.1% rise in May. AUD/CAD - Loonie Gains on Aussie Following Data in Both Countries In a battle of two currencies favored as destinations for carry trade the Australian Dollar-Canadian Dollar pair showed a sharp slide in favor of the Loonie. Australia's weaker data and the faster producer inflation from Canada made this a one-sided trade this session. Since yesterday's high near 0.98 the pair is down about 150 pips. Upcoming Releases Tonight, there will be several more releases from Australia including retail sales, trade balance and private sector credit. Japan will post its manufacturing PMI, and figures on earnings and housing starts. New Zealand reveals a survey on business confidence. Overnight, Switzerland and the Euro zone post data on consumer inflation, while Germany and the Euro-zone release their unemployment rates. Tomorrow, the US and Canada post GDP data, while the US also releases its weekly jobless claims. Capital Market Services, L.L.C. www.cmsfx.com ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C.

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Daily Forex Technicals | Written by DailyFX | Jul 30 08 19:56 GMT |

Yen Crosses Bearish at least in the Short Term EURJPY Under the preferred count, a triangle is complete at 158.60 (view a daily to see waves A and B). The rally that followed is in 5 waves but is small relative to the triangle, making it likely that the advance is the first wave of the terminal thrust. A bullish bias is warranted against 158.60 but with 5 waves up from there, the EURJPY should correct lower. Expect decline over the next week(s). Support begins at 165.50. GBPJPY As long as 219.30 is intact, we are treating the advance from 192.60 as a corrective 4th wave. Within the advance, the rally from 199.79 would equal the 192.60-208.94 rally at 216.13, very close to the 7/23 high at 215.84. On the short term charts, the drop from 215.83 does look impulsive so a cautious bearish bias is warranted against there. The minimum objective is below 211.59. CHFJPY The big picture focus remains on the A-B-C advance from the 2000 low at 58.82. Wave C would equal wave A (arithmetically) at 112.27 but waves A and C do not have to be equal. The advance has already satisfied minimum expectations and a long time support line has acted as resistance since December 2007. A break above this line argues for an extension towards 112. It is best to remain bullish against 98.27 and buy sharp pullbacks against there (unless the decline becomes impulsive). Fibo support begins at 102.50 and extends to 100.87. CADJPY There is no change to the bearish outlook for the CADJPY. “Price below 109.62 keeps the series of lower highs (and lower lows) intact; which is the definition of a bear market. The 200 day SMA is at 106.78 and provided resistance on 7/23.” Price has fallen below the line and remained there since 7/24, indicating that bears are in control. AUDJPY The AUDJPY advance from 88.14 MAY be complete as a double zigzag at 104.45. It is also possible that this rally is the first leg of a complex correction. Regardless, the trend should be down for the next few weeks. Fibo support does not begin until 98.22. NZDJPY The NZDJPY has traded sideways since August 2007. There is no doubt that the action since is a correction, probably a triangle. A bearish break of the triangle is expected eventually but it does not appear that the triangle is complete. A push through the May 2008 high could complete wave E of the triangle and give way to lower prices. Coming under 76.71 would present a bearish break opportunity against 83.02 TREND ANALYSIS is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Euro Directions

Daily Forex Technicals | Written by FX Solutions | Jul 30 08 16:48 GMT |

The Euro is approaching critical technical supports: at 1.5500-15 an up trend line going back to last August (never broken) ; at 1.5410-20 the 38% Fibonacci retracement from the February run up ; at 1.5380-90 the 23% Fibonacci from the entire post August move . If we get close to 1.5400 the market will treat the two Fibonacci levels as one. There should be sell stops in that area. Traders will probably wait until GDP tomorrow and perhaps NFP Friday before acting. It could get interesting. Joseph Trevisani FX Solutions IMPORTANT NOTICE: These comments are for information purposes only. Past results are not necessarily indicative of future results. Trading Futures, Options on Futures, and Foreign Exchange involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. The information contained on this email does not constitute a solicitation to buy or sell by FX Solutions,LLC., and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law. (Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; downtrend lines in red; horizontal support/resistance lines in yellow; 200-period simple moving average in light blue.)

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Closing Market Recap: TSX Posts Largest Gain Since March 11

Market Updates | Written by CEP News | Jul 30 08 22:16 GMT |

(CEP News) - A rebound in crude oil prices and takeover speculation led the Toronto Stock Exchange to its best session in more than four months. Elsewhere, markets were volatile as an unexpectedly strong report on U.S. employment and new U.S. liquidity provisions competed with rising fuel costs. The U.S. dollar and Treasury yields leaped higher early in the session but the moves were later dampened by a $5 rally in oil. Stocks in the U.S. initially sold off as crude rallied but later regained their footing and rallied into the close. Toronto's S&P/TSX composite index closed up 341 points to 13,683. Besides the rebound in energy prices, takeover speculation ramped up following Teck Cominco's purchase of Fording Canadian Coal Trust on Tuesday. The Dow Jones industrial average closed up 186 points to 11,584, the S&P 500 up 21 points to 1,284 and the Nasdaq up 10 points to 2,330. U.S. two-year yields were up 0.8 bps to 2.63%, with five-year yields flat at 3.36%, 10-year yields up 0.6 bps to 4.04% and 30-year yields up 2.1 bps to 4.64%. The Eurodollar March 09 contract was up 3.0 ticks to 96.86. The yield curve was flatter, with the 10/2-year spread down 0.2 bps to 141.39 bps. Yields on two-year Canadian government bonds were up 0.9 bps to 3.07%, with five-year yields up 1.8 bps to 3.38%, 10-year yields up 2.8 bps to 3.82% and 30-year yields up 2.8 bps to 4.17%. The December 08 BAX contract was up 2.0 ticks to 96.90. The Canadian 10-year note is yielding 22.59 bps less than the U.S. 10-year note. "Yields spiked early in the US session on the strong ADP employment report, but then completely reversed in sympathy with the spike in oil. Late in the session, yields rebounded modestly as equities surged into the close," wrote T.J. Marta, fixed income strategist at RBC Capital Markets, in a research note. Private payroll company ADP said the U.S. added 9k jobs in July, against a consensus estimate for job losses of 60k. Further fuelling optimism, the Federal Reserve announced it will extend its emergency lending to investment banks through January and said it will introduce a $25 billion, 84-day Term Auction Facility. The Fed said it is hoping to address the ongoing "fragility" of the financial system. "The feeling is that [the new lending facility] reduces the risk of flight-to-quality but we think that's a mistake. To us, it points out that the problems are going to persist and we take that as a positive for bonds," a Treasury trader in New York said. As has been the case recently, oil has been a key driver in other markets. Crude opened to the downside but got a lift when the U.S. Energy Information Administration released weekly inventory data. The figures showed an unexpected decline in gasoline supplies. Scotia McLeod commodities futures specialist Mathieu Tessier said a recent round of profit taking has run its course, while concerns about Nigerian and Middle Eastern supply will continue to add upward pressure. Israeli Prime Minister Ehud Olmert's announced he will resign in September and there is speculation his successor will be more likely to launch an attack on Iran. WTI crude oil was up $4.58 to $126.77. Tessier said the next resistance level is at $127.50 and he now sees $120 as support. "I don't know if this rally will last but I would be reluctant to short sell," he said. In foreign exchange, prices were volatile but markets closed relatively unchanged. The Canadian dollar was down 0.0005 to 0.9768 against the U.S. dollar (1.0237 USD/CAD) and down 0.11 to 105.59 against the yen. The U.S. dollar was down 0.04 to 108.10 against the yen and the Dollar Index was down 0.001 to 73.308. The euro was up 0.0001 to 1.5577 against the U.S. dollar, up 0.0011 to 1.5946 against the Canadian dollar, up 0.0002 to 0.7861 against the pound sterling and was lower by 0.05 to 168.36 against the yen. The pound sterling was down 0.0002 to 1.9816 against the U.S. dollar and up 0.0006 to 2.0281 against the Canadian dollar. The front month gold contract at the Chicago Board of Trade was down $13.90 to $902.80 per ounce. The day ahead will be very busy with U.S. second quarter GDP, weekly jobless claims and the Chicago PMI. In Canada, May GDP figures will be released. All data taken at 5:11 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 Cristina Markham, cmarkham@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.

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Wednesday's News Recap: Oil Soars on Israeli PM Resignation, ADP Jobs Up 9k

News Recap | Written by CEP News | Jul 30 08 20:26 GMT |

(CEP News) - Oil prices shot back up Wednesday afternoon by more than $5 a barrel following the resignation of Israel's Prime Minister. Earlier in the day, the private employment figure for July released by ADP came in higher than expected and the Federal Reserve announced an addition Term Auction Facility worth $25 billion. A two-week slide in oil prices came to an abrupt end this afternoon when Israeli Prime Minister Ehud Olmert announced his resignation, effective in September. Oil shot up by more than $5 to above $127 a barrel on fears about instability in the Middle East. Crude oil was down earlier in the day following the release of a lower-than-expected drop in U.S. oil inventories. The Energy Information Administration reported an 81k drop in U.S. crude stockpiles for the week ending July 25, much lower than the consensus estimate of 1300k from economists. The EIA said imports were in line with the four-week average and increased to 10 million barrels per day from 9.8 million the week prior. Gasoline inventories were expected to rise 350k barrels on the week but decreased by 3525k. Distillate inventories slightly overshot expectations for a 2050k build by increasing 2396k. Private non-agricultural employment in the United States unexpectedly rose by 9k jobs in July, according to a report released from Automatic Data Processing Inc Wednesday. The previous month's data was revised slightly to a loss of 77k from an originally reported loss of 79k. The figure was much better than expectations, which were looking for a pullback of 65k jobs. The increase was driven by growth in the service sector, which saw an advance of 74k jobs, while jobs in the goods producing sector fell 65k and manufacturing pulled back 49k. Economists were quick to douse optimism over the better-than-expected reading, with many saying the report would not cause them to change their forecasts for Friday's upcoming nonfarm payrolls report from the Bureau of Labor Statistics, which is expected to show a loss of 75k jobs in July. "Nonfarm and the government reports have been diverging from the ADP the last couple of months," said Stephen Wood, senior portfolio strategist at Russell Investments. "So, ADP has been optimistic or positive or more positive than the nonfarm numbers have been, but what I think it's looking towards is a stabilization more than a market improvement." The Federal Reserve announced today that in addition to its $75 billion, 28-day Term Auction Facility (TAF), the Fed will also be conducting a $25 billion, 84-day TAF to address the ongoing "fragility" of the financial system. The Fed also said it would be extending its extraordinary lending to late January 2009, "in light of continued fragile circumstances in financial markets." The U.S. Treasury Department will hold $27 billion in auctions for 10 and 29 3/4-year bonds next week, officials said in the quarterly refunding statement. The 10-year note will be auctioned Aug. 6 at 1 p.m. while the 29 3/4-year bond will be sold the following day at the same time. Both auctions will settle Aug. 15. On the same day, the Treasury will refund approximately $43.5 billion in maturing securities. The 10-year auction will be for $17 billion and the 29 3/4-year auction for $10 billion. Annual unemployment rates grew higher in June in 332 out of 369 metropolitan areas, while falling in 27 other areas, according to the U.S. Bureau of Labor Statistics. This is an increase from the previous month where unemployment grew in 328 out of 369 metropolitan areas. The national unemployment rate for the month was 5.7%, not seasonally adjusted, up from 4.7% a year ago. Meanwhile, online advertised job vacancies dropped by 5.4% on a year-over-year basis in July, according to the Conference Board Help-Wanted OnLine Data Series released on Wednesday, marking the fifth consecutive month of national declines. The Conference Board said there were 3.864 million online advertised job vacancies in July, compared to a revised estimate of 4.195 million jobs in the previous month. Fannie Mae's portfolio balance surged 22.8% on the year to $749.6 billion in June, the mortgage insurer said on Wednesday, as delinquency rates in the United States continue to move higher. Fannie reported serious delinquencies on loans backed by the agency moved up to 1.3% in May from 1.22% in April. The government-sponsored enterprise's (GSE) issuance of mortgage-backed securities in May also totalled $63.3 billion in May Hope Now, the private sector alliance of mortgage service providers, counsellors and investors, announced that mortgage service providers have staved off the foreclosure of 1.9 million homes in the past year in what has been the largest bailout the housing industry has ever seen. Mortgage service providers saved 181,000 homes from foreclosure in June, while the second quarter saw 522,000 workouts completed, Hope Now reported. Weekly mortgage applications in the United States declined in the week ending July 25, according to data released from the Mortgage Bankers' Association (MBA) on Wednesday, which reported a 14.1% week-over-week fall in applications. In the previous week, applications fell 6.2%. In Canada, a 6.1% increase in petroleum and coal products in June helped Statistics Canada's Industrial Product Price Index (IPPI) climb 1.3% in June over May while crude oil pushed the Raw Materials Price Index (RMPI) up 4.4% in the month. Both index figures came in above consensus forecasts of a 0.6% increase for manufactured goods and a 3.1% rise in raw materials. StatsCan also reported that domestic production of crude and equivalent hydrocarbons totalled 12.8 million cubic metres in May, down 4.7% from the same month a year earlier. Exports in the month totalled 8.9 million cubic metres, down 2.8% year-over-year. Imports of crude, meanwhile, fell 5.2% from May of last year to 3.9 million cubic metres. A Bank of Canada auction of C$2 billion, five-year 3.50% Treasury notes drew a high yield of 3.379% allotted to 56.34375% of bidders on Wednesday. The average yield was 3.376% and the low 3.373%. Non-competitives took C$59,100,000 of a total C$5,002,100,000. A report from CIBC expects Canada's GDP to come in at just 1.1% in 2008 before rising up to 2.8% next year. The report pegs growth in gross domestic product at 0.9% in the third quarter of this year and 3% in the final three months. The headline rate of inflation, meanwhile, is expected to climb to 3.9% in the fourth quarter of this year and come in at 2.9% for 2008 as a whole. In 2009, the CIBC report says, headline inflation in Canada will be 3.9%. In its world economic outlook, the Conference Board of Canada said strong export markets should help the U.S. dodge an outright recession this year. The weak American dollar and growth in emerging markets will provide some good news for an economy that is reeling from soaring energy prices and the housing market meltdown, the report noted. In overnight news, the European Commission reported that business sentiment in the euro zone declined further than expected in July, as reflected by the business climate indicator falling to -0.21 from June's 0.13 level. Economists had expected a less pronounced fall to -0.02. The EU Commission also reported stronger-than-expected falls in all of its euro zone confidence indicators for the month. Against expectations of only a one-point decline, euro zone consumer confidence slipped all the way to -20 in July from June's -17 print. By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Sean McKibbon, smckibbon@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. 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