Markets

Commodities Bounce as G-8 Said Global Growth Self-Sustainable

Market sentiment recovered on Friday as the G-8 statement showed confidence over global growth outlook. The US dollar fell to a 1-week low against the euro after news said that China would increase purchases of European bonds. The front-month contract for crude oil price edged high to settle at 100.59, up +0.36%, after losing more than -1% on the prior day. Brent crude closed flat at 115 but the price movement was less volatile when compared with WTI crude. Gold jumped to as high as 1543.5 before settling at 1536.3, up +0.89%. Demand for an alternative to fiat currencies is strong as fiscal concerns remain elevated in advanced economies.

The G-8 post-meeting statement revealed that global economic recovery 'is gaining strength and is becoming more self-sustained'. Yet, policymakers remained cautious about fiscal debt problems in many countries including the US and Japan and pledged to adopt effective ways to cut debts. While Japan is allowed to implement austerity measures to lower its deficits, Fitch Ratings Japan's credit outlook to 'negative'. This has once again raised concerns about the country's fiscal conditions and spurred demand for gold and high-quality bonds such as German bunds.

The euro rose although sovereign debt crisis in the region has not yet been resolved. Market sentiment was bolstered after Financial Times citing comments from Klaus Regling, CEO of EFSF, that China may buy a 'strong proportion of the Portuguese bailout bonds.

Concerning economic data, US personal income grew +0.4% m/m om April, easing from +0.5% in the prior month. Growth in personal spending was +0.4% in April, below consensus of a +0.5% gain and a rise of +0.6% in the prior month. University of Michigan confidence index was surprisingly revised higher to 74.3, from preliminary reading of 72.4, in May. Pending home sales were a great disappointment, plummeting -11.6% m/m in April, after rising +5.1% a month ago. The market had anticipated a milder drop of -1%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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