Our market will have another of its upward wiggles today of the sort seen a couple of times last week after Wall Street and commodity markets steadied in trading Friday night our time.
But there’s likely to be little in the way of well-founded strength, such is the skittishness of sentiment at the moment.
Oil and copper are driving sentiment here as much as the economy and worries about interest rates: in the US it’s the economy first, second and third.
Oil prices finished last week higher, rising almost three per cent Friday to close at $US 52.99, after touching a 19 month low on Thursday.
But WTI was down 7.2 per cent on the week and 14.5 per cent for 2007 so far: quite an adjustment and surely more than just due to the warm weather in the US and Europe.
Analysts say the drop in oil prices has surprised the markets, especially OPEC members who have approved a cut in output that has yet to be implemented.
Base metal prices, which started the year with steep falls, recovered some of their losses last week with three month copper finishing at $US 5,760 a tonne on the LME, still off around 20 per cent since early December.
Nickel ended steady at $US 32,750 a tonne because the supply shortage shows no sign of easing.
Gold was quoted at $US 624.30/$US 625.50 an ounce in London, and $US 626.90 in New York, up $US 13 an ounce on Friday. Gold was up around three per cent on the week, but it’s still under the $US 636 at the start of this month.
Most commodities were weaker at the start of the week but strengthened, especially on Friday.
Besides oil and the base metals, agricultural commodities stood out also on Friday, led by corn and wheat.
US corn futures rose to a 10-year high of 396.50 USc a bushel after the US Department of Agriculture cut its estimate of US corn stockpiles at the end of the year to 752m bushels (a three-week supply), compared to previous estimate of 935m bushels.
The lower stocks figure followed a cut in the USDA’s estimate for US corn production by 210m bushels to 10,535m.
It’s the combination of lower corn output and an expected increase in corn demand from the ethanol industry which put a spark under futures prices.
Wheat prices jumped 28 USc to 498 USc a bushel on worries that US growers will switch from wheat to corn because of the better outlook. The influence of demand from the US ethanol industry cannot be underestimated.
Wheat stocks remain around 10 year lows and analysts saw no joy in the USDA figures for the grain, especially with the drought continuing in Australia.
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Helping sentiment on Wall Street were the lift in oil prices and the best retail sales figures in five months for December and the important holiday period.
The market had its best weekly advance since September and boosted the S& P 500 index to its highest level in more than five years.
The Dow ended at its second straight record so far in 2007. After the better than expected jobs figures for December, analysts now say the chances of a cut in interest rates has receded to much later this year.
The S&P 500 rose 6.91 to 1430.73 on Friday, the Dow added 41.10 to 12,556.08 and the NASDAQ Index jumped 17.97 to 2502.82, the highest since February 2001.
For the week the S&P 500 rose 1.5 per cent in the past five days, the Dow 1.3 per cent and the NASDAQ rose 2.8 per cent.
The US Commerce Department reported that retail sales rose 0.9 per cent in December or one per cent if cars and trucks are excluded. Economists had forecast a rise of 0.7 per cent, having been influenced by reportsof less than stellar sales performances from the likes of Wal-Mart.
