Solid earnings results from Halliburton lifted US stocks and in turns boosted crude oil prices higher. WTI crude oil price soared to an intra-day high of 77.69 but gains were then trimmed as disappointing housing data triggered deflation worries. The front-month contract ended the day at 76.54, up +0.70%. Brent crude traded in similar pattern with price rising to as high as 77.2 before closing at 75.62, up +0.33%.
Despite thin trading volumes, Wall Street rebounded with both of DJIA and S&P 500 adding around +0.6% as Halliburton , a petroleum services company in Houston, reported its profit jumped +83% to $480M in 2Q10. The company is one of the oil services companies that has exposure in the Gulf of Mexico. The market had worries oil spills over the region might have negatively impacted company profits. Price rallied +6% after the stronger-than-expected results. Some other stocks also rose on optimistic earning outlook. Education stocks such as Education Management Co and Corinthian Colleges Inc jumped +17% and +9.1% respectively on speculations that Obama's proposed regulations would not hurt profits as much as previously feared.
Gains were limited as the NAHB housing market index disappointed. The National Association of Home Builders/Wells Fargo housing market index fell to 14, the lowest since April 2009, in July from a downwardly revised 16 in June. It was the first report of the week expected to show weakness in the housing sector. In the coming week, we will be receiving housing starts and existing home sales data. Both are anticipated to have weakened from a month ago.
Gold price was hurt as a drop in the housing market index reinforced deflationary worries in the US. Meanwhile, a break below 1185 has turned the near-term price outlook more bearish and further weakness is likely.
Today in Asia, risk assets remain supported as the International Strategy & Investment Group said China may soon end its tightening policies in the housing market. Property shares in China surged. Similar rumors were spread last week but were denied by the Ministry of Housing and Urban-Rural Development which reiterated its stance to maintain curbs on speculative property purchases.
In RBA's minutes of the July 6 meeting, policymakers said the European bank stress tests have 'the potential to have a significant impact on financial markets and global confidence' and the important question for the central bank is whether new information released before the next meeting would 'materially changed the medium-term outlook for inflation' which might trigger further tightening in coming months.
Australian dollar surged against USD before the report and the market is currently pricing in 18% or a rate higher in August as CPI data due on July 28 may signal a rise in price level.
The Bank of Canada will meeting today and the consensus is that the central bank will raise the policy rate by +25bps to 0.75% as domestic activities have been growing robustly.