Caution was the order of the day, with the dollar rising against the euro in a seesaw session in which risk tolerance rose and then fell as investors weighed the outlook for growth and corporate earnings.

Data showed orders in Germany, Europe’s largest economy, rose at the strongest monthly pace in nearly two years in May. But economists said the yearly comparison would remain weak for some time.

Euro zone government bond prices fell and the Bund future retreated from seven-week peaks as heavy European supply of almost 14 billion euro cut safety bids for bonds.

Another decline on Wall Street rekindled a safety bid for U.S. government debt, offsetting worries about demand for this week’s sale of $73 billion in bonds.

Tumbling energy shares dragged down European and U.S. equity markets as oil fell more than 2 percent, pressured by investors’ caution over recovery and an expected increase in gasoline stocks during the heart of the U.S. driving season.

Exxon Mobil Corp fell 1.7 percent and Chevron Corp dropped 1.3 percent in U.S. trading, while Royal Dutch Shellshed 0.75 percent and Total lost 1.2 percent in Europe.

“The markets are in a consolidation mode,” said Andrew Bell, head of research at Rensburg Sheppards. “To propel the markets higher, we have got to see evidence of the turning point in earnings and of the recovery and economic growth moving from less bad to a little bit better.”

At 1:30 p.m. EDT (1730 GMT), the Dow Jones industrial average was down 67.41 points, or 0.81 percent, at 8,257.46. The Standard & Poor’s 500 Index was off 6.44 points, or 0.72 percent, at 892.28. The Nasdaq Composite Index lost 18.77 points, or 1.05 percent, at 1,768.63.

Disappointing UK industrial output data pulled shares lower in London, with utilities among top European decliners.

The FTSEurofirst 300  index of top European shares closed 0.8 percent lower at 826.36 points. The FTSE 100 closed down 7.91 points at 4,817, a fresh two-month low.

British manufacturing output unexpectedly fell 0.5 percent in May, official data showed, making it less likely the economy returned to growth in the second quarter.

Copper prices turned negative as concerns over demand and world growth persisted. Copper for three-months delivery in London traded at $4,930 a tonne.

Gold erased earlier gains to trade near break-even as the dollar recovered lost ground against a basket of currencies, reducing the precious metal’s appeal as an alternative asset.

Spot gold prices rose 20 cents to $924.20 an ounce and the U.S. Dollar Index  was up 0.25 percent at 80.584.

The euro was down 0.23 percent at $1.3942, while against the yen, the dollar fell 0.56 percent to 94.83.

An expected increase in U.S. gasoline stocks for the week ended July 3, ahead of the long U.S. Independence Day holiday weekend, pressured oil.

“Consumer confidence is weighed down by higher retail prices and rising unemployment and so the number of Americans taking to the road over the holiday weekend was probably lower than last year,” said Harry Tchilinguirian, senior oil analyst with BNP Paribas.

The benchmark interbank cost of borrowing euros fell to a new low on Tuesday as a banking system flush with funds remained reluctant to lend money into the real economy.

The benchmark 10-year U.S. Treasury note was up 11/32 in price to yield 3.47 percent. The 2-year U.S. Treasury note was little changed, yielding 0.94 percent.

Asian stocks edged up slightly but struggled, with the MSCI index of Asia-Pacific shares outside Japan rising 0.4 percent. Japan’s Nikkei share average <.N225> dipped 0.3 percent as a stronger yen hit exporter shares.

NEW YORK, July 7 (Reuters)

Markets briefly cut losses after data showed the service sector contracted at a slower pace in June, blunting some pessimism over the economy after a last week’s much worse-than-expected jobs report.

“Overall the data looks like a positive, although it may not be enough in the near term to overcome last week’s disappointing jobs report,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

Oil touched a five-week low and fell to around $64 a barrel, sending Exxon Mobil Corp down 2.1 percent at $67.05, and Chevron Corp fell 2.1 percent to $63.09. The two companies were the biggest weights on the Dow Jones industrial average.

Although the weaker oil prices bode well for recession-weary consumers, strong commodity prices have been viewed as a signal the global economy is stabilizing.

The Dow Jones industrial average <.DJI> fell 63.86 points, or 0.77 percent, to 8,216.88. The Standard & Poor’s 500 Index <.SPX> lost 8.45 points, or 0.94 percent, to 887.97. The Nasdaq Composite Index <.IXIC> gave up 24.56 points, or 1.37 percent, at 1,771.96.

NEW YORK, July 6 (Reuters)

Google, Chevron and Goldman are all betting that this prediction is correct. This from Bloomberg:

Unlike photovoltaic solar panels that convert sunlight to electricity, solar thermal focuses sunrays with mirrors to heat oil in glass pipes to about 700 degrees Fahrenheit (370 degrees Celsius). The oil turns water to steam, which spins an electric turbine. A solar thermal unit that begins operation in 2010 will produce power at 14.2 cents a kilowatt hour, almost triple the 4.8 cents for a plant using pulverized coal, the Energy Information Administration estimates.

Costs for solar thermal may fall as low as 3.5 cents a kilowatt hour by 2020, according to a report commissioned by the U.S. Energy Department. Meanwhile, coal expenses may rise. Congress is considering limits on carbon dioxide and other greenhouse gas emissions. The purchase of pollution permits may be required under a measure the Senate will begin debating next month.

Chevron, Goldman Sachs, FPL, PG&E and other companies have filed more than 50 applications with the Bureau of Land Management to lease government-owned desert property for solar power systems … Google’s philanthropic division put $10 million into eSolar, a start-up in Pasadena, California. Dan Reicher, a former Energy Department official who manages the unit’s climate and energy initiatives, said there will be more such investments.

The PowerShares Clean Energy ETF (PBW) has more than $1.5bn in assets and is one of the most popular ways to invest in solar, biomass, wind, and geothermal energy, says Brian Hunt in Daily Wealth.

“Common sense tells us when the holy trinity of fossil fuels – crude oil, coal, and natural gas – rise in price, companies that provide cleaner substitutes should also rise in price.

“PBW’s only been around for three years […] But with oil approaching $130 a barrel and clean energy stocks out of favor, expect a rally from the ‘treehugger-approved’ companies of the world.”

“Solar panels won’t be accepted en masse unless the economics of it makes sense,” says Charles Delvalle in Investor’s Daily Edge. “Sure, adoption is growing. But it won’t be mainstream until everyone can afford it. The same goes for wind power.

“With so many solutions not making any economic sense, why is adoption skyrocketing? You can thank the government and their incentives. States are ramping up incentives for clean energy production (like California’s $3.3 billion solar initiative). If it weren’t for government incentives adoption would drastically drop.

“When you combine these government incentives with the whole culture change that’s going on, you have a recipe for amazing growth.”

• The U.S. Treasury Department announced yesterday (Wednesday) that it would bring back the one-year Treasury bill at its next quarterly refunding auction, MarketWatch reported. “The majority of members believe that the addition of the year bill combined with increases to the size and frequency of existing coupon debt over coming quarters will still not be sufficient to satisfy the increased financing needs of the Treasury over the intermediate and longer term,” a panel of experts said in a government report, stating the next option could be to bring back the 3-year note as well.

• United Online Inc. (UNTD), the owner of Internet service providers NetZero and Juno, announced it would acquire online florist FTD Group Inc. (FTD) for about $456 million in cash, stock and notes, The Wall Street Journal reported. “This transaction will meaningfully diversify our revenue base within a large global market experiencing significant migration to the Internet,” said United Online Chief Executive Mark R. Goldston.

• Descendents of oil scion John D. Rockefeller, the founder of Standard Oil from which both Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) can trace early roots, have called upon Exxon to be more environmentally conscious, despite the company’s record recent profits, Forbes reported. Neva Rockefeller Goodwin, a great-granddaughter of John D. Rockefeller, said yesterday (Wednesday), “The truth is that Exxon Mobil is profiting in the short term from investments and decisions made many years ago, and by focusing on a narrow path that ignores the rapidly shifting energy landscape around the world, including developing nations.”

• Slowing demand and increasing competition are to blame for Garmin Ltd. (GRMN), navigation device maker, to miss market estimates for the first quarter. Garmin’s shares dropped as much as 14.4% on the day to its 52-week low of $39.75 a share as it posted a profit of $147.8 million, or 67 cents a share. Analysts expected the company to earn 74 cents a share, according to Reuters Estimates.

• Soft-drink titans PepsiCo. Inc. (PEP) and The Coca-Cola Co. (KO) continue to push their battle into uncharted waters, as Pepsi announced it acquired V Water, Britain’s vitamin-enhanced bottled water, for an undisclosed amount. V Water is very similar to vitaminwater, which Coca-Cola bought last year for $4.1 billion. Sales of non-carbonated drinks are growing considerable faster than carbonated beverages, and Pepsi already owns SoBe Life Water, Gatorade sports drink and Aquafina bottled water. 

• Brazil’s Bovespa stock index jumped to a record after Standard & Poor’s unexpectedly raised the country’s credit rating to investment grade. The Bovespa Index of the most-traded stocks on the Sao Paul exchange surged 6.38% to 67,896.13 at 3:32 pm EST, its biggest gain in three months.

• Kraft Foods Inc. (KFT) reported first-quarter profit of $608 million, a 13% drop from a year ago, yesterday (Wednesday). Though sales improved 21% despite economic pressures and rising commodities prices, as Kraft raised prices on 90% of its products.

• Kellogg Co. (K) reported yesterday (Wednesday) that first-quarter profit fell 2% despite recent price increases. Net earnings fell to $315 million compared with $321 million a year ago. Earnings per share increased from 80 cents a share to 81 cents a share because of a $650 million share-repurchase program, the Associated Press reported.

According to information collected by Chevron, worldwide investments in renewable and alternate fuels have increased nearly fourfold since 2004. In the past 12 months investors have poured nearly $150 billion into the biofuel sector. Biofuel volume will increase by about 45% by 2030 to meet future demand, but still will represent only about 10% of the total energy mix. This 10% is about equal to the current share. Relative quantities might not change much because overall global demand is growing so quickly.

Robertson added, “Energy efficiency is the most immediate and important action that each of us can take to start to reduce energy prices. The United States must become a nation of energy savers. In short, we need a ‘Made in America’ solution enabled by everything from human ingenuity to ’smart’ buildings to advanced vehicles and transportation systems. Markets are indicating that consumers are already taking action. You and your committee have a critical role to play to engage the US public and put the United States at the forefront of responsible energy use.”

Until Next Time…

Byron

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!