Financial markets declined in Asian session on Monday. Investors were disappointed by China's economic growth in 1Q12. Concerns over sovereign debt problems in the Eurozone remained and the next focus is the upcoming G-20 meeting as whether non-EMU G20 members approve an increase in contributions to the IMF will be discussed. Commodity markets were weighed down by the world growth outlook. The front month contract for WTI crude oil slipped further, currently trading at a 3-day low of 102.22. It was also pressured by Saudi's comments that it aimed to bring down oil prices. The equivalent Brent crude contract dropped to 120.11 in Asian session, the lowest level in 2 trading days.
China's GDP growth eased to +8.1% y/y in 1Q12 from +8.9% in the prior quarter. The market had anticipated a milder drop to +8.4%. This slowest growth since 2Q09 was impacted by government policy tightening, property sector weakness and soft external demand. It is, however, anticipated that expansion in China will pick up the pace again later in the year as the government tune the monetary policies. Separately the People's Bank of China widened the trading range of RMB against USD by +50 bps to 1%. This is viewed as a step further to internationalization of the country's currency.
In the Eurozone, Spain was reported to have borrowed 316.3B euro from the ECB in March, up from 160-170B euro in the previous 2 months. The market was unhappy with such news as Spanish banks now account for 63% of all borrowing from the ECB on a net basis and the country is viewed by many market participants as a reminiscence of Ireland, where the fiscal position was offset by the fragile banking system. The Eurozone debt crisis will likely be on the agenda of the G-20 meeting on Thursday. News reports cited G-20 officials that finance ministers might agree to increase the resources of the IMF by between $400-500B, compared with the $600B requested by the IMF.
Commitments of Traders:
Speculators were mixed towards to the energy complex in the week ended April 10. Net length for crude oil futures declined -17 975 contracts to 197 582. Net length for heating oil fell -776 contracts to 20 798 while that for gasoline dropped -6 282 contracts to 91 622. Net short for natural gas futures slipped +1 522 contracts to 122 560.
Similarly, speculators were bearish on precious metals. Net length for gold futures declined -5 112 contracts to 136 653 while that for silver dropped -1 869 contracts to 18 186. For PGMs, net length for platinum fell -3 167 contracts to 20 788 while that for palladium slid -1 439 contracts to 5 157.