Commodity prices rebounded in tandem with stock markets today as Greek debt talks appeared to have made good progress and Japanese production data surprised to the upside. WTI crude oil prices rose for the first time in 4 days while Brent crude soared after the plunge yesterday. Although Saudi Arabia assured that it would cover the shortfall of Iranian oil, China's oil demand this year may contribute to price increases. Gold resumed the rise after the brief retreat yesterday. Holdings in ETF have strengthened in recent weeks, too.

Financial sanctions imposed by the US and oil embargo by the EU on Iran would have impact on Asian countries' Iranian oil imports. Indeed, much of the growing energy need from Asian countries has been met by shipment from Iran. Data from the DOE/EIA suggested that over Asia takes up over 60% of Iran's oil exports and of which 40% goes to China and India. While the sanctions aim to stop Iran from development nuclear weapons, something that is important for countries all over the world, it's unlikely that all customers from Iran would comply with the restrictions. Indeed, China and India have already voiced that they would still be buying oil from Iran. Although China has decided to import less oil from Iran after the latest round of negotiation, it should not be viewed as a signal that China would join the West in sanctioning Iran. Indeed we believe the Chinese government might increase purchases at sharply discounted price levels as the country resume restocking of its SPR program.

Gold remained resilient despite a drop yesterday. ETF gold holdings have recovered to the highest level since mid-December. Meanwhile, Hang Seng Bank, a Hong Kong-based bank, announced that it would launch the first RMB-denominated gold ETF in Hong Kong. While the new fund would have insignificant impact on gold price, it indicates the strong demand over gold and investors' bullish outlook over the precious metal.

Concerning macroeconomic data, Japan reported that industrial production expanded +4.0% m/m in December, up from consensus of +2.9% and November's drop of -2.7%. On annual basis, the reading contracted -4.1%, compared with -5.0% expected by the market and -4.2% in November. The job market in the world's third largest economy remained dismal with unemployment rate climbing to 4.6% in December from 4.5% a month ago. In the US, Chicago PMI probably added +0.8 pointed to 63 in January while consumer confidence index gained +3.5 points to 68 during the month.