Crude oil rallied Thursday as US and European equities strengthened following stronger-than-expected economic data and earnings results. Ease in debt concerns in Greece in hopes that a loan package will be approval in coming days also boosted market sentiment. The front-month contract of WTI crude oil price closed at 85.17, up +2.3%. Price remains firm in Asian session today.
Wall Street advanced with DJIA and S&P gaining +1.1% and +1.3% respectively. Motorola forecast its 2Q10 earnings will reach 9 cents a share while the company will post the smallest decline in revenue in 3 years. Hawlett-Packard announced an M&A plan to acquire Palm for $1.2B. The news, together with a drop in initial jobless claims to 448K (previous: 456K), sent equities higher.
Earlier in European session, bourses also strengthened with Germany's DAX and CAC 40 indices climbing +1% and +1.42% respectively while UK's FTSE 100 adding +0.56%. S&P's downgrades and rapid of spread have triggered EU leaders and the IMF to speed up talks with Greece concerning loan provision. News said that Greece has agreed the outline of 'a 24-bn-euro austerity package', including a 3-year wage freeze for public sector workers, in return for a multibillion-euro loan from EU and IMF. European Union Economic and Monetary Affairs Commissioner Olli Rehn said the plan will be 'a multi-annual program that will lead to major fiscal and structural adjustment.' He also said that the plan will be concluded soon.
Gold slid to 1162.2 before closing at 1168.8 (-0.26%) Thursday as default risks in the Eurozone temporarily diminished. However, we believe buying interests will emerge again on dips based on our opinion that Eurozone countries will have a long way to go in solving the fiscal problems. Gold, probably gaining +5% in April, will be recording the strongest month since November when the yellow metal rallied +14% on central bank buying.
US President Barack Obama announced he will nominate Janet Yellen, the President of San Francisco Fed, to serve as vice chairman of the Fed Board. Yellen is known as a 'dove' in the Fed and she is more concerned with boosting employment and economic growth than on controlling inflation. With her as a vice chairman, the Fed's monetary stance will likely remain ultra-accommodative. This is gold-positive as low interest rates reduce the opportunity of owning gold.