Crude oil hovers around 71 in European morning. Recently, energy prices have been stuck within a range and its ups and downs have been determined by economic indicators and stock markets. Without much meaningful data released today, energy prices trade with a soft tone.
The BOE's minutes for the September meeting was a non-event votes for leaving both the policy rate to 0.5% and the asset buying program at 175B pounds were unanimous. There was nothing mentioned about reducing remuneration rate on bank reserves. Perhaps this signaled that the economic outlook in the UK has improved.
Today, the Confederation of British Industry raised its forecast for UK's GDP growth to +0.3% in 3Q09 and +0.4% in 4Q09, and anticipated that BOE will stop buying assets after the current scheme is finished. The British pound surges higher against USD and euro after the report. Currently trading at 1.6422, GBP has risen for the second day against the greenback and 1.615/1.62 has been acted as a support level. Against the euro, GBP has risen for the third consecutive day with the rally accelerating.
In the 16-nation Eurozone, PMI improved but was less than market expectation. Flash reading on manufacturing PMI rose to 49, compared with consensus of 49.8, in September from 48.2 in July. For service PMI, the reading rose to 50.6, the first time in expansionary territory since May 2008.
Stock markets advanced for the second day. In Asia, the MSCI Asia Pacific Index excluding Japan gained +0.3%. In Europe, UK's FTSE 100 Index rises +0.3% to 5158. Germany's DAX and France's CAC 40 also edge +0.2% higher.
Gold meets selling pressure at 1020 and plunges to 1015. Silver falls to 17 while platinum drops to 1328. The latest trade report in China revealed the country's lure for PGMs. Platinum imports surged +78% yoy to a record high of 205K oz while palladium soared +63% yoy to 80K oz, the highest level since February. We believe the strong demand was driven by recovery in auto sector. Auto sales advanced +81% yoy and the volume was above 1M units for the 6th consecutive month.
Market's focus is on the Fed's announcement after the 2-day FOMC meeting. Although leaving the Fed funds rate unchanged at 0-0.25%, the Fed should have turned more upbeat on the assessment of the economic growth. At the same time, policymakers probably decided to slow down the pace of the purchase of agency MBS and agency debt. The program will likely be extended to first half of 2010 from December 2009.