Commodity prices continue to be influenced by macro events. Moody's lowered Portugal's credit rating by 2 notches to A1 with a 'stable' outlook as the government's 'financial strength will continue to weaken over the medium-term'. The downgrade reminded the market that sovereign crisis in the Eurozone is not over yet. This helps push gold price higher.

However, gains in the yellow metal as a safe-haven asset would be limited as the stock market is boosted by strong corporate earnings and as Greek bonds' auction is well-received.

Greece sold 1.625B euro of 6-month notes at a rate of 4.65%, lower than 5% charged by EU's bailout package. The bid-to-offer ratio is 3.64, signaling market is generally confident of Greece's ability to repay the debts.

Concerning the stock market, bourses open higher in European session as spurred by yesterday's earnings surprise from Alcoa. The largest US aluminum producer said that net income reached $136M in 2Q10, compared with a net loss of $454M the same period last year. Revenue also rose +22% to $5.19B, higher than market expectations of $5.02B. Meanwhile, BP jumps further after yesterday's +9.4% rally as the market is pricing in the potential asset sales to Apache Corp and the expectations that the company may be able to write-off the costs of oil spill cleanup against taxes.

Optimistic earnings expectations largely upstaged disappointing date from ZEW. The economic research agency reported that economic sentiment in the Eurozone fell -8.1 points to 10.7 (consensus: 16.3) in July. Corresponding reading for Germany plunged to a 15-month low of 21.2 from 28.7 in June.

Driven by strength in equities, crude oil price recovers to 75.8 after sliding to as low as 74.25. The IEA, in its July report, unveiled for the first time its demand outlook for 2011. The agency forecast oil demand to increase +1.5% y/y to 87.8M bpd in 2011 with the major growth driver coming again from China. The growth in 2011 will be slower than +2.1% in 2010 as China's contribution will be reduced to 30% from 50% this year. Concerning supply, the IEA expects call for OPEC will rise to 29.2M bpd as non-OPEC production will only expand +0.4M bpd next year.

The IEA also said that OPEC members continued to produce above limits. Excluding Iraq, production by the 11 OPEC members with output targets rose to 26.6M bpd, with compliance at around 59% in June. OPEC-11 production is running about 1.76M bpd above the group's 24.845M bpd collective quota.

Crude oil price may climb higher if API's inventory released US market close shows another week of draw in crude inventory. Consensus forecasts crude stockpiles to have dropped -1.35 mmb last week while gasoline stockpile increased +0.35 mmb.