Crude oil price rebounds above 67 in European morning as USD retreats. IMF's improved outlook on global credits, strong China PMI and Japan industrial output data also revive market expectations on economic recovery. In China, oil stocks plunge after the Chinese government reduced the ex-factory fuel prices.
In its semi-annual report, IMF cut its estimates for loan and investment write-downs by -15% to $3.4 trillion, suggesting improvement in global credit market and world economy. As stated in the report, 'systemic risks have been substantially reduced following unprecedented policy actions and nascent signs of improvement in the real economy'. However, 'credit channels are still impaired and the economic recovery is likely to be slow'. Banks' losses on bad assets will probably increase by $470B, $420B and $140B from July 09 through next year in the Eurozone, the US and the UK respectively.
According to a survey done by HSBC, China's manufacturing PMI slid 0.1 point to 55 in September from 55.1 in August. Despite the fall, a reading above 50 represented expansion and it's the 6th consecutive month that the country's manufacturing sector is in expansionary phrase. The official PMI, to be released tomorrow, is expected to have risen to 55 during the month from 54 in August.
In Japan, industrial production index rose +1.8% mom in August following an upwardly revised +2.1% increase in the prior month. On annual basis, the contraction of -18.7% was much lower than -22.7% recorded in July. Looking into the details, the shipment index for capital goods turned positive, gaining +1.9% qoq in July-August from -17% in April-June, for the first time in 2 years. This might be signaling that capex has almost bottomed as the shipment index for capital goods is usually a leading indicator for capex.
The Chinese government announced to reduce ex-factory prices of gasoline and diesel by RMB 190 a metric ton. Sinopec (0386.HK) and Petrochina (0857.HK) fell -1.4% to HK$ 6.59 and -1.6% to HK$ 8.76 respectively, underperforming -0.3% decline of the benchmark Hang Seng Index, as the cuts will hurt profit margins of refiners.
USD retreats against major currencies amid batter economic outlook as investors seek higher risks. Leading gains against the dollar were Australian dollar and New Zealand dollar. In Australia, retail sales rose +0.9% mom in August after falling -0.9% a month ago. The gain was higher than consensus of +0.5%. In New Zealand, NBNZ business confidence improved strongly to 49.1 in September from 34.2 in the prior month. Against the euro, the greenback weakens to 1.466 after rebounding to 1.453 Tuesday. The currency pair will likely record a decline of -4.7% in the third quarter, after gaining more than +5% in the second quarter.
Gold price climbs above 1000 again as the dollar plummets. No matter whether the yellow metal will close above 1000 today, it will likely record the biggest quarterly gain since 1Q2008. High gold price did exert pressure on jewelry demand. Imports by India, the world's largest buyer, probably dropped for the 5th month in September, according to Bombay Bullion Association Ltd.