Asian stock market extends strength in the Wall Street last week with the MSCI Asia Pacific Index gaining +1%. The market sentiment has improved as macroeconomic indicators released last week were broadly encouraging. While there have been talks of a double-dip recession in the economy, the data indicated growth has remained intact so far. Commodity prices are also boosted as USD's retreat increases the appeal of commodity investments. The front-month WTI crude oil futures soar above 74 while corresponding Brent crude futures trade above 76 in Asian session today.
Despite US retail sales disappointed the market with a contraction of -1.2% m/m in May, University of Michigan consumer sentiment surged +1.9 points to 75.5 in June, the highest since January 2008. This reinforced consumers' confidence although sovereign crisis in the Eurozone may slow economic recovery. Yet, we remain skeptical to the sustainability of robust economic data as there is high uncertainty in the market including effectiveness of debt-ridden countries' austerity measures and contagion from peripheral European economies to other parts of the world. Moreover, tightening in China also poses an overhang of commodity demands.
Gold remains firm in Asian trade after adding +0.65% last Friday. Apart from futures, capitals have also flowing into other gold investments, Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, expanded 0.24M oz to a record of 41.99M oz last week.
The economic calendar is rather busy in the US this week. On Wednesday, there will be housing starts and permits reports while the government will also release CPI data and leading indicators on Thursday. In Europe, we are looking forward to SNB's rate decision. While it will most likely keep the policy rate unchanged, we would like to see the central bank's view on recent slump in the euro and further intervention of Swiss Franc from appreciation.
Commitments of Traders:
Crude Oil: Net speculative long positions plunged more than 7K to 17.46K, the lowest level since July 2009. Decline in long positions and increase short position contributed to the contraction last week. Net longs may rise in the coming week as driven by broad-based improvement in risk appetite
Natural Gas: Net speculative long positions dropped for a fifth week to 154.8K as traders bet hot weather in the US should boost cooling needs. Moreover, gas supply may also be affected by hurricanes
Gold: Net speculative long positions soared after declining for 3 consecutive weeks. Net longs added almost +2.85K to 227.4K amid flight for safe-haven assets. We expected such theme will continue driving gold investment in the medium-term
Silver: Decline in long positions outpaced drop in short positions and these resulted in modest contraction in net long positions for silver. Over the past few weeks, net longs in silver have been hovering around 35K-level and this pattern is similar to 'sideway' trading in Comex silver futures
Platinum: Net longs edged higher last week but positions over the past few weeks remain well-below peaks in April/May. While categorized in the precious metal complex, demand for platinum, as well as palladium, is heavily reliant on the auto-sector. Worries over economic slowdown inevitably raised concerns over demand for platinum. Traders hence prefer taking profits from previous long positions