Crude oil edged higher earlier in the day but faltered below 80 in European session. Currently trading as 78.8, the front-month WTI contract drops amid profit-taking after price rallied almost +4% Thursday. As crude oil has reached the upper end of recent trading range, further meaningful rise in price would be difficult unless economic outlook and demand/supply balance show signs of improvement.

Gold broke 1200 briefly but, again, failed to sustainably stay above there. Indeed, buying interests emerges as price has dropped over the past few days. However, there lacks a catalyst to drive price higher. The upcoming stress tests may push the yellow metal sharply higher or lower temporarily but the impact may not last long, unless there's further news showing downside risks in European banking system.

Economic data released has been encouraging today. German IFO business confidence surprisingly jumped a 3-year high in July. The business climate index rose to 106.2 in July from 101.8 in the prior month. The market has anticipated a dip to 101.5. The 'current assessment' improved to 106.8 from 101.1 in June while the 'expectations' component rose to 105.5 from 102.4 in June.

In the UK, GDP expanded +1.1 q/q in 2Q10, compared with consensus of +0.6%, following a modest growth of +0.3% in the prior quarter. This is the fastest growth in 4 years. From a year ago, the economy grew +1.6% after contracting -0.2% in the first quarter. Growth was broadly based during the quarter with the construction sector jumping +6.6%, manufacturing production +1.6% q/q and business and financial services +1.3%.

The market is mixed towards the data with UK's FTSE dipping -0.2% while Germany's DAX and France's CAC 40 gaining +3.28% and +0.50%.

Focus is in fact turned to European bank stress results to be released later today. Although the euro has strengthened recently as investors anticipate positive results, negative surprises should hurt the currency and market sentiment seriously.