On the 3rd day of rebound, WTI crude oil breaks above 80 again as driven by strength in gold and advance in stock markets. World Bank's upgrade on economic growth in China and decline in USD ahead of FOMC announcement also lifted interest in the commodity market.
Currently trading as 80.3, the benchmark contract in crude oil has jumped +4.9% after plunging to 3-week low at 76.55 yesterday. The macroeconomic environment has had much control on the price and mixed data released in recent weeks have made price movement volatile. We are skeptical about the sustainability of oil trading above 80 as energy fundamentals remain weak. Although API reported yesterday huge draw in crude inventory, both gasoline and distillate stockpiles increased as demand sank. The energy report by EIA will probably depict a similar picture.
Gold's rise accelerates after brief consolidation. The benchmark Comex futures surges to 1096 in European morning as USD weakens. Others in the precious metal complex also rally. Silver advances to 17.5 after jumping +4.5% while platinum continues its 3-day rally to 1366 following the +1.4% gain Tuesday.
Economic data released today were largely inline with market expectation though disappointment was seen in Australia's retail sales. Retail sales dropped -0.2% mom in September, compared with market expectation of an +0.5% gain, following decline of -0.9% in the prior month. In the Eurozone, final services PMI in Germany was revised down to 50.7 from 50.9 in October while the reading for the 16-nation as a whole was upgraded to 52.6 from 52.3. In the UK, services PMI improved to 56.9 in October from 55.3 a month ago. Producer Price Index (PPI) dropped -0.4% mom in September after rising +0.5% a month ago. This translated to an annual -7.7% decline for the month. Sluggishness in price level may help the ECB justify its stance in keeping interest rate low for a long period of time.
However, neutral/mildly bearish indicators did not weigh on stock prices. Instead, equities in both Asia and Europe advance after the World Bank upgraded its growth forecast in China. The world lender estimated economy in China will grow +8.4% in 2009, compared with previous projection of +7.2%. In the report, it's stated that 'large and timely fiscal stimulus spending in most East Asian and Pacific countries - led by China and Korea - along with a powerful process of inventory restocking now underway, have driven the rebound in the region and contributed significantly to confidence in a global pick-up... Developments in the East Asia & Pacific region remain strongly influenced by China, where the projected increase in GDP in 2009 will offset three quarters of the decline in the GDPs of the US, the Eurozone and Japan'. However, the World Bank also warned that if China is excluded, economic outlook remains weak in East Asia.
Stock markets were also boosted by strong company earnings. Korea Exchange Bank's 3Q09 profit surged 3 times from last year while Westpac Banking Corp's profit in the second half plunged less than market expectation. The MSCI Asia Pacific Index rose +0.9%. In European morning, UK's FTSE 100 Index climbs +0.7% while Germany's DAX and France's CAC 40 soar more than +1%.