Crude oil price rises to 71.4 in European morning as investors remained thrilled by strong API data and EIA (US Energy Department) upgrades. USD's renewed weakness against major currencies and strength in stock markets also helped boost oil price higher. Investors anticipate the EIA will also report better-than-expected inventory data today.
USD plunges to 1.4096 and 1.6348 against the euro and the pound after losing 1.2% respectively Tuesday. WE expect the greenback will continue to drift lower as it's unlikely for the Fed to deliver the rate hike as traders speculated. With unemployment rate on the rise and inflation continues to undershoot target, the Fed has already given downwardly revised economic projections in the FOMC meeting months ago. Using the Fed's estimates, some economists indeed forecast the Fed Funds rate to be negative!
Stock markets in Asia performed well today with the MSCI Asia Pacific Index adding 2.7%. Japan's Nikkei 225 Stock Average also climbed 2.1% to the highest in 8 months as led by oil and metal stocks. Investors seemed to have ignored that Japan's machine orders dropped -5.4% mom and -32.8% in April, worse than both consensus and -1.3% mom and -22.2% yoy in the previous month.
Shares in Europe opened higher with UK's FTSE 100 Index gaining 1.8%. Germany's DAX and France's CAC 40 also surge 1.9% and 1.7%, respectively. Earlier today, reports showed that Germany's industrial production rose +0.3% mom in April, better than consensus of -0.1%, after declining -0.3% a month ago. On annual basis, the gauge plummeted -12.3% following a -13.1% decline in March.
Precious metals' prices also recover as the dollar declines. Gold for August delivery soars to 962 while September contract for silver rises to 15.15. Platinum prices gains for the third day to 1270. News about PGM metals has been mixed in these 2 days. On the positive side, the China Association of Automobile Manufacturers reported today vehicle sales rose 34.02% y/y to 1.12M units in May, driven by the government's stimulus, such as tax break and farmers' subsidy program, to stimulate purchases. The association forecasts that full-year sales will reach 11M units in 2009.
In South Africa, mineworkers union asked for wage increase of 20% for its members at Impala Platinum, the world's second largest producer of the metal. While it will increase production cost in long-term, production may be negatively affected in near-term should they strike.
On the negative side, GFMS said that global platinum surplus may widen by more than 80% in 2009 as surge in price damped jewelry demand.