Crude oil prices plummeted yesterdays in the face of the broadly steady market. Disappointing services PMIs from China, the UK and the Eurozone heightened concerns over the global economic outlook, upstaging positive US economic data. The front-month contract for WTI crude oil prices plunged to 87.7, the lowest level since August 3 before ending the day at 88.14, down -4.08%, while the Brent crude contract fell -3.05% and settled at 108.17. Gold continued to consolidate with the benchmark Comex contract adding +0.24% to 1779.8.
Following disappointing manufacturing PMI, services PMI in major economies also weakened in September. China's services PMI fell to 53.7 in September from 56.3 a month ago. In the UK, the reading slipped -1.5 points to 52.2 in September, compared with consensus of 53.0. This suggested that the country's economy had hardly grown in 3Q12. In the Eurozone, the services PMI also dropped to 46.1 last month from 47.2 in August, suggesting that the bloc was in recession in the third quarter.
In the US, the services ISM data rose +1.4 points to 53.7 in September. The employment index, however, dipped modestly to 51.1 from 53.8. As the number of payrolls in the service sector contributes around 80% of private sector jobs in the US, the employment index can be used as a leading indicator of the job market outlook. The ADP reported that employment gained +162K in September, down from a downwardly revised +189K a month ago. The market had anticipated an addition of just +140K.
The ECB would hold meeting today but it would very likely leave its policy rate unchanged at the October meeting. The market remained concerned about the possibility, timing and the amount of a Spanish request for funding. IMF Managing Director Christine Lagarde told a newspaper that "if Spain wants it, we could help in diverse ways, for example by simply auditing and monitoring reforms negotiated with its European partners without the IMF participating in financing…But we could also play a role in financing". The next event in focus would be the meeting held on Friday among Spain's Rajoy, Italy's Monti and France's Hollande.
Oil and Gold Reports contributed by Oil N' Gold