Crude oil price waxed and waned yesterday as both macroeconomic environment and industry fundamentals were mixed. Despite a brief recovery to 76.41 in European morning, as funding conditions in the Eurozone appeared better than previously anticipated, the front-month contract for WTI crude oil plunged to as low as 74.39 in NY session as both gasoline and distillate stockpile surged last week. The contract ended the day at 75.63, down -0.41%. WTI crude fell -9.7% on the second quarter and -5% year-to-date. Today in Asia, price broke below 75 again as Chinese PMI was disappointing.

Gold edged slightly higher for a second day but remained in consolidation around 1240. We expect range-trading to continue in the near-term but a rally may be seen if there's funding stress in the Eurozone after the 442B-euro 12-month tender expires today. Settling at 1245.9, the benchmark contract gained +0.28% yesterday but jumped +11.8% on the second quarter.

In European session, the financial markets were firm as Germany recorded a 12th consecutive decline in unemployment in June. More importantly, ECB said it will lend banks 131.9B euro for 3 months, well-below market expectations of 200B euro and probably an indication of a stronger-than-expected banking system in the region. The news has also increased market's confidence the Spanish 5-year bond auction today will be well-received.

Yet, the market sentiment was dampened again as Moody's said it placed Spain's AAA rating on watch, with a 2-notch downgrade possible. We believe a downgrade is likely given S&P and Fitch have already cut Spain to AA and AA+, respectively.

On the data-front, US ADP employment increased +13K in June, compared with consensus of a rise of +60K and May's +55K. This raised risks of downside surprises for tomorrow's payroll data.

According to the US Energy Department, total crude oil and petroleum products stocks surged +3.58 mmb to 1101 mmb in the week ended June 25. Utilization rate dipped -1% to 88.4%. Crude oil inventory dropped -2.01 mmb to 363.1 mmb with the biggest draw in the West Coast (-4.34 mmb). Cushing stock fell -0.80 mmb.

Gasoline stockpile increased +0.54 mmb to 218.1 mmb while the market had anticipated a drop of -0.5 mmb. Production rose +1.21% while imports soared +22.2%. These were partly offset by rise in demand which surged +2.39% to 9.46M bpd. Distillate stockpile rose +2.46 mmb to 159.4 mmb. The bigger-than-expected increase was driven by +1.46% increase in production and +7.02% gain in imports. Meanwhile, demand slid -6.18% to 3.55M bpd.

Today, the first day of 2H10, China reported another month of disappointing manufacturing growth. The government data showed that PMI declined for a second month, slipping to 52.1 in June from 53.9 in the prior month. The market had anticipated a milder drop to 53.2. The US and several European countries will also report manufacturing data later in the day. Switzerland's SVME-PMI probably slid to 65.3 in June from 66.4 in May while UK' manufacturing PMI is expected to have dipped to 57.6 from 58. In the US, the ISM manufacturing index probably fell to 59 in June from 57 in May.