Financial markets begin the week with modest downward bias as China’s "beige book" showed more payroll cuts ahead. German newspaper Der Spiegel reported that Greece has a budget gap of 20B euro. Meanwhile, the market is also disappointed as Spanish and Italian bond yields rose again and Italy’s undersecretary of finance, Gianfranco Polillo, said that no country would voluntarily give up its sovereignty requesting financial assistance unless it has "the water up to their necks". Spain’s economy minister De Guindos affirmed that "Spain will do what it has to do but with no rush". Moreover, he also indicated that 60b euro would be sufficient to recapitalize the country’s banks.
The China Beige Book, covering the period from August 9 to September 3, showed that growth of manufacturing, trade and retail sales activities decelerated in 3Q12 and may record the weakest annual expansion in 22 years. According to Craig Charney, research director of the survey, "the dramatic and unexpected worsening of the European crisis and slowing of America’s economy brought China’s export order growth to a near-standstill". The manufacturing sector is found to have the biggest drop in companies reporting higher revenue and higher output. Job cuts are also expected to be more likely in coming months than previously.
In the Eurozone, some mixed reports came from Der Spiegel. On a positive note, the newspaper reported that the EU members are planning to allow the ESM to leverage its capital in the same way as the EFSF, so that the former can reach a capacity of more than 2 trillion euro and to rescue big countries if necessary. Yet, the newspaper also reported that, albeit preliminary, the troika estimated that Greece has pointed to a budget gap of 20B euro, doubling the previous projection. According to Der Spiegel, the debt-ridden country can only get the next tranche of funding if it narrows the gap. Meanwhile, there were reported that Greek Prime Minister Antonis Samaras has again asked the country’s official creditors to take a haircut on the claims to their debts.
Commitments of Traders:
Speculators were bullish towards the energy complex in the week ended September 18. Net length for crude oil futures rose +18 486 contracts to 267 151 while that for gasoline added +1 745 contracts to 70 453. Net length for heating oil added +2 952 contracts to 14 977 and net short for natural gas futures slid -14 021 contracts to 89 693.
Speculators were also bullish towards precious metals during the week. Net length for gold futures increased +9 099 contracts to 191 115 while that for silver gained +1 073 contracts to 32 555. For PGMs, net length for platinum gained +2 382 contracts to 36 134 while that for palladium rose +1 412 contracts to 10 094.
Oil and Gold Reports contributed by Oil N' Gold