European bourses and US stock futures fail to carry on Asian market's strength and slip in European session as investors await US new home sales. Commodities also weaken as there's lack of catalysts to push prices higher. Currently trading at 78.3, the benchmark WTI crude oil contract falls for a second day from an 11-week high made last week. Gold edged higher but gains were pared as buying interests failed to sustain. Negative correlation between gold and the euro has declined over the past 2 weeks, suggesting concerns over European financial markets have eased.

US new home sales probably rebounded +6.67% m/m to 320K in June, following a record -32% slump to 300K in May. The market has become anxious about US housing market as recent data have unveiled that underlying demands have remained weak after expiration of first-homebuyer tax credit. Despite the recovery in June, home sales should remain fragile for the rest of the year and stronger recovery in the job market and low mortgage rates are critical factors for a sustainable growth in sales.

Gold's near-term outlook remains soft although recent price decline should have driven buying interest. Should price fail to get a boost in coming weeks and continue to weaken further in August, we hope a seasonally strong September (Indian buying season) would send price higher.

The negative correlation between gold and EURUSD has dropped in recent weeks. While gold and euro has traditionally been positively correlated, the relationship reversed as sovereign crisis in the Eurozone elevated in mid-May. This was because risk-averse investors sought gold as safe-haven assets. The situation eased and the 30-day correlation fell to 13.4% last Friday, compared with -43.1% early in July. Positive stress test results and strong peripheral bond auctions have relieved the market concerns.

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PGMs strengthen amid anticipations of recovery in the auto market. Platinum and palladium today soared to 4-week highs of 1159.8 and 497 respectively as Ford Motor reported its 5th straight quarter profits on Friday. Net profits surged +15% to 31.3B in 2Q10 from 27.2B the same period last year. Ford's sales of light vehicle in the US rose +20% in the quarter, compared with industry average of +18%. The second-largest US automaker said it would have a positive net cash position by end-2011.