Financial markets strengthened ahead of the election results in spite of weakness in the dataflow as investors getting more confident that Obama would be re-elected*. Wall Street gained with the DJIA and the S&P 500 adding +1.02% and +0.79% respectively. Commodities also jumped as the US dollar weakened. The front-month contract for WTI crude oil jumped +3.57% while the equivalent Brent crude contract added +3.10%. Gold jumped abruptly above 1700 yesterday with the benchmark Comex contract closing at 1715, up +1.89%.
With the lack of tier-1 data yesterday, weakness in some European data failed to tame the rally. Germany’s factory orders contracted -3.3% m/m in September, down from -1.3% a month ago. Meanwhile, Eurozone’s services PMI was revised down to 46 in October from 46.2 in preliminary estimate. UK’s industrial production contracted -2.6% y/y in September after a -1.2% drop a month ago. The market had anticipated a milder contraction of -1.6%. Manufacturing production also fell -1.0% y/y in September from -1.2% a month ago. Meanwhile, the El Pais newspaper stated that the European Commission’s latest economic outlook would show that it is forecasting a -1.5% decline in Spanish GDP in 2013, significantly lower than the -0.5% contraction estimated by the Spanish government. The budget deficit at would be increased to 6% rather than the 4.5% forecast.
Concerning the dataflow today, Eurozone’s retail sales probably stayed flat in September following a +0.1% gain in the prior month. Germany’s industrial production might have slipped -0.4% y/y in September after contracting -1.4% in the prior month.
This week’s oil inventory report will cover the period of Hurricane Sandy approaching the Northeast coast of the US. The mark expects crude inventory to have gained +2 mmb in the week ended November 2. Gasoline and distillate stocks probably slipped -1.5 mmb and -1.63 mmb respectively. The industry-sponsored API estimates a -0.03 mm drop inventory but gasoline gained +1.38 mmb during the week.
*Obama wins the election with over 280 electoral votes.
Oil and Gold Reports contributed by Oil N' Gold