Fears of slowdown in global economic growth triggered selloff risky assets. Wall Street tumbled with DJIA losing -2.6% and S&P sliding -3.1%. The latter breached the key support level of 1040.78, confirming resumption of medium-term downtrend. European bourses also plummeted with all major indices falling more than -3%. Concerning the commodity sector, crude oil slumped as the broad market sentiment deteriorated sharply. This upstaged an industry report showing decline in crude and gasoline inventories. WTI crude oil price plunged -2.95% to settle at 75.94 while Brent crude dropped -2.86% to 78.78.

Following the Conference Board's downward revision of the leading economic index for China due to calculation error, concerns over economic recovery were fuelled as US consumer confidence missed expectations. The confidence index slipped -10.4 points to 52.9 in June, compared with consensus of a milder drop to 62.5. Both the 'current conditions' component and the 'expectations' component fell during the month. Regarding the job market, consumers were less optimistic than before as those thinking jobs are plentiful slipped 0.3 points to 4.3 while those thinking jobs are hard to get rose 0.9 points to 44.8. The index is indicative to US unemployment rate.

Disappointment from consumer confidence index overshadowed a better-than-expected S&P/Case-Shiller house price index which rose +3.8% y/y in April, following a +2.3% gain in the prior month. The strong reading was driven by tax credit expiry.

The industry-sponsored API reported crude oil inventory drew -3.4 mmb, gasoline stockpile dipped -0.91 mmb and distillate stockpile gained +3.9 mmb in the week ended June 25. Cushing stock recorded the biggest drop in more than 9 months, by -1.9 mmb, to 36 mmb. However, this failed to lend support to prices.

According to the National Hurricane Centre, Tropical Storm Alex became Atlantic season's first hurricane and might bring 'large and destructive waves' to the western Gulf of Mexico. However, its direction would unlikely bring significant damage to key energy infrastructure.

Gold initially fell sharply, to as low as 1227.6, in tandem with others in the commodity complex but a strong rebound followed. The benchmark contract reversed losses and ended the day at 1242.4, up +0.31%. Weakness in the euro against the dollar and the yen, as well as strength in major bond markets compared with fragility in peripheral bond markets, indicates risk aversion has dominated current market condition again. This should benefit safe-haven assets such as USD, JPY and gold.

Weekly change in inventory as of 25/06/10
Change
Market Expectation
Previous

Crude oil
 
-0.90 mmb
+2.02 mmb

Gasoline
 
-0.50 mmb
-0.76 mmb

Distillate
 
+0.80 mmb
+0.30 mmb

Comparison between API and EIA reports:

API (Jun 25)

EIA (Jun 25 )

Actual
Inventory
Previous

Forecast (using API's inventory level)
Inventory

Crude oil
-3.40 mmb
359.0 mmb
+3.69 mmb

-6.12 mmb

359 mmb

Gasoline
-0.91 mmb
220.3 mmb
+0.81 mmb

+2.42 mmb
220 mmb

Distillate
+3.90 mmb
158.6 mmb
+1.10 mmb

-2.08 mmb
159 mmb

API collects stockpile information on a voluntary basis from operators of refineries, 76% of the time, using data in the past 4 years.  

Source: Bloomberg, API, EIA