Comments from central bank officials continued to uphold market confidence, sending stock markets higher in spite of weakness in the economic dataflow. Wall Street climbed higher with the DJIA and the S&P 500 gaining +0.39% and +0.51% respectively. The commodity sector was rather mixed. While crude oil prices rose with the front-month WTI and Brent crude contracts soaring by +1.595 and +2.24% respectively, gold faltered after rising over the past 2 days. Speculations that the ECB would announce asset purchases in September and comments from Fed's Rosengren sustained the bullish sentiment in the near term.
The euro was lifted as Germany for the first time officially showed supports on the ECB President Draghi's asset purchase plan. Comments by Chancellor Angela Merkel's deputy spokesman Georg Streiter that Germany is "not worried" by the ECB's possible bond purchase appear to the green light for this move and investors hope the measure would be announced in as soon as next month. This overshadowed the disappointing economic data released in the Eurozone with Italy's economy remaining in contraction while Germany's factory orders dropped more than expected.
Meanwhile, Boston Fed President Eric Rosengren indicated a large scale easing program is needed to stimulate growth and the job market in the US. At an interview with the CNBC Rodengren, a voter in the FOMC in 2013, called for an "open-ended" QE program of "substantial magnitude". The program "needs to be substantial enough that it offsets some of the shocks that we're getting from abroad and some of the concerns that people have with how weak the world economy has been". His comments, together with Fed chairman Ben Bernanke's comments earlier this week, raised further hopes that the Fed would soon implement QE3 as a boost of the US economy.
On the dataflow, the UK will publish its quarterly inflation report in which the BOE members would unveil their views on the inflation and economic outlooks, sending indications on further easing measures. In the US, the non-farm productivity probably increased +1.4% in 2Q12 after dropping -0.9% a month ago. Concerning oil inventories, the industry-sponsored API estimated that crude inventory in the US slipped -5.4 mmb in the week ended August 3. Gasoline and distillate stocks gained +0.42 mmb and +2.4 mmb respectively. The market anticipated crude dropped -0.3 mmb and gasoline slipped -2 mmb. Distillate probably added +1 mmb, however.