While some oil bulls continued to push WTI contracts higher using the good news from Enbridge, the broad market sentiment was so vulnerable that prices retreated after rising to as high as 103.37 earlier in the day. Weakness in Brent crude was more severe with prices approaching 110 again. The WTI-Brent spread has narrowed to -8.4 in European session. Gold price fell along with others in the commodity sector although uncertain economic outlook should traditionally be positive for the yellow metal.
Gold had a volatile quarter in 3Q11. While price had surged to a record high of 1923.7, the sharp selloff had sent price below 1600 after the CME's hikes in margin requirements. A report from the World Gold Council unveiled that gold demand was robust, rising to 1053.9 metric tons, during the period. The Council expected that European bar and coin investment will remain strong in the 4th quarter given the lingering uncertainty in sovereign debt crisis in the region.
The BOE's quarterly inflation report released yesterday signaled policymakers have turned more pessimistic towards UK's economic outlook than 3 months ago. The central bank attributed the major cause of economic weakness to the sovereign crisis in the Eurozone. The BOE stated that 'implementation of a credible and effective policy response in the euro area would help to reduce uncertainty and so support U.K. growth', while 'its absence poses the single biggest risk to the domestic recovery'. Concerning the EU plan agreed on October 27, the BOE said that it 'briefly led to some lessening in the immediate pressures on the most vulnerable euro area countries'. However, optimistic market sentiment has 'subsequently reversed' as there lacked details about the plan as well as the political turmoil in Greece.
Household spending in the UK stayed weak. Retail sales dipped -0.6% m/m in October while the reading in September was revised down to +0.5%. On annual bases, sales climbed +0.9%, exceeded market expectations and the downwardly revised +0.3% in September. Excluding auto fuel, retail sales rose +0.6% and +0.9% respectively on monthly and annual basis respectively.
In the US, initial jobless claims probably rose +5K to 395K in the week ended November 12. Moreover, some housing data will be released with housing starts falling -7.29% to 610K while building permits rising +1.85% to 605K in October. Philly Fed manufacturing might have climbed to 10 in November from 8.7 a month ago.