Crude oil price extend gains above 84 in European session as investor concern about a European fiscal crisis eased temporarily. Stocks and bonds drift higher while the euro continues to recover from a 1-year low. Currently trading at 84.3, the front-month contract of WTI crude oil price surges another +1.3% after Wednesday's rise of +0.95%.
Now that the market expects negotiations between Greece, the EU and the IMF regarding the rescue package will be speeded up as the sovereign crisis is quickly spreading to other countries in the Eurozone. According to Reuters news, austerity measures being discussed between the parties include raising VAT by 2-4% from 21%, reduction in salary bonuses and state sector wage supplements. Taxed on fuel, tobacco and alcohol may also be increased by at least 10%. While none the measures are confirmed, the market anticipates more details will be released over the weekend.
Corporate earnings and economic indicators catch more attention today. In the Eurozone, economic confidence rose to 100.6 in April from 97.9 in March. The market has anticipated a milder improvement to 99.4. Other confidence readings also beat forecasts. For instance, industrial confidence improved to -7 (consensus: -8) from -10 and services confidence rose to 5 (consensus: 3) from 1.
European stocks soar as driven by encouraging earnings results. Banco Santander, the biggest Spanish Bank, reported +5.7% y/y increase in net income in 1Q10. Unilever, the world's second largest food company reported a jump of net income, by +33% y/y, in first quarter. Moreover, Repsol YPE, the biggest oil company in Spain, said the company's upstream division will expand 3-4% per year through 2010.
Gold pulls back after soaring for 2 days as concerns over European sovereign debt moderated. Currently trading at 1169, the benchmark contract for gold slides -0.24% from Wednesday's close but remains at this year's high.
There have been speculations that gold will make new record highs as the yellow metal's appeal as a safe haven increases. the chart below shows that the correlation between gold and USD has changed since the beginning of the year. Movements between the 2 have become more positively correlated recently. The 2010-high (1175.3) made yesterday was just -4% below the all-time high of 1227.5. Whether gold can advance further and reach a new high this year depends on evolvement of the deficit problems in the Eurozone as well as other countries bearing huge debts, and investment flows into ETFs.