Risk assets were generally lowered yesterday amid worries over economic slowdown. Fed's beige book report and durable goods orders surprised to the downside while ECB's lending survey indicated credit tightening. Both US and European bourses slipped. In the commodity market, crude oil slumped as unexpected surge in inventory put further pressure on prices. Gold extended weakness to a 3-month low before buying interest pushed price higher.

The Fed's July beige book reported that 'economic activity has continued to increase, on balance, since the previous survey'. However, development in 2 of 12 districts 'held steady and 2 showed slower pace of expansion. In June, economy in all 12 districts 'continued to improve' at 'modest' pace. There were improvements in manufacturing and services sectors but some districts showed better growth while others were more subdued. Labor market conditions 'improved gradually' in several districts. Some reported increased demand for temporary workers while some saw more hiring in the manufacturing sector. However, Dallas reported that firms in the energy industry experienced significant regional layoffs as a result of 'the deepwater drilling moratorium' while San Francisco noted 'continued high levels of unemployment and limited hiring'. Job market conditions appeared to have softened from the previous reporting period when 'employment levels edge[d] up in most districts'.

Durable goods orders contracted -1% m/m in June after falling -0.8% in May. The market had anticipated an increase of +0.85. Excluding transportation, the reading declined -0.6%, compared with consensus of a +0.5% gain.

In the Eurozone, ECB's lending survey showed banks have tightened credit standards for companies and households in the second quarter. As stated in the report, 'the downward trend in the net tightening of credit standards on loans to enterprises, which came to a halt in the first quarter of 2010, was reversed in the second quarter, increasing from 3% to 11%...Looking forward, euro-area banks anticipate credit standards on loans to enterprises to tighten somewhat in the third quarter'.

These reports damp market optimism and stocks in the US and Europe fell with DIJA, S&P 500 and Stoxx600 losing -0.38%, -0.69% and -0.35% respectively.

WTI crude oil plummeted to as low as 75.9 after the US Energy Department reported huge oil inventory in the week ended July 23. However, price later rebounded and eventually closed at 76.99, down -0.66%. As near-term fundamental outlook remains unchanged while macroeconomic data has been mixed, we expect oil to continue trading within its predefined range of 70-80.

Gold was a tad higher after the sharp fall on Monday. As concerns over sovereign crisis in the Eurozone appear to moderate further, demand from emerging market will be the only positive catalyst in coming months. UBS said physical demand from India has been robust in recent days as buyers enter the market for bargain hunting. Demand may be boosted in coming months due to rise in agricultural income led by a good monsoon and the wedding season in September.


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