Greece announced an additional 4.8B-euro austerity measure to reduce the country's budget deficit. The plan includes raises in tobacco, alcohol and sales taxes which are expected to increase government revenue by 2.4b euro. The government will also reduce salary bonuses to civil servants by -30%. Although the measures have angered pensioners, drivers and civil servants who marched to the finance ministry and went on strike, Prime Minister said that these measures are necessary so as to avoid catastrophe.
The market is relieved as Greece shows determination to reduce to 300B-euro budget deficits. The euro rises for the second day against USD. Commodities, especially metals, remain firm.
Gold price stays firm around 1135/40 while silver extends gains to 14.15 after soaring +3.6% Tuesday. Apart from weakness in USD, precious metals are boosted by the news that Russia's central bank is looking to increase the share of gold in its reserves.
According to Autodata Corp, US sales of cars and light truck surged +13% y/y to 10.38M in February. The data were generally positive with the exception of Toyota. We believe auto market will continue to recover in the US as global economic outlook improves. Platinum rallied +2.1% to 1576 while palladium gained +1.6% to 444.9 yesterday. Both metals remain strong today.
Hovering around 80, crude oil's near-term outlook remains strong as driven by better sentiment on economic recovery and potential stabilization in Greece's deficit problem.
Correlation between crude oil and S&P 500 Index has been strong since 2009 and recently, the correlation appears to have increased. We believe this is because the market has used the stock market as a predictor for US economic growth.
While we are waiting for oil inventory report, there are still several important macroeconomic data due today.ISM non-manufacturing data probably edged higher to 51 in February from 50.5 in the prior month while ADP employment is expected to show -10K decline in payrolls in February after a -22K contraction a month ago.