Investors turned cautious on Monday as anticipations of a firm commitment from the G-20 on the resources necessary to lever up the EFSF for bailing out debt-ridden European countries did not materialized. Added to the worries were political turmoil in Greece and Italy. In the commodity sector, oil prices moved sideways while gold climbed modestly higher.
At the end of the G-20 communique, member countries pledged to 'stand ready to ensure additional resources could be mobilised in a timely manner' and, by the next meeting, to 'work on deploying a range of various options including bilateral contributions to the IMF, SDRs, and voluntary contributions to an IMF special structure such as an administered account'. The leaders also agreed to 'to further strengthen global financial safety nets and support the IMF in putting forward the new Precautionary and Liquidity Line (PLL)'. Moreover, the IMF, together with EC, will monitor Italy's austerity implementation on a quarterly basis. Yet, the G-20 failed to give the IMF more firepower. These outcomes are probably not sufficient to alleviate market worries over the sovereign debt crisis in the 17-nation region, especially after comments from Angela Merkel, German Chancellor, that it might take 10 years for the problems to be resolved.
In Greece, the referendum was cancelled and the Prime Minister won the confidence vote. News reports said that Prime Minister George Papandreou has agreed to step down in exchange of formation of an interim government with the main opposition party to ensure implementation of the new European deal. However, further details are awaited. Fiscal sustainability in Italy remained worrisome. The parliament will vote on the 2010 budget report but the surge in Italian bond yields suggests that the outlook is not optimistic.
Commitments of Traders:
With the exception of gasoline, speculators were bullish on the energy complex in the week ended November 1. Net length for crude oil futures edged up, by +1 894 contracts, to 161 612. Net length for heating oil increased +670 contracts to 19 815 while that for gasoline slipped -2 813 contracts to 57 837. Net short for natural gas futures fell to 162 559 contracts.
Speculators were bullish on precious metals. Net length for gold futures soared +10 224 contracts to 139 945 while that for silver climbed 1 152 contracts to 12 174. For PGMs, net length for platinum added +890 contracts to 20 602 while that for palladium increased +135 contracts to 6 777.