Market sentiment was given a boost yesterday by Spain's 2013 Budget, speculations of additional Chinese stimulus as well as better-than-expected US jobless claims. Wall Street rose with the DJIA and the S&P 500 indices gaining +0.54% and +0.96% respectively. In the commodity sector, crude oil rebounded sharply with the front-month WTI crude contract gaining +2.08% while the equivalent Brent crude contract rising for a second consecutive day soaring to a 6-day high of 112.01, up +.179%. The benchmark gold rallied +1.53% to 1780.5 at close.

Spain pledged to adopt a further 40B euro on spending cut, including an average of 8.9% on Ministry expenditure and freezing public sector wages. Meanwhile, the VAT will increase further so as to raise revenue by 3.8%. These measures are to help the country lower its public deficit to 6.3% of GDP this year and 4.5% of GDP next year, based on the assumption of GDP contraction by -1.5% this year and -0.5% next year. The government will enact 43 new laws in 6 months to reform the economy while an independent fiscal authority will be established to oversee the execution of the Budget. The market appeared to receive the Budget positively. However, the challenging part remains on execution given the Spanish economy has contracted -1.3% in last year and has a 25% unemployment rate.

In China, industrial profits dropped for a 5th month by -6.2% to RMB 381.2B in August while the Shanghai stock index breached below the 2000 level. The PBOC this week injected a net of RMB 365B (subtracting maturing reverse repos) into the market this week is amongst the biggest on record. These stirred expectations that government would announce further monetary easing measures to bolster the economy so as to ensure annual growth rate of 7.5%. Moreover, China Securities Regulatory Commission is expected to announce a series of measures to boost stock prices.

On the dataflow, US' GDP growth was revised down to -1.3% saar in 2Q12 from +1.7% in the prior quarter. Moreover, durable goods orders plunged -13.2% m/m in August, compared with a +4.2% gain a month ago. Excluding transportation, the reading slipped -1.6% after falling -0.4% in July. Yet, the market was thrilled by initial jobless claims which slipped -26K to 356K in the week ended September 22. The four week average thus dipped -5K to 374K. Today, the focus is on the Eurozone CPI which probably eased to +2.4% y/y in September from +2.6% in the prior month. In the US, the Chicago PMI which probably stayed unchanged at 53. The final University of Michigan sentiment might have slipped -0.2 points to 79.

Oil and Gold Reports contributed by Oil N' Gold