Political unrest in Egypt intensified as tens of thousands of protesters defied a curfew and gathered in central Cairo, urging for a fresh regime. In the financial markets, demand for safe-haven assets such as bonds, US dollar, Japanese yen and Swiss franc advanced while higher-yield assets such as equities declined as risk appetite was greatly reduced. Concerning commodities, oil prices rallied amid worries that supplies will be affected if protests in Egypt spread to the Middle East. Currently trading at 89.9, the front-month contract for WTI crude oil rose to as high as 90.87 earlier in the day after a +4.32% jump last Friday. Gold, however, pared Friday's gains due to strength in USD.
While macroeconomic data were being ignored, US GDP expanded at a +3.2% annualized rate in 4Q10. While the reading missed market expectations of +3.5%, it significantly accelerated from +2.6% in the prior quarter. More importantly, the shift from inventories to consumption was welcomed by the market. 4Q growth was driven by consumer spending which jumped +4.4%, the fastest pace since 2006. The composition of more final demand and less inventories and imports is positive for 2011. That said, Moody's warned that US' rating may be put on the watch list. The rating agency said that 'the probability of assigning a negative outlook in the coming 2 years is rising' as the country's deficits widen.
Only second-tier data were released in Asian session today. In Japan, industrial production grew +3.1% m/m in December after rising +1% in the prior month. On annual basis, the reading gained +4.6%, moderating from +5.8% in November. New Zealand's trade deficits widens to NZD 250M as driven by the rise in aircraft imports. Separately, New Zealand's home-building approvals decreased -18.6% in December from a month ago, compared with consensus of a -1.2% drop.
Commitments of Traders:
Speculators were bearish on the energy complex in the week ended January 25. Net length for crude oil futures plunged -23 234 to 143 317 contracts, the lowest level since November 2010. Net length for heating oil futures and gasoline futures also declined by -3 971 to 38 404 contracts and -2 321 to 70 203 contracts respectively. Net shorts for natural gas futures, however, dropped for the first time in 3 months, by 11 040 to -210 523 contracts.
Similarly, speculators were bearish on the precious metal complex. Net length for gold futures fell for a 4th consecutive week, by -4 404 to 160 589 contract, the lowest level since May 2009. Net length for silver futures slid -1 427 to 28 226 contracts. For PGMs, net length for platinum futures dipped -958 to 28 859 contracts while that for palladium futures dropped -606 to 13 887 contracts.