Crude oil pares gains after rebounding earlier in the day. While price slump to a 3-week low spurs buying interests, the market hesitates to take a more optimistic view on the economic outlook. Meanwhile, market sentiment recovers slightly after a strong economic report from the Eurozone. Yet, investors remain cautious and are reluctant to aggressively enter longs.

Eurozone's economy expanded +1% q/q in 2Q10 (consensus: +0.7%), following a +0.2% growth in the prior quarter. On annual basis, the reading surged +1.7% after a +0.6% growth in 1Q10. Global economic recovery has helped the region's growth and the -10% decline of euro against the dollar earlier this year has benefited exports. The driving force for the expansion in the second quarter is Germany which recorded growth of +2.2%, the strongest expansion in 2 decades.

Stocks rose in Asia with the MSCI Asia Pacific Index gaining for the first time in 5 days. Strong corporate earnings reports temporarily overshadowed underlying economic weakness. Genting Singapore reported profit of $291M in 2Q10 after making losses the same period last year. Moreover, billionaire Li Ka Shing's purchase of Hutchison Whampao shares, the biggest single purchase in 7 years, also lifted equities. In Europe, bourses opened higher as Eurozone's growth beat consensus but gains were pared as concerns about global slowdown lingered.

Currently trading at 1218, gold remains firm in European session and may strengthen further later in the day as US' pullback makes the metal even more attractive. Apart from flagged economic outlook, geopolitical tensions probably push gold higher. China criticized US' use of a nuclear-powered aircraft carrier in joint naval drills with S. Korea in the Yellow Sea. China said the US will 'pay a costly price' for its action. Potential friction between the 2 countries may trigger inflows to gold.

Copper price recovers for a second day, also stimulated by a weaker USD as well as rebound in commodities. We expect the rise to be short-lived as copper, as well as other base metals, is facing headwinds of slowdown in Chinese industrial activities. Although copper imports rose in August from a year ago, the first increase in 4 months, imports are expected to resume the downtrend later in the year. Economic data in July generally missed market expectations despite overshooting CPI. Yet, the government may not rush to ease recent tightening policies as part of the slowdown was designed.