The market is on risk-off mode in Asian session Monday amid fears of recession. Oil prices extended weakness Friday's selloff while gold remained firm as demand for safe-haven asset increased. Last Friday, the US employment report showed no growth in payrolls in August. While part of the reason was Verizon's strike which deducted 45K of workers in the market, the addition in payrolls was still lower than previously estimated even if these positions were added back. Private sector positions increased +17K during the month, down from +156K in July, but were offset by the -17K decline in government jobs. The unemployment rate stayed unchanged at 9.1%. The set of data signaled the lack of confidence in both employers and consumers as policymakers have made little progress on bolstering the economy.
As the US market is closed for Labour Day holiday, the focus is on the Eurozone. Peripheral bond yield jumped last week as worries that some debt-ridden countries may not be able to repay their debts reemerged. The EU/ECB/IMF inspection on Greece has been suspended as the lenders unexpectedly left on Friday, suggesting disagreements between the parties. The review is expected to resumed in mid-September, According to the troika, 'gross progress' has been made, but time is needed for 'Athens to allow the authorities to complete technical work, among other things, related to the 2012 budget and growth enhancing structural reforms'. Nevertheless, investors worried that the unplanned suspension was due to Greece's inability to comply with its fiscal consolidation requirements.
Italy's austerity plan will be revised as it faces strikes and economic weakness. The Italian government agreed to drop the 'solidarity tax' high incomers and trim the reduction of government funding by 1.8B euro. The ECB said that it will closely watch the issue and reiterated that the package much be 'fully confirmed and implemented.
Commitments of Traders
Speculators were bullish on the energy complex in the week ended August 30. Net length for crude oil futures increased to 152 688 contracts. Net lengths for heating oil futures and gasoline futures soared to 16 764 contracts and 50 630 contracts respectively. Net short for natural gas futures fell to 179 695 contracts during the week.
Speculators were bearish on the precious metal complex. Net length for gold futures declined for a 4th consecutive week, losing -10 734 to 176 947 contracts. Net length for silver futures, however, slipped to 26 843 contracts. For PGMs, net lengths for platinum futures dropped -1 731 to 26 576 contracts while palladium futures dipped -502 to12 296 contracts.