Risk sentiment appeared to have improved yesterday as there were no further 'bad news' from Libya and other countries in the MENA region. The market focused on better-than-expected personal income and new M&A news. Wall Street rose with DJIA and S&P 500 gaining +0.79% and +0.22% respectively. In the commodity sector, oil prices erased all gains made in Asian session and ended the day with modest losses. The front-month WTI crude oil contract settled at 97.06, down -0.84%, after failing to test 100 while corresponding Brent contract slipped -0.53% and closed at 111.8 during the day. Gold hovered within a range of 1400 and 1420 throughout the day but closed flat. The all-time high of 1432.5 is a strong resistance. Fresh news about geopolitical tensions and/or central banks' affirmation of accommodative monetary policies is needed to send prices to a new high.
While fighting between opposition parties and government forces continues, Qaddafi is doomed. Unrest in Oman and Yemen continued but protests in Saudi Arabia remained insignificant. Concerning oil supply, the Saudi government said it has met the oil supply that Libya lost. According to the IEA, oil production disrupted amounted to 800K in recent unrest in Libya.
While there's lack of news about tensions, investors shifted the focus to macroeconomic data and corporate activities. In the US, personal income climbed +1% m/m in January while consensus and December's reading were both +0.4%. Personal spending grew only +0.2%, easing from +0.7% in December. Several M&A deals were lifting market sentiment. Ventas, second-biggest U.S. health-care real estate investment trust by market value, announced it would buy Nationwide Health Properties at $5.8B that will create the nation's largest health care real-estate investment trust. Australia' Equinox Minerals has planned to acquire Lundin Mining Corp, a copper and zinc producer in Canada, at CAD 4.8B. In an annual letter to investors, Warren Buffet said his 'trigger finger is itchy' to make more acquisition for his company. Meanwhile, health insurer Humana raised its 2011 earnings forecasts.
The focus of today is Fed Chairman Ben Bernanke's testimony to congress. The market is interested to know how the Chairman views the economic developments and future monetary policies. Gold prices have been responsive to QE measures. If Bernanke expressed that the Fed would expand QE measures, the metal will rally for sure. In our opinion, Bernanke will note that recent economic outlook has improved, as a result of exceptionally low interest rates and the asset-buying program. Yet, it would be premature to exit any accommodative measures for the time being.