WTI-Brent spread narrowed markedly as Nymex crude rallied while Brent crude fell. The front-month contract for WTI crude oil jumped +1.61% to settle at 86.36, the highest close in 5 days. The more actively-traded April contract gained +1.14% to close at 88.84, narrowing the WTI-Brent spread to 13.75. While escalated tensions in the Middle East and North Africa triggered concerns over oil shipment and sent oil prices higher, another reason for the phenomenon is profit-taking. Traders who shorted the WTI-Brent spread want to lock in profits. More of this will be seen before the March Nymex contract expires on February 22. Geopolitical tensions continued to drive demand for safe-haven assets. Gold gained for a 4th consecutive day with the benchmark Comex contract surging to 1385.8, the highest level since January 13, before settling at 1385.1.

Tensions in the Arab world are getting more serious. At least 5 people have been killed in Bahrain since demonstrations began on Monday. Bahrain's army attacked crowds of protesters, firing teargas shells and rubber bullets. In Iran, the state-run Press TV said that 2 of the country's warships were heading for Egypt's Suez Canal, even without permission granted by Egypt. Anti-government protests in Yemen and Libya have shown no signs of moderation while demonstrations were reportedly seen in Algeria.

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Mixed US data indicated the path of economic recovery will remain uncertain. Headline CPI gained +0.4% m/m in January, higher than consensus of +0.3%, despite an ease from +0.5% in the prior month. From a year ago, inflation rose +1.6% in January following a +1.5% rise in December. Core CPI gained climbed +0.2% and +1.0% on monthly and annual basis respectively. Both readings exceeded market expectations and December's figures. The set of data signaled the trough of inflation has probably passed. Separately the Philly Fed manufacturing index impressively jumped +16.6 points to 35.9 in February. This was the highest level since January 2004. Shipments, unfilled orders and employment gained solidly despite mild change in new orders. However, the upbeat market sentiment was offset as initial jobless claims rebounded +25K to 410K in the week ended February 12 with the 4-week moving average adding +2K to 418K. Continuing claims also increased for the first time in 3 weeks, gaining +1k to 3911K in the week ended February 5. The Conference Board reported that leading indicators missed expectations and was up only +0.1% m/m in January. December's gain was revised lower to +0.8% from +1.0%.

While there's lack of important US data today, the focus will be on UK's retail sales which probably gained +0.2% m/m in January after contracting -0.3% in the prior month. In Canada, headline inflation might have climbed +0.3% m/m in January after a flat reading in December. The annual rate is expected to be +2.4%, unchanged from a month ago.