Crude oil rebounds after the Bundesbank raised it forecasts on Germany's economic growth. European bourses also open higher following the upgrade and stronger-than-expected retail sales in the UK. The dollar strengthens against the euro and the yen amid Greece concerns and intervention talks. Gold remains firm, trading at around 1230. Renewed worries over Greece's financial system may lift price higher.

The Bundesbank forecasts the country's GDP will expand by about +3% in 2010, up from June's projection of +1.9% percent it predicted in June. According to the central bank, the 'growth tempo will normalize after the extraordinarily dynamic second quarter...But all in all, the fundamental economic situation in Germany is very favorable at the moment'. Regarding, the 2H10 outlook, the Bundesbank anticipated the economic upswing to continue with 'a continuation of moderate upward price developments'.

Investors' confidence was further supported by a UK report showing that retail sales grew +1.1% m/m in July following a +0.7% gain in the prior month. Meanwhile, the country's budget deficits narrowed to 3.17B pound in July, down from 5.52B pound the same period last year.

Stock markets climb modestly with UK's FTSE 100 Index edging +0.09% while Germany's DAX and France's CAC 40 Index gaining +0.4 to +0.5%. In Asian session, the MSCI Asia Pacific Index rose +0.8%. Japan's Nikkei 225 Stock Average rallied +1.32% to 9363 amid speculations that the BOJ may implement additional easing policies to stimulate recovery. the Sankei newspaper said today that the central bank may increase the credit facility for lenders to 30 trillion yen from 20 trillion yen. The duration of the loans may also be increased to 6 months from 3 months. Japanese yen also dropped against the dollar after the report. Yet, the news has not been verified.

The euro weakens for a second day against USD as the market worries that Greece may not be able to control its deficit level after the EU/IMF funding program ends in 2014. Yield spread between 10-year Greek and German government bonds widened to 850bps, the highest level since early May, on Tuesday and stayed at elevated level. As we mentioned last week, gold price, apart from benefiting from safe-haven demand due to global economic uncertainty, will be supported as sovereign crisis in peripheral European countries lingers.