The market was in a moderately risk off mode yesterday, driven by disappointing Eurozone economic data. Wall Street dropped with the DJIA and the S&P 500 losing -0.29% and -0.13% respectively. In the commodity sector, crude oil prices initially rose after collision of a US naval ship and a tanker in the Straits of Hormuz and Israel' s announcement of military exercises. Gains were pared as fresh concerns of global economic recovery grabbed the centre stage. The front-month contract for WTI crude oil initially climbed higher to 94.14 before ending the day at 92.73, down -0.15% while the Brent crude contract initially rose to as high as 115.11 before ending the day at 113.6, up +0.58%. Gold slipped as investors worried that the ECB might not adopt an unsterilized bond purchase program while the Fed might not announce QE3 ahead of the Presidential election.

As we await the Eurozone GDP report, it's unveiled that the Greek GDP contracted 6.2% y/y in 2Q12, suggesting the recession continued and implementation of fiscal austerity measures would be more difficult. Meanwhile, as the ECB decided to stop accepting Greek sovereign bonds as collateral in its monetary policy operations, emergency funding from Greece's central bank to Greek banks increased to 106B euro in July from 62B euro in June, compared with the drop of the ECB's assistance from 74B euro to 24B euro during the period.

The Eurozone economy probably contracted -0.2% q/q in 2Q12. Although the 17-nation avoided a technical recession after a flat GDP reading in the previous quarter, the economic developments have been dismal. Several peripheral countries have indeed slipped into recession and the situation will only be worse as the government implement fiscal consolidation plans. As the biggest economy in the Eurozone, Germany's GDP probably expanded modestly by +0.1% in 2Q12. The country's economy ministry warned last week that trades have declined and business sentiment in recent months has dropped sharply. There pointed to "significant risks" to Germany's outlook. Some economists forecast that Germany's economy would contract in the third quarter from the second quarter, before deteriorating further in the fourth quarter. The global economic outlook would certainly weaken should Germany fail to support the Eurozone anymore.

Elsewhere, the UK's inflation probably eased further to +2.3% y/y in July from +2.4% a month ago. In the US, retail sales gained +0.3% m/m in July after a -0.5% drop a month ago. Excluding auto, retail sales probably added +0.3%, following a -0.4% slip in June.