Crude oil trading has become less volatile Monday as there's not much news from the sector as well as the macro side. Currently trading at 74, the benchmark contract remains at the 10-month high. Robust sentiment on global economic recovery still provides strong support to price.
At the annual central bankers' symposium, both Fed Chairman Ben Bernanke and ECB President Jean-Claude Trichet said that there are signs that the world economy has bottomed. Bernanke said that near-term growth 'appears good' and the global economy is 'beginning to emerge' from recession while Trichet saw the economy is starting to get out of the period of freefall' though this 'does not mean at all that we do not have a very bumpy road ahead of us'.
Upbeat comments do not only push commodity prices higher by also stock markets. In European morning, benchmark indices open higher with UK's FTSE 100 Index gains +0.6% to 4880, the highest level since October 2008. Germany's DAX and France's CAC 40 also gains about +0.6% to 5490 and 3635, respectively. In Asia, the MSCI Asia Pacific Index gained +2.5% while Japan's Nikkei 225 Stock Average adds +3.4% to 10581.
However, investors need to be more cautious as China has just warned of new economic worries. According to a report on the State Council's website, Premier Wen Jiabao said that 'There are still a lot of unstable and uncertain factors ahead and the economic situation ahead is still very grave, although both the world economy and the national economy are making positive changes now'. Wen also said that there have been increasingly more positive signs in the country's economic performance, but stressed that the country's economic recovery is still 'unstable', 'not consolidated', and 'unbalanced' and warned against blind optimism.
While many investors understand USD moves in opposite direction to commodities few understand how they relate. Data show that crude oil price and USD move with linear relationship when oil moves above 40/bbl.
Gold price edges higher to 957. However, we believe the yellow metal will remains its sideways trading in the near-term as USD is relatively firm and capitals have been flowing out from gold investments.