Despite the ECB's upbeat economic outlook, investors remained cautious as jobless claims data surprised to the upside. Bourses ended modestly while oil and base metals slid amid worries over US' slowdown. Treasury remained firmed with yield grinding lower as weak economic data made further QE from the Fed more likely. Gold gained for a 7th consecutive day on QE speculations but reduced sovereign crisis concerns limited upside. Price movements today have been narrow as the market awaits the employment report.

At the August ECB meeting, policymakers left the main refinancing rate at 1% and reiterated current levels of interest rates were 'appropriate'. While this has been universally anticipated, comments that economic activities in 2Q10 strengthened and 'available data for the third quarter are better than expected' clearly signaled the central bank has turned more optimistic (or less pessimistic) to the Eurozone's outlook. The Committee members also dropped the word 'high' when describing 'uncertainty' in the environment. Yet, President Trichet stressed that that 2H10 is likely to be less buoyant than Q2 which we expect to be particularly flattering'. When asked about rising lending rates, President Trichet referred the situation to 'normalization' as demand for liquidity from banks had fallen. When asked about plans of scaling back its supply of unlimited cash to banks, Trichet declined to comment.

However, the relieved ECB was upstaged by US initial jobless claims which surprisingly rose to 479K in the week ended July 31 from 457K in the prior week. The market had anticipated a -1K dip. 4-week average also increased +5k to 459k, the highest reading since July 3. The disappointment exacerbated worries about economic recovery as weak employment is detrimental to consumption, the biggest component of growth. Worse still, a retailer survey showed that same store sales growth climbed +3%, compared with forecast of +3.2%, in July. Consumer confidence has been deteriorated by the sluggish employment situation.

Concerning the July employment report due later today, the market expects headline payrolls have dropped -65K with the jobless rate rising to 9.6% (June: 9.5%).

Wall Street was weighed down by the negative data but losses were pared later in the day as President Barack Obama would announce a loan guarantee worth $250M today to finance Ford Motor's exports. Speculations on Fed's QE also helped erase stock market declines. DJI and S&P 500 Indices finished that day at -0.05% and -0.13% respectively.

Given the recent high positive correlation between crude oil and stock markets, it's reasonable to see crude's slide. The front-month WTI contract edged lower, by -0.56%, to 82.01 at close. The number of hurricanes this year will probably lower than previously feared. The US Climate Prediction Center revised down the forecast for the 2010 Atlantic hurricane period to 14 to 20 named storms, down from 14 to 23. The Center said that 8 to 12 of those storms may grow into hurricanes. The revision overshadowed the US National Hurricane Center's report that Storm Colin strengthened over the Atlantic Ocean and may pass to the west of Bermuda within 2 days. Hurricanes are a dangerous threat to oil and gas production in the Gulf of Mexico.

Gold strengthened for a 7th day as increased possibility of QE and weakness in USD boosted demand for the yellow metal. The benchmark contract rose to as high as 1202.2 before settling at 1199.3, up +0.28%. Nonetheless, bulls are hesitant to push gold significantly higher as deflationary fears weigh. Moreover, there are more signs indicating sovereign crisis in the Eurozone has eased. The IMF/EU delegation assessed that Greece has shown 'great progress' in implementing fiscal-consolidation measures to reduce its deficits. According to the joint statement, 'the end-June quantitative performance criteria have all been met, led by a vigorous implementation of the fiscal program, and important reforms are ahead of schedule'.